U.S. airlines battle Persian Gulf carriers

Nova Safo Nov 16, 2015

U.S. airlines battle Persian Gulf carriers

Nova Safo Nov 16, 2015

The three legacy U.S. airlines  American, United and Delta  are engaged in a war of words with their counterparts in the Persian Gulf. They claim the Gulf carriers are rigging competition in their favor through billions of dollars in unfair aid from their governments.

Both sides have made their case to U.S. officials, who are now considering how to respond. There have been no indications as to what federal agencies might do, following intense lobbying that has included both sides enlisting allies. The U.S. carriers have had the written support of a number of members of Congress. The Gulf carriers have partnered with smaller airlines, such as JetBlue and Hawaiian Airlines, which have sided with them. 

At issue are Open Skies agreements, which govern international travel. These agreements are between countries, and they facilitate unfettered competition among airlines of different national origin. 

“The airlines of either country can fly as much as they want to the other country,” said Seth Kaplan, managing partner of the trade publication Airline Weekly. “They don’t have to ask special permission to do that.”

For the legacy U.S. carriers, Open Skies agreements have brought about lucrative partnerships with European counterparts.

“When you fly between the U.S. and the UK, you might be on American, and you might be on British Airways,” Kaplan said, “Because they’ve basically merged their operations in those markets.”

Open Skies agreements have also benefited Persian Gulf carriers: Emirates, Qatar and Etihad airlines.

Those three are looking to expand further into European routes, which has alarmed legacy U.S. carriers and some European airlines, as well. The U.S. carriers believe Persian Gulf states unfairly subsidize their airlines, making it difficult  if not impossible  to compete with them on trans-Atlantic routes.

The U.S. legacy carriers, along with other groups such as airline workers’ unions, have formed a group called the Partnership for Open and Fair Skies. Through it, they have been arguing that the Gulf carriers are competing unfairly. The partnership said its forensic accountants have tracked down $42 billion in aid that oil-rich Gulf states have provided to their airlines. 

“With the Gulf carriers being floated by their governments … they can fly routes that don’t make economic sense … and they do it at the expense of U.S. carriers,” said Jill Zuckman, the alliance’s spokesperson.

The U.S. airlines want the Gulf carriers to freeze their expansion into routes originating from the U.S., and for the American government to negotiate permanent changes, Zuckman said. She would not elaborate on what exact changes the legacy carriers are seeking, saying that they only seek to start a dialogue on the issue.

The Gulf airlines, meanwhile, have come out swinging, and have accused U.S. airlines of shedding crocodile tears.

“The legacy carriers themselves benefit from massive federal, state and local government support of their own,” said Tim Clark, the CEO of Emirates Airlines, in a lengthy news conference earlier this year. He accused American carriers of seeking nothing less than to alter the very nature of long-established Open Skies agreements. Instead of complaining, Cook said U.S. airlines should start competing with Gulf carriers on quality and service.

“The legacy carriers are earning record profits,” Clark said. “Why couldn’t they have spent that improving what they do? … Investing in comfortable seats and all the things that Emirates prides itself on doing.”

Buckman said that U.S. airlines are happy to compete, but they want to compete on a level playing field.

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