Gulf and US Airline Conflict Spreads to Europe

The US airlines claim that the Gulf giants have received around $42 billion in subsidies and are able to use these to operate with lower loads and offering lower fares, enticing passengers onto their own services. Delta Air Lines has been the most vocal of the three US carriers and how they have skewed the competitive landscape in Europe and the US.

The conflict between the three largest airlines in the United States and the fast-growing Gulf hub carriers has deepened after it emerged this week that American Airlines, Delta Air Lines and United Airlines representatives met with officials from the European Union last week to discuss what they claim are unfair government subsidies that are providing them with an unfair advantage.

This latest meeting further escalates the efforts of the US carriers to attempt to block the development of the likes of Emirates Airline, Etihad Airways and Qatar Airways in their home market through the submission of a 55-page document the Obama administration, urging a review of US open skies air treaties with both Qatar and the United Arab Emirates (UAE).

News of the submission to US Secretary of Transportation, Anthony Foxx, was first revealed at this year’s Routes Americas forum in Denver last month, when former US deputy assistant secretary of state, John Byerly, outlined details of the meeting between airline and government representatives you can read our report here ‘US Airlines Make Call to Restrict Gulf Carrier Growth in US Market’).

“It’s disturbing — at least it’s disturbing to me — to learn that a troika of the CEOs of Delta, United, and American met on Wednesday and Thursday of this week with two members of President Obama’s Cabinet and with other senior Administration officials for a reported further salvo in their war against Open Skies,” he said in his address to the audience of airline, airport officials at the network planning event.

This topic was first revealed at our Routes Americas forum in Denver and is likely to be a discussion point at our forthcoming Strategy Summits at Routes AsiaRoutes Europe and at the inaugural Routes Middle East & Africa, where an airline panel discussion will look at Arab liberalisation and question if the skies are really opening up.

The US shifting their efforts to Europe is sure to stir up support from Air France and Lufthansa which have also publicly complained about the Gulf operators. The French and German markets also have restrictive air service arrangements with the UAE and Qatar which has limited the growth of Emirates Airline, Etihad Airways and Qatar Airways in their own markets.

The US airlines claim that the Gulf giants have received around $42 billion in subsidies and are able to use these to operate with lower loads and offering lower fares, enticing passengers onto their own services.  Delta Air Lines has been the most vocal of the three US carriers and how they have skewed the competitive landscape in Europe and the US.

This matter took an unexpected twist last week when Delta’s chief executive officer, Richard Anderson, appeared to link the Gulf-based air carriers with the US 911 terrorist attacks during a CNN interview. In its Quest Means Business programme he said: “It's a great irony to have the United Arab Emirates from the Arabian Peninsula talk about that, given the fact that our industry was really shocked by the terrorism of 9/11, which came from terrorists from the Arabian Peninsula.”

Delta has subsequently apologised for the remarks from its boss, stating he was reacting to claims the gulf carriers have been making that US airlines received subsidies in the form of payments from the US government after the 911 attacks and the bankruptcy proceedings that resulted.

“He didn’t mean to suggest the gulf carriers or their governments are linked to the 9/11 terrorists. We apologise if anyone was offended,” said the airline.

However, he comments have understandably led to a strong reaction from the Gulf carriers, none more so than Qatar Airways chief executive officer, Akbar Al Baker, who told CNN: “I think he should be ashamed to bring the issue of terrorism to try to cover his inefficiency in running an airline.”

Sir Tim Clark, president, Emirates Airline has also spoken out on the US airline claims and has challenged them to detail how the value of subsidies has been calculated, calling the claims "sweeping and unfounded". He has said the airline can provide a defence against subsidy claims and has even hinted at possible legal action over the criticisms, especially those voiced by Delta.

"As far as the airline industry is concerned, aeropolitical protection for airlines is arguably the biggest subsidy of all," he told our data partner, Flightglobal. "Therefore, it would be ironic, and a shame, if the US, who have been the forerunners of liberalisation and deregulation, would now contemplate a u-turn on its successful international aviation policies for the benefit of a narrow few, based on sweeping and unfounded subsidy allegations."

In a tough talking discussion with Reuters he has subsequently followed this up calling for the right of reply to the 55-page dossier prepared by three American airlines claiming unfair subsidies and presented to the US government, which has not been released to third parties.

In the interview Clark urged Washington to block the three carriers’ calls to renegotiate Open Skies agreements and also asked the US to think about the impact on its aerospace industry, which has been boosted in recent years by orders from the Gulf.

“We have invested heavily in the US aerospace industry and a lot of what we have done with regard to market access has allowed us to go and place these orders, for which we have contracts in place. I don’t want to be seen as threatening or intimidatory but I am hoping that the US government thinks about all of this,” he said.


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