US carriers focus on alleged subsidies to Gulf carriers

Status
Not open for further replies.

typhoonpilot

Well-Known Member
#1
ANALYSIS: US carriers focus on alleged subsidies to Gulf carriers
By: Edward Russell
Washington DC
Source:

20 Feb 2015

American Airlines, Delta Air Lines and United Airlines are concerned about the magnitude of subsidies they believe Gulf carriers receive, as the US carriers push to limit open skies with Qatar and the UAE.
"We live in a world where there are benefits to the hometown carrier – that's OK," a senior airline official close to the open-skies issue tells Flightglobal. "But [for Gulf carriers] the subsidies appear to be bottomless, absolutely bottomless."

In evidence presented by the US carriers to government officials, subsidies since 2004 are alleged to total more than $40 billion, said to include $2.4 billion in hedge losses that Dubai's government assumed from Emirates, a $6.3 billion equity infusion by Abu Dhabi's government, and a $7.8 billion interest-free loan to Qatar Airways.

The Gulf carriers firmly deny that they receive any form of state support.

"Quite frankly, I think Mr Richard Anderson needs to go and study in a university to find out what the difference is between equity and subsidy," said Akbar Al Baker, Qatar Airways' chief executive, in an interview with CNN's Richard Quest on 17 February. "We don't receive any subsidy. What the government has given us is equity into an airline, which they own."

The US carriers claim that Qatar Airways benefitted from about $17.5 billion in subsidies and state benefits between 2004 and 2014, citing, in addition to the interest-free loan, $6.8 billion in savings from Qatari government loan guarantees and another $984 million from a ban on unionised labour. They say Emirates meanwhile received $6.8 billion and Etihad $18 billion.

"We are very interested to see how the figure of '$40 billion of government subsidies and benefits' was calculated," Emirates Airline president Tim Clark told Flightglobal earlier in February. "It is especially surprising because some of the complaining CEOs have publicly called for the US to emulate the pro-aviation growth policies of Dubai."

Richard Anderson, Delta's chief executive, told CNN on 16 February that evidence of the subsidies had been found through investigation of public documents available in third countries.

In January, the chief executives of American, Delta and United met with senior Obama administration officials, including secretary of transportation Anthony Foxx and secretary of commerce Penny Pritzker, to make their case on limiting Gulf carrier access to the USA. A second meeting was held during the week of 9 February.

The US carriers argue they are supportive of open skies given a level playing field, but claim that the dramatic expansion of Gulf airlines into the USA is siphoning demand away from them, at below-cost fares, and negatively impacting their ability to provide domestic service to their hubs that feed international flights.

The mainline carriers are pushing US regulators to invoke the "consultation provisions" under the two open-skies agreements in order to limit service, United chief executive Jeff Smisek said earlier in February.

Their hope is that Emirates, Etihad and Qatar will be limited to just the flights they operate now and that the open-skies arrangement will be rolled back to a bilateral air services agreement that does not include fifth-freedom rights for the three Gulf carriers, says the official.

This would block them from adding more flights in the lucrative US-European market, which they can access with the existing fifth-freedom rights, adds the official, who sees controversial remarks made by Anderson in his CNN interview as a diversion from the central issue.

In an exchange with network anchor Richard Quest, Anderson sought to counter the point that US airlines had benefited from huge government subsidies after the 9/11 terrorist attacks by citing "the great irony" that the terrorists originated from the same region as the Gulf carriers.

Delta issued an statement saying Anderson "didn't mean to suggest the Gulf carriers or their governments are linked to the 9/11 terrorists" and apologising to anyone who was offended.
Emirates rejected the apology and accused Anderson of deliberately crafting and delivering his statements for a "specific effect". The Dubai-based carrier added: "This brings into question his credibility as a CEO of a US public listed company, as well as the integrity of the submission which his airline has submitted to the US authorities."​
 
Status
Not open for further replies.
Top