DALLAS — Executives from American Airlines and Lufthansa complained about an unlevel playing field with Persian Gulf carriers, during a session at the World Travel and Tourism Council's Global Summit here.
Karl Ulrich Garnadt, a member of Lufthansa’s executive board, said the situation is particularly difficult for European airlines.
"Scott, you ain't seen nothing yet with regards to the Gulf carriers,” Garnadt said, addressing AA President Scott Kirby.
Garnadt said that in Europe, Gulf carriers operate seven times the capacity of European carriers between the Gulf and Europe, and that virtually all traffic between Europe and Southeast Asia is dominated by the Gulf carriers.
“And there is no end to this development,” Garnadt said.
The Big 3 U.S. airlines have publicly alleged that the Gulf carriers — Etihad, Emirates and Qatar Airways — are heavily subsidized by their governments. Kirby sought to prove that point by saying he had found a published Etihad fare of $48 for a flight between New York and Mumbai this summer, which after fees came to $680 round trip.
“It costs way more than that to fly to a market like that,” he said. "Fair trade requires fair competition. We like Open Skies but we can't compete with $50 billion in subsidies.”
American, Delta and United have petitioned the U.S. government to freeze the Gulf carriers' growth in the U.S., saying that the Gulf airlines are unfairly subsidized, but the Big 3 have been unsuccessful.
James Hogan, president of Etiahd, was originally slated to be on the panel, but he was absent. The panel also included Aireen Omar, CEO of Malaysia-based low-cost carrier (LCC) AirAsia Berhad.
Garnadt also said that the Big 3 U.S. carriers had nothing on the major European airlines when it came to competition from LCCs, asserting that 41% of intra-European local traffic was from "so-called local carriers” in the model of Spirit and Frontier.
“I’m not sure how much market share they have in the U.S., but I’m sure it’s far away from 40%,” he said.
Kirby said that American has to compete against LCCs in certain markets, because so many people book on price alone.
"We are competing with any carrier that flies head-to-head with us in a nonstop market, whether it's Lufthansa, Spirit, Delta,” he said.
"Eighty-seven percent of our customers only flew us one time,” Kirby added. He said that 13% of Americans’ customers account for half of its revenue. "It’s the way travel is. ... For half of our customers, we have to acknowledge that they care about price."