U.S. airline group: Subsidies give Gulf carriers an unfair edge

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Three U.S. airlines are charging Abu Dhabi, Dubai and Qatar with violating open-skies agreements and are asking the U.S. government to intervene.

The three — American, Delta and United — claim national flag carriers in the Persian Gulf region receive billions of dollars in unfair subsidies from their oil-rich governments.

The U.S. airlines are asking for a freeze on Gulf carriers adding service to U.S. and a “solution to address the flow of subsidized Gulf carrier capacity to the United States,” said Carter Yang, a spokesman for the Partnership for Open & Fair Skies, a new coalition of airlines and aviation-related labor unions. The group called the subsidies “unprecedented” and claimed that continued “unfettered access” to U.S. gateways threatens thousands of jobs.

The U.S. airlines say that the Gulf carriers’ service to the U.S. has not “meaningfully” increased traffic to the U.S. but has displaced U.S. market share and moved U.S. aviation jobs overseas.

Yang said the group is in an “ongoing dialog” with the government. “We believe [U.S. officials] are taking this issue very seriously,” he said.

The group details the allegations in a 55-page document describing interest-free loans with no deadlines, lower airport fees and other practices. Three carriers — Qatar, Emirates and Etihad — have received $42 billion in subsidies and other benefits from their governments since 2004, according to the coalition, which claims Qatar and Abu Dhabi’s Etihad wouldn’t be financially viable without financial assistance.

Gulf airlines have successfully used their proximity to the rapidly developing Indian subcontinent, Southeast Asia, Australia and parts of Africa to act as primary hubs among these fragmented markets.

Emirates denied the allegations. Its president, Tim Clark, said the airline had not had time to read the white paper but “are confident that any allegation that Emirates has been subsidized is totally without grounds.” Etihad declined to comment until it reviews the report.

Aviation, according to the white paper, plays an outsized role in Gulf economies, citing one Emirates-commissioned study that found the aviation sector will contribute 32% of Dubai’s gross domestic product and account for 22% of its employment by 2020. The economic development strategies of these nations depend heavily on the continued flow of international air passenger traffic through their hubs, it stated.

Gulf airlines have successfully used their proximity to the rapidly developing Indian subcontinent, Southeast Asia, Australia and parts of Africa to act as primary hubs among these fragmented markets.

“They’re kicking butt with the model,” said Kevin Mitchell, founder of the Business Travel Coalition and OpenSkies.travel. “The Gulf carriers have a gigantic geographic advantage.

Industry analyst Henry Harteveldt said that while Persian Gulf carriers can turn to their governments for financing, other carriers must find their own means of raising money. Similarly, airports outside the Gulf region must face challenges to expand that Gulf airports don’t face.

But, said Harteveldt, U.S. carriers are “not exactly defenseless.”

Harteveldt and Mitchell said that U.S. carriers are enjoying the benefits of consolidation and antitrust immunity through mergers and joint ventures with overseas partners. And they have their own advantages, including participation in joint ventures, code sharing, hubs, extensive domestic networks and alliances (including some with Gulf airline members).

Yang, the coalition spokesman, said that antitrust immunity is not a subsidy and that the mergers of U.S. carriers undergo careful scrutiny.”

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