U.S. will 'do the right thing' regarding Gulf carriers, Delta exec says

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A Delta Airlines executive predicted Thursday that the U.S. government will eventually take action to rein in the three Gulf carriers that the legacy U.S. airlines accuse of accepting state subsidies in violation of international open skies agreements.

"This is our No. 1 priority in Washington," Delta's chief legal officer, Peter Carter, said during the carrier's first quarter earnings call. "We have reason to believe the U.S. government is going to do the right thing, and having said that, because this is primarily a diplomatic process, it will take some time."

Delta, American and United allege that carriers Emirates, Qatar and Etihad have taken $42 billion in subsidies from their governments since 2004, giving them an unfair advantage in the international aviation market. But their entreaties for action from the Obama administration have been opposed by smaller U.S. carriers, which say that the Big Three have themselves been beneficiaries of government largesse and argue that measures against the Gulf carriers would reduce competition and thereby harm consumers.

Delta, American and United have asked the Obama administration to put a freeze on new routes to the U.S. for the Gulf carriers pending consultations on the subsidies that they have allegedly received since 2004, subsidies the Gulf carriers deny having received.

The administration has made no moves so far on the issue.

Carter's remarks came toward the tail end of an earnings call in which Delta reported that net first quarter income was up 27%, at $946 million, from last year. The carrier took in revenue of $9.25 billion, which was $20 million below analysts' estimates. The year-over-year decrease of 1.5% was spurred in part by a decline of 5.1% in its per-mile revenue on airline tickets. The carrier also suffered $5 million in revenue losses due to the closing of Brussels Airport following last month's terrorist bombing. Countering lower ticket costs was a 34%, or $705 million, reduction in fuel prices.

Delta's adjusted earnings per share of $1.32 in the first quarter beat estimates by 2%. The carrier's operating margin was 18.5%.

Incoming Delta CEO Ed Bastian lauded the results during the call.

"These are nothing short of outstanding results in what is typically ... our weakest quarter of the year," he said.

As of early afternoon Thursday, Delta stock was selling for $48.65, up 1.3%.

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