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Delta CEO: Gulf Carriers Are the Greatest Challenge to Airline Industry, “They’re Governments”

Delta CEO: Gulf Carriers Are the Greatest Challenge to Airline Industry, “They’re Governments”
Joe Cortez

Delta’s CEO calls Middle Eastern carriers the “greatest challenge” to the airline industry and decries privatization of air-traffic control in the U.S.

Comparing the ongoing Open Skies situation to trade inequities that the auto industry faced in the 20th century, Delta Air Lines CEO Richard Anderson called Middle Eastern carriers one of the greatest challenges to the airline industry. The remarks came during Anderson’s speech at the Detroit Economic Club Tuesday morning, where he spoke openly on a number of issues facing the American airline industry today, including Open Skies and the proposed privatization of air-traffic control.

When asked about the greatest challenge to the American air transport industry by moderator Bill Emerson, Anderson pointed the finger at Open Skies and the Arabian carriers involved. The CEO went on to directly compare the situation to trade inequities faced by American auto makers throughout the 1970s and 1980s.

“The facts are pretty straightforward,” Anderson told attendees. “We all remember, 20 or 30 years ago, the inequities of the trade regime between the U.S. and Japan around automobiles and the devastating effect that trade imbalance had on the automobile industry had here in Detroit. We’re facing a similar situation with the United Arab Emirates and Qatar Airways — they really aren’t airlines, they’re governments.”

Anderson reinforced allegations raised by Delta and fellow legacy carriers American Airlines and United Airlines in February, claiming the “Middle East Three” — Emirates, Etihad Airways and Qatar Airways — accepted over $42 billion in illegal subsidies. The executive illustrated the accusation by comparing the growth of the ME3 to that of his own airline.

“Typically, our industry grows at [Gross Domestic Product] rates,” said Anderson. “Delta Air Lines will grow at about where GDP will grow. These carriers grow at four-times GDP, because governments write billion-dollar checks to put a direct subsidy in to distort the marketplace.”

While Anderson was careful to state that his airline supports trade, he made a point of reinforcing his argument that the problem lies solely in agreements with Qatar and the UAE, extolling the strength of a similar agreement the U.S. maintains with the Netherlands and accusing Middle Eastern governments of violating the tenets of the policy.

“We’ve signed 115 of those Open Skies agreements over the past 23 years and all but two of them work really well,” said Anderson. “We support Open Skies. We support open and free trade, but in this instance we have bilateral agreements that are being violated right now by those countries.”

Anderson also used Tuesday’s speech to express his opposition to the proposed privatization of air-traffic control in the U.S. As chairman of the RCTA NextGen Advisory Committee, Anderson insisted that air-traffic control is a “non-delegable government service.”

“I think the FAA does a good job and I think, oftentimes in this day and age, we’re very quick to criticize government; it’s a pretty popular thing to do,” Anderson began. “But if you ever stood in the tower at [Detroit Metropolitan Wayne County Airport (DTW)], or sat in the cockpit on the jumpseat of one of our airplanes with headsets on, when we’re pushing a big bank out of [DTW], you’ll see how well that system works and how safe that system works.”

Instead of privatizing the air-traffic control systems, Delta’s CEO suggested an alternative solution lies in technology. Anderson said his airline’s plans include supporting the FAA, as well as installing upgrades to GPS and ADS-B technologies.

When asked about Delta’s competitive advantage in the aviation industry, Anderson spoke to the values of his company, comparing it to the longevity of Detroit’s auto makers. However, he added, the company could only be compared when on a level playing field in the industry.

“What we’ve discovered at Delta Air Lines, we compete against a lot of state-owned and state-subsidized enterprises, when the playing field is relatively level, we win,” Anderson said. “But when the playing field is so far tilted, it’s difficult in any industry to compete against governments.”

[Photos: Detroit Economic Club/Lawrence Technological University]

View Comments (19)

19 Comments

  1. JW76

    June 23, 2015 at 4:58 pm

    “Oh please, Uncle Sam, can you regulate those bad foreign airlines so we can squeeze even more out of the little people of America?”

  2. You want to go where?

    June 23, 2015 at 5:41 pm

    I guess it is too much for me to hope that he would say that the oligopoly of US carriers is the greatest challenge to the airline consumer.

  3. sdsearch

    June 23, 2015 at 6:00 pm

    Let Delta’s CEO do all the talking and American’ CEO stay mum so that Qatar can stay in the oneworld alliance. 🙂

  4. SFO777

    June 23, 2015 at 6:39 pm

    Anderson is an embarrassment. And not just because he apparently doesn’t knot how to a tie.

  5. bigbuy

    June 23, 2015 at 6:39 pm

    @JW&6,,,,,+1000!!!!

  6. chinatraderjmr

    June 23, 2015 at 7:06 pm

    Fools don’t usually become CEO’s of huge companies but Anderson is the exception. DL has ONE flight to Dubai and as are most DL flights, its not a pleasant experience. I want what I pay for and the Gulf carriers give me more for my money then the American carriers do. Its called capitalism and how ridiculous for an American carrier to make up the crap they do to try to reduce competition. The so called “white” paper that the American carriers spent millions of dollars putting together that supposably shows how unfair the playing field is mentions customers “US” exactly ONCE!!!!! DL’s Anderson (and to a lessor extent UA and AA) should perhaps spend their time and money more wisely, making their airlines better instead of crying about how much better other airlines are

  7. jallred6

    June 23, 2015 at 8:33 pm

    Funny that Anderson cites Detroit vs. Japan 20 years ago, as he has the same problem now — just as American auto makers got their *ss kicked in innovation and quality, so too is Delta behind the ME3.

    Stop Whining, Mr. Anderson, and start competing.

  8. flyerslc

    June 23, 2015 at 8:44 pm

    Complete arrant nonsense. The reason that the American car companies lost in the 80’s and 90’s was because the product was inferior. Period. If you had a choice between buying an inferior product that put your family at risk and one that worked well without questions, there was no choice. So we can have our tax dollars subsidize incompetence and then bail out the company when they ultimately fail or stop listening to this self-serving anti-free market garbage.

  9. DL172

    June 23, 2015 at 8:48 pm

    The U.S. Automobile Industry was vastly inefficient and lacked innovation compared to their Japanese counterparts. Japan produced cars better than we did, simply put. So Middle East carriers, produce a better quality service and Anderson wants uncle sam to step in? Otherwise, Delta would have to compete and become a better airline….oh no….the horror. Welcome to capitalism it’s the best system we know about. Protectionism is for people, who can’t compete.

  10. bigbuy

    June 24, 2015 at 4:20 am

    Wonder if Mr. Anderson would be kind enough to cut a check to the taxpayers who bought reinforced cockpit doors for his airline after 9/11?

  11. Analise

    June 24, 2015 at 6:32 am

    What a load of garbage. Delta should focus its energies on improving its product…like not flying old 757s to CDG from JFK. Ripped up seats and nasty flight attendants are American airlines’ bane. Improve the product and the people and you will get the customers.

  12. Sabai

    June 24, 2015 at 8:20 am

    Oh cry me a river. Detroit had its lunch eaten by Japan while whining about unfair labor costs. Japan then moved its factories to the US and still kicked GM’s butt. Delta (and the others) are screwing their pax with fees, making record profits, and still complains about “foreign” competition.

    Screw you Richard.

  13. JohnnyRockets

    June 24, 2015 at 8:55 am

    Give him a break, he is just trying to keep his job.

    If ME3 invades the US, wouldn’t we ditch the legacies?

  14. cmd320

    June 24, 2015 at 9:17 am

    This has nothing to do with open skies and everything to do with DL (and UA and AA for that matter) offering an inferior product. Mr. Anderson loves to play the victim and compare his company with the automotive industry, however he still has an advantage of being protected in the domestic market unlike auto makers. Hopefully we will see that end sooner rather than later.

  15. aristotled

    aristotled

    June 24, 2015 at 4:26 pm

    A lot of great observations here folks. I’ll repeat some for solidarity reasons…Anderson and the other legacies needs to step up their game. Emirates has already begun advertizing on youtube and offers many flights in the US from a number of cities and this will certainly increase and expand. The ads on youtube are quite good…they show how US air travel USED to be and how the customer was treated so well and ate well on board, etc…. then they explain how it can be that way again…right now! I am frankly sick and tired of inferior service for inflated prices. It is time to compete agressivley instead of whine about it. Get your head out of the sand, Anderson, and face reality. Denial is not a river in Egypt, but you might need to give up your job due to a superior airline from that region. Dr Deming, an American, was the one who, in 1950, boosted the crippled Japanese to the point where they defeated Detroit in the 70’s – 80’s… Americans can do this for US airlines. Looking forward to it.

  16. PaulMCO

    PaulMCO

    June 24, 2015 at 6:17 pm

    Let us talk about the subsidies that Delta gets.
    Who paid for Delta’s shuffling off it pension liabilities on the American taxpayer after its stint in Bankrupcy??
    Who forces US Contractors to fly American carriers?
    Same with freight for US government contracts.

    Are these not subsidies.

    I would ask the CEO to open their books to see what Tax subsidies that the city of Atlanta and State of Georgia are chipping.

    I am no fan of US carriers. I love the fact that one complaining being AA has zero flights anywhere in the Middle East or anywhere these airlines service in ME, Africa or India/Pakistan. The others like UA has one flight to Dubai and Kuwait primarily for the U.S. Government money. They DQed service to Doha last year.

  17. UncleDude

    June 25, 2015 at 8:51 am

    Anybody any idea how much Chapter 11 by NW/DL/UA/CO/AA cost?

    Also how much have the New Gulf Sates Airlines spent with Boeing over the past 40 years. EKs last order with Boeing alone was more than their alleged Subsidy

    http://www.emirates.com/us/english/about/news/order-boeing.aspx

  18. PaulMCO

    PaulMCO

    June 25, 2015 at 12:05 pm

    According to Emirates under the blanket of Chapter 11 of US bankruptcy law, United got US$44 billion, Delta US$15 billion and American Airlines US$12 billion. This primarily debt relief. Whether you consider this a subsidiary or not open and debatable. You can look at the state owned European airlines too. LH, AF, KLM, Swiss all have taken state subsidies going back to the 1980’s.

  19. Babu

    June 28, 2015 at 2:43 am

    Why does this bozo say the ME3 receive ILLEGAL government subsidies? What’s ILLEGAL about it?

    And frankly, my dear, I don’t give a damn. I care about the product and experience I receive in exchange for thousands of my dollars. ME3 (and Asian and European) carriers win every time.

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