Delta CEO: Gulf Carriers Are the Greatest Challenge to Airline Industry, “They’re Governments”
Joe Cortez June 23, 2015
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]
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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.
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.
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
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.
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.