Arabian airlines are at odds with U.S. carriers after the Legacy Three asked the White House to reconsider “Open Skies” agreements.
With the “big three” taking their regulation pleas to the White House, the stage is set for a showdown between American legacy carriers and luxury carriers of the Arabian Gulf. Bloomberg reports that the CEOs of America’s three legacy carriers — Doug Parker of American Airlines; Richard Anderson of Delta Air Lines; Jeff Smisek of United Airlines — met with Obama administration officials to request a change in the “Open Skies” agreements with Gulf nations.
Thirty-five years after the Chicago Convention, the Carter administration began pursuing Open Skies agreements with nations around the world for reciprocal air traffic. Today, the U.S. maintains these agreements with more than 100 nations, including every European state and many nations of the Gulf Peninsula.
According to the State Department, the established Open Skies agreements promote “increased travel and trade and spurring high-quality job opportunity and economic growth.” However, the heads of U.S. legacy carriers believe this promotion of international growth is hurting American carriers, not helping them. In their request to the White House, the three CEOs claimed the benefits of Open Skies agreements that are reciprocally extended to other nations hinder airline competition.
According to a Bloomberg editorial printed by The Chicago Tribune, the big three are asking for the Obama administration to grant protections to the airlines in select markets, arguing that direct international flights operated by Gulf carriers undermine competition. The executives also claim that the Gulf operators have more to gain from the agreements, considering that the American marketplace is much larger compared to Arabian domestic opportunities.
In addition, the legacy CEOs allege that Gulf carriers have been accepting “hidden subsidies from regional governments” to fly to the U.S under Open Skies agreements with their home nations. Bloomberg reports the three executives claim Gulf carriers — specifically mentioning Emirates, Etihad Airways and Qatar Airways — have accepted $40 billion in government subsidies, resulting in a significant competitive edge for the Gulf carriers.
“[The Gulf airlines] are planning to take market share from international carriers outside of their home countries, and this is all being done in a subsidized manner,” Delta spokesman Trebor Banstetter told Bloomberg. Neither American nor United provided immediate commented.
The legacies’ claims have been vehemently denied by Emirates CEO Tim Clark. According to Clark, although Emirates received some help in startup costs in 1985 and a single $88 million investment — all of which has been repaid through combined dividends exceeding $2.8 billion — the airline has not received any additional support in government subsidies or other assistance.
“I am surprised by reports that the three largest U.S. carriers — each of which was a beneficiary of America’s unique Chapter 11 bankruptcy reorganization law — have presented a case against open skies access for some airlines including Emirates, based on claims of subsidies,” Clark said in a statement to FlightGlobal. “We are very interested to see how the figure of ‘$40 billion of government subsidies and benefits’ was calculated.”
Etihad and Qatar Airways did not provide a comment to the media. While the Department of Transportation acknowledges the meeting with the executives took place, officials did not provide comment to FlightGlobal. In addition, the administration provided no timetable as to if — or when — action on the meeting may be taken.