Clash of the Titans: American airlines versus the Gulf carriers

Tim Clark at ATM 2015The big guns of the airline industry are lining up for what could be one of the biggest battles in recent aviation history. On the US side: American, Delta and United. On the Gulf side: Emirates, Etihad and Qatar Airways. The Americans launched the first salvo with a 54 page report supported by over a 1,000 pages of evidence claiming to show that the Gulf carriers have benefited from more than $40bn in allegedly “unfair” subsidies.

On the other side, Etihad has countered by publishing a number of reports claiming that the US “Big Three” have received subsidies themselves in excess of $70bn.

The stakes are high. Sir Tim Clark has said that he would resign were it to be proved that Emirates has received subsidies.

In an interview with me at Dubai’s Arabian Travel Market he was confident that Emirates can “deal a sledgehammer to that report”. The airline has now produced a response in excess of 200 pages, plus supporting evidence. It methodically tackles the allegations made against Emirates and questions the soundness and reasoning of the US document.

Willie Walsh, CEO of IAG, is alone amongst European legacy airlines in dismissing the US claims out of hand.

He has offered support and admiration for the Gulf carriers since long before Qatar Airways became a shareholder in the Group . In its own submission to the US Department of Transport concerning the complaints, IAG highlights the fact that ” There can be few major carriers in the world that have not previously benefited from State support of its business in one form or another”.

I’ve personally witnessed the development of the Gulf carriers over the last 30 years and seen how effective they have become in tapping into the growth markets of the 21st century making good use of the long range capability of their modern fleets.

Whilst the American & European carriers are less well placed geographically to do so, in my view, some have equally been less inclined to seek out new opportunities . There are certainly numerous government funded airlines around the world who have done precious little to demonstrate the same entrepreneurial spirit shown by the Gulf carriers.

On the other hand it has been admirable to watch the US Big Three as they’ve turned themselves around into successful airlines, finally delivering sustainable levels of profitability when just a few years back you might have called them basket cases. It would however be disingenuous to say that this has been achieved without any government financial assistance.

The plaintiffs are the big boys of world aviation, not some playground weaklings. It’s perhaps no surprise that the US Department of Justice recently launched an enquiry into whether they might have it a little too cosy in their own domestic market.

Sadly, I don’t see any winners in the trajectory that this complaint may take, only losers, not least the travelling public. It could be that a real Pandora’s box has been opened. There are wider ramifications too for trade and employment with the Gulf carriers being key customers for Boeing aircraft. Reduced competition and choice seem the only certain outcome if the complaint reaches its natural conclusion.

The Gulf carriers have not surprisingly responded with force. It would be preferable if a way can be found to put hostilities aside and get back to the real business of competing in the market. Regrettably, at the present time this doesn’t look likely.

 

Related to the subject:

See my interviews with:

Also, my article in Harvard Journal of Middle Eastern Politics and Policy.

 

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