British Airways, Iberia Exit AEA in Spat Over Gulf Airlines

International Airlines Group (IAG), the parent of British Airways and Iberia has left the Association of European Airlines (AEA) at the end of March in what Aviation Daily described as "the worst clash" among European carriers over how to deal with the growing competition of Qatar Airways, Etihad Airways and Emirates Airline.

AEA has lost British Airways and Iberia as members over the internal controversy on state subsidies paid to Gulf carriers
AEA has lost British Airways and Iberia as members over the internal controversy on state subsidies paid to Gulf carriers

According to the trade paper, the conflict centres on demands presented by Air France-KLM and Lufthansa to limit access to Europe for the Gulf carriers, and to investigate and limit what they perceive as state subsidies to the three airlines.

IAG has taken a completely different approach. IAG CEO Willie Walsh has said numerous times that he has “no issues” with the growth of the Gulf airlines and that he admires them. Qatar Airways has become IAG’s largest shareholder, with a stake of almost 10% as of this year, and has indicated that it would like to own a larger stake, the report noted.

State subsidies exceeding $40 billion
The move coincides with attempts by three U.S. carriers, Delta Air Lines, United Airlines and American Airlines which have launched a massive lobbying campaign in the U.S., alleging that the three Gulf Airlines received more than U.S.$40 billion in subsidies from their governments, which they claim breaches the Open Skies pacts the U.S. has concluded with the UAE and Qatar.

AEA has more or less followed the Air France-KLM and Lufthansa demands, but has denied the notion that it was protectionist. IAG has pulled back on its AEA involvement for some time. Walsh did not attend the last AEA summit in Istanbul late last year.

AEA between two millstones
AEA reportedly has desperately tried to keep both BA and Iberia as members. However, according to industry sources, IAG's Walsh has refused to take phone calls from AEA Chairman Temel Kotil, who is also the CEO of Turkish Airlines, an airline which Air France-KLM and Lufthansa also consider as a massive threat.

In a recent analysis of the US and European claims, Australia-based Centre of Asia Pacific Aviation (CAPA) wrote that the threat posed by the Gulf airlines for European carriers, is quite different from their U.S. peers. "Lufthansa and Air France are vociferously opposed, fearing the loss of valuable east-west sixth freedom flows over their hubs," CAPA said.

CAPA supports the Gulf carrier’s views
"Lufthansa in particular has been the strongest and most active critic of the Gulf airlines, among other things concerned at losing its dominant position in the lucrative Indian transfer market. Lufthansa is also concerned that its near-monopoly position in the German market is challenged by a revitalized Air Berlin, thanks to Etihad’s minority investment in the smaller carrier. It is also affected by the rebirth of Alitalia for similar reasons," CAPA observed.

CAPA also noted that Air France, despite its reservations, has established a relationship with Etihad. And for example, Air France-KLM works with the Gulf airline in their African hub of Nairobi in Kenya.

Describing IAG as "always much more entrepreneurial than its peers", CAPA said that IAG has accepted the new environment, even inviting Qatar Airways into the oneworld Alliance and allowing "a friendly minority share" in IAG.

Hogan keeps on warning Europe
In a related development, Etihad Airways' chief executive James Hogan, following a meeting with European Union's Transport Commissioner Violeta Bulc, has warned Europe that it will suffer if it restricts the access of foreign carriers to its market.

According to Hogan, "The growing resistance to us from a handful of protectionist competitors could have unintended consequences well beyond limiting our development. If our growth is curtailed or our investments in airlines are compromised, the real damage will be to Europe in lost jobs, lost flight connectivity, lost investment in local and national economies and lost consumer choice."

Nol van Fenema

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