Hypocrisy in Subsidy Claims Revealed

Right from the start, the U.S. legacy airlines' relentless campaign against the Gulf carriers has been characterised by an incredible amount of hypocrisy by Delta, American and United. The trio is pressing the Obama administration to freeze all new flights from their three rivals from the Gulf - Emirates, Etihad and Qatar Airways - and revise open skies agreements between the U.S. and the United Arab Emirates and Qatar, because the Gulf carriers are allegedly state subsidised.

U.S. carrier JetBlue commissioned Emirates to operate the services between Washington and Dubai based on the “Fly America Act”  -  photo: JetBlue
U.S. carrier JetBlue commissioned Emirates to operate the services between Washington and Dubai based on the “Fly America Act” - photo: JetBlue

The three Gulf carriers have steadfastly denied these subsidy claims and countered the U.S. campaign as solely based on protectionist motives.
In the past few weeks, a couple of developments have laid bare the deceptive tactics of the three U.S. carriers.
Delta, the most vociferous in its subsidy allegations, has acquired a stake in state-owned and officially subsidized China Eastern Airlines, while American Airlines has quietly grown its partnerships with two of the three Gulf competitors, Etihad and Qatar Airways.

Stop fiddling around with open skies issues, warn some U.S. carriers
The latest to show its true colours is United Airlines, which just last month announced it will exit the Dubai market because the General Services Administration awarded the government contract (“Fly America Act”) on flights between Washington and Dubai to JetBlue. To be clear, the flights will be operated by Emirates, JetBlue’s code-share partner, because JetBlue does not fly to the Middle East. Fly America is effectively a subsidy as it mandates that government employees travel on U.S.-owned and registered airlines. Or in plain language, United will exit the Dubai market because it no longer receives U.S. government preferences and/or subsidies to carry the government business.
Meanwhile, a rival group of smaller U.S. airlines and major air cargo companies again have voiced strong opposition to any attempt to review open skies agreements as demanded by the three U.S. legacy carriers. These critics, as well as several leading travel organizations, warn that meddling with open skies pacts could lead to reprisals, and produce unintended consequences for airlines that have commercial ties with the Gulf carriers or cargo companies that use places like Dubai as global trading hubs.

Mutual accusations of protectionism
“Breaking up open skies would be so harmful and so shortsighted,” said Roger J. Dow, the president of the U.S. Travel Association. “If we cut off growth from the three Middle East carriers, we cut off growth to parts of Asia, India and Africa. It would be the biggest mistake we’d be making.”
And in a joint opinion column for The Hill, top executives of JetBlue, Hawaiian Airlines, FedEx and Atlas Air recently stated that: "It's important to realise this isn't the United States against the UAE and Qatar, it is three U.S. airlines who favour protectionism over competition. Together, our airlines collectively transport more than 42 million passengers annually, ship nearly 8 million tonnes of cargo, and employ 250,000 people; 40 percent more than the Big 3 combined. We understand firsthand how critical the network of Open Skies agreements is for not just U.S. airlines, but also consumers, businesses, and our military."
While there are signs that a resolution by the Obama administration may be near, a decision could still be pushed down the road, mainly because the administration could be unwilling to shake up the current airline status quo.

Nol van Fenema

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