Last updated: 02:53 PM ET, Mon August 31 2015

Delta: Gulf Airline Subsidies Are For Economy

Airlines & Airports | Delta Air Lines | Rich Thomaselli | August 31, 2015

Delta: Gulf Airline Subsidies Are For Economy

Delta Air Lines said today the subsidies that Persian Gulf carriers receive from their respective governments are not to grow the airlines themselves, but instead to grow the economy in the United Arab Emirates and Qatar.

Ben Hirst, Executive Vice-President and Legal Counsel for Delta, made his remarks this morning at the Boyd Group’s 20th annual International Aviation Forecast Summit at the Bellagio Hotel and Casino in Las Vegas.

Hirst, who said he was speaking on behalf of American and United airlines as well, said the goal of the big three U.S. airlines was not to drive their Persian Gulf counterparts out of business but to create a level playing field as per the Open Skies Agreements.

“The reason for the subsidies is to use the growth of air transportation to help the economy diversify beyond oil,” Hirst said in his speech.

Delta, American and United have alleged that Emirates, Etihad and Qatar airlines received $42 billion in government subsidies between 2004 and 2014, distorting the international marketplace. He noted for instance, that China, with a population of 1 billion, has 61 widebody aircraft on order from the two major manufacturers. The UAE and Qatar, with a combined population of just a million-and-a-half residents, has 588 widebodies on order among Emirates, Etihad and Qatar airlines.

“We’re ready to compete with anybody but on a level playing field,” Hirst said “I mean, Etihad, which didn’t even exist 10 years ago, is the 13th largest airline in the world right now.”

Hirst insisted to moderator Michael Boyd that “we’re not trying push these guys out of business.”

But they do want the Obama administration to open consultations with the two governments.

“We think we clearly established a violation of the open skies agreement,” Hirst said. “The governments need to sit down and come to a reasonable agreement.”

That doesn’t seem likely. While Hirst said the Persian Gulf airlines have admitted to receiving government money, Emirates, Etihad and Qatar have all termed it as government loans that need to be paid back.

The Gulf carriers have also said U.S. airlines received their own subsidies with bailouts in the aftermath of the Sept. 11 terrorist attacks.

“Chapter 11 is not a subsidy,” Hirst said. “Shareholders take it in the shorts in bankruptcy. That is not a government subsidy.”

Hirst said that if the administration can’t get the governments of Qatar and the UAE to sit down and talk, “There are other remedies that can be pursued if reasonable minds can’t reach an agreement. We will pursue them down the line.”

He did not say what those remedies are.

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