Last updated: 01:07 PM ET, Thu July 23 2015

Economist Says Gulf Airlines Create Disparity

Airlines & Airports | Rich Thomaselli | July 23, 2015

Economist Says Gulf Airlines Create Disparity

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A new white paper by a noted aviation economists finds that the continued expansion of Middle East airlines into the United States is threatening service and access for communities across the nation.

In the paper, entitled “Violations of ‘Fair and Equal’ Open Skies Agreements Threaten Large and Small American Communities and their Access to the Global Air Transportation Network,” William Swelbar examines how Qatar Airways, Etihad Airways and Emirates are diverting passengers from U.S. carriers, creating potentially devastating economic impacts to domestic markets.

The big three U.S. airlines – American, Delta and United – have alleged that their three Gulf counterparts have accepted $42 billion in government subsidies over a 10-year period, distorting the market.

Swelbar, the executive vice president at InterVISTAS Consulting, Inc., and a research engineer at MIT’s International Center for Air Transportation, concludes that subsidized Gulf carriers are shifting passenger traffic away from U.S. air carriers without generating new demand, thereby threatening the viability of nonstop flights and service to local communities in the U.S.

“With each new U.S. gateway that the subsidized Gulf carriers enter, there will be more and more smaller communities that will see their traffic numbers dwindle and their domestic services threatened as international passengers drive directly to these gateways to access subsidized Gulf carrier flights,” Swelbar wrote.

Swelbar says the market is distorted by a rampant increase in subsidized Gulf carrier capacity, beyond what regional demand would dictate; a reduction in passengers traveling on U.S. airlines to key local and connecting markets; a shift of connecting passengers from U.S. airlines to subsidized carriers; and a reduction in U.S. airline service, due to the reduction in local and connecting passengers.

“The U.S. carriers are not asking for an end to Gulf carrier service, or an end to competition with foreign carriers,” Swelbar wrote. “Competition is necessary to a healthy market and brings value to consumers and businesses. More importantly, the U.S. carriers are not asking to undo the Open Skies policy that has benefitted U.S. consumers and communities in the overwhelming majority of cases. They simply insist that competition with Gulf carriers is conducted in a way that meets the Open Skies agreement of ‘fair and equal.’ ”

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