New Report: Majority of Gulf Carrier Routes to US Lose Money
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A potentially game-changing new report, commissioned by the lobbyist for the big three U.S. airlines, claims that the majority of flights to America by Middle East Gulf airlines are losing money.
With the Obama administration still pondering whether to re-open negotiations of the Open Skies Agreements with the United Arab Emirates and Qatar, the report could have an influencing effect for those who want to curtail further expansion into the international market from Gulf carriers Emirates, Etihad and Qatar airlines.
The report was prepared by GRA Inc., an independent aviation economics firm, at the request of the Partnership for Open & Fair Skies. The Partnership represents American, Delta and United airlines as well as several dozen unions and chambers of commerce, which allege that the Gulf airlines receive subsidies from their respective governments.
All three Gulf carriers have denied the charge.
In addition to asking the administration to request new consultations with the two foreign governments, the Partnership is also asking for an immediate freeze on the introduction of new passenger service by the Gulf carriers during these consultations.
The findings by GRA, contained in a report entitled "Gulf Carrier Profitability on U.S. Routes," alleges that of the 23 routes operated by the Gulf carriers to the United States in 2014, 19 have lost money. The combined losses for the three carriers on these routes average -14.4 percent; more than half of the routes showed losses of more than 20 percent.
The authors concluded that “our findings indicate that the three carriers have over-expanded in U.S. markets beyond levels one could justify from the operating results. No individual Gulf carrier shows profits on more than 30 percent of the markets it operates to the U.S. The loss margins in many markets would not be sustainable for a private company, nor would a private company be planning to expand in this theater.”
“Without the blank checks from their governments, the Gulf carriers would be grounded,” said Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies. “Meanwhile, the U.S. carriers are being forced off routes because of the Gulf carriers’ unfair competitive edge. This new information shows that it’s time for the Obama administration to enforce our Open Skies agreements with the UAE and Qatar.”
Zuckman was referring to Delta’s decision last month to cancel nonstop service between Atlanta and Dubai, saying the decision “comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and subsidized airlines.” The Gulf carriers quickly shot back, noting that none of them offer service on the Atlanta-Dubai route.
TravelPulse.com reached out to all three Gulf airlines for comment. None had responded by publication time.
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