Last updated: 03:26 PM ET, Thu June 30 2016

State Department Gives Gulf Carriers a Win in Open Skies Dispute

Airlines & Airports | Josh Lew | June 29, 2016

State Department Gives Gulf Carriers a Win in Open Skies Dispute

Photo courtesy of Etihad Airways

The U.S. State Department has weighed in on the ongoing dispute between U.S. legacy carriers and Gulf airlines, handing domestic carriers a huge setback. While domestic carriers have long held forth the notion that their UAE- and Qatar-based competitors benefit from unfair subsidies from their respective governments, and thus violate current air travel agreements, the Gulf carriers have insisted they are doing nothing wrong. The State Department, it would appear, agrees with them to some extent.

In a decision quietly reached this past Friday  It decided not to set up formal talks with Emirates and its peers, instead suggesting informal discussions, which could take place sometime in July, according to Politico. 

Read More: Foreign Airlines Seeking A Bigger Piece of American Pie

Subsidies or protectionism? 

The U.S. legacy carriers claim that the three Gulf airlines have received billions in government subsidies, which would go against the current set of open skies agreements because it would give the foreign airlines an unfair competitive advantage. The Gulf carriers have continued to deny any wrongdoing.

United, Delta and American have largely pulled out of the Middle East and South Asian markets because they have not been able to compete with Emirates, Etihad and Qatar.  

On the other side of the argument is the idea that the U.S. airlines are using their lobby in Washington to gain an advantage over their competitors. Doing this would also be against the spirit of the open skies agreements. 

No major moves by Washington any time soon

Washington's opinion seems to have fallen closer the the side of the Gulf carriers. Legacy carriers wanted formal talks with Gulf authorities and they wanted the government to put a stop to the foreign airlines’ U.S. expansion while the talks were underway. It appears that kind of move will not happen anytime soon.

The three Middle Eastern airlines combined currently fly about 200 flights per week to 12 US destinations.  

Is it fair to group the three Gulf carriers together?

Qatar Airways has become known for its vocal opposition to legacy carrier’s efforts. The airline’s CEO has, on more than one occasion, sought to provoke Delta Airlines. He famously said that his carrier’s new Doha-Atlanta route would “rub salt in the wounds” of Delta after it canceled service on the route. 

Read More: Qatar Airways CEO Taunts Delta While Announcing New Flight

The other two airlines have not engaged in that kind of rhetoric. Emirates continues to dispute the claims that it receives unfair subsidies from its government. 

President and CEO of Etihad Aviation Group, James Hogan, has said that what his airline is doing is completely fair. He told USA Today, "we believe competition is good. We believe we act fairly. We believe we're a responsible business partner for the U.S."

Hogan also added another angle to the story when he differentiated his airline from the other two Gulf carriers in a Forbes interview. “I’m not part of the Persian Gulf Three either. Etihad is pursuing our own strategy, which is  different. We haven’t created or caused any damage under the open skies agreements between the United Arab Emirates and the United States. We have filed our response with the (U.S.) State Department which is examining the claims of the big U.S. carriers. And we’ll wait to see what they say. It’s  in the hands of the (U.S.) government.” 

More competition is good for travelers

U.S. Travel Association President Roger Dow lauded the State Department’s decision, calling it a victory for travelers as well as for the Gulf carriers. "I am grateful to the Obama administration for not buying into a highly questionable suite of arguments against Open Skies that from the beginning smacked of protectionism, cronyism and an unfortunate allergy to healthy competition.” 
The expansion of the Middle Eastern airlines and their partner carriers has largely been good for fliers from the U.S. These airlines have opened up service to new international destinations that were either not served or lightly served by the Big Three in the U.S. and they have increased competition on important connecting routes. 

For now, Gulf carriers will continue their U.S. expansion. U.S. legacy carriers will undoubtedly keep lobbying in Washington, but it seems like there are a decreasing number of allies in their corner.  


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