Last updated: 03:12 PM ET, Fri April 17 2015

What Fate Awaits Gulf Airlines if U.S. Revisits Open Skies?

Airlines & Airports | American Airlines | Rich Thomaselli | April 17, 2015

What Fate Awaits Gulf Airlines if U.S. Revisits Open Skies?

Now that the Obama administration has agreed to investigate claims by U.S. airlines that Middle East countries are subsidizing their carriers, creating an unfair advantage on international routes, it begs the question:

What is the fate of Emirates, Etihad and Qatar airlines if the U.S. government agrees to revisit terms of the Open Skies Agreement?

Ask both sides and it’s hard to tell. asked Kevin Mitchell that very question. Mitchell is the president of the Business Travel Coalition which, along with the U.S. Travel Association, is the biggest supporter of Open Skies and says the rapid rise of the Gulf airlines has created competition in the marketplace, lower fares and better service.

Mitchell’s answer to what the fate of the Gulf airlines would be was an email detailing an exchange between Jeffrey Dastin-Thomas of Reuters News Service and Delta Airlines CEO Richard Anderson on Delta’s earnings call.

Dastin-Thomas: Could you elaborate on the exact changes Delta might like to see to Open Skies agreements if the United States asks for consultations with the Qatar and UAE?

Anderson: Yeah. This is Richard Anderson. What we have asked for is consultations and that those consultations would lead to some accommodation that takes into account the $41 billion of subsidies that have been provided to the United Arab Emirates and Qatar. And that would be with respect to the routes that are flown between those countries and the U.S. and with a particular focus on fifth and seventh freedoms. So we've land our case out (sic) to the United States government. They're taking it seriously. We're in the process of answering questions with them. And the end results needs to be like the Chinese steel case or agricultural cases that the U.S. frequently brings, where you come up with remedies that will address a subsidy number that is actually the largest subsidy number I believe that has ever been proven in a WTO case.

Dastin-Thomas: And just to clarify, so might there be a clause discussed about capacity dumping or price dumping?

Anderson: Correct

Delta, American and United airlines, in association with several powerful industry unions, formed the Partnership for Open & Fair Skies and presented a 55-page white paper to the Obama administration detailing the level of subsidies the Gulf airlines have received.

Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies, told today that the U.S. airlines are not looking to put the Gulf airlines out of business or to cut existing routes.

“We’re asking for our government to ask them for consultations, which is allowed for under the Open Skies Agreement,” she said. “We’re asking them to put a freeze on existing routes. We’re asking that while they hash this out, please make sure (the Gulf airlines) do not add routes.”

To clarify, the "freeze" is not to suspend current routes being flown by Emirates, Etihad and Qatar, but to freeze routes already in place as the only routes they can fly – and prevent new flights to new or existing destinations from being added while discussions take place.

“What’s here today,” Zuckman said, “would stay.”

The Gulf airlines appear to be sensing a shift worldwide, however – Air France and Lufthansa, much like the U.S. airlines, have asked the European Union to look into the subsidy issue – and are adding new routes seemingly every week.

Emirates, for example, will start additional flights to Seattle and Boston, and recently announced a new route between Dubai and Orlando.

And while nobody will say anything officially, there is much rumor and speculation in the airline industry that one or more of the big three Gulf airlines will add new routes to Minneapolis, Philadelphia and Detroit.

“We haven’t taken a position on what our government should do beyond a freeze,” Zuckman said. “Our position is that this is something the government should work out with the governments of the United Arab Emirates and Qatar.”


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