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U.S. Airlines Cry Foul as Cash-Rich Gulf Carriers Grab More Business
The Washington Diplomat / July 2015

By Larry Luxner

Several months ago, a clever 60-second radio spot began airing on WTOP, Washington's all-news FM station. It starts with a female announcer warning: “Ladies and gentlemen, please proceed to Gate 17. American jobs now departing for Dubai.”

The advertisement - some would say scare tactic - goes on to describe how the oil-rich states of Qatar and the United Arab Emirates have subsidized their national air carriers to the tune of $42 billion, giving them an unfair edge and threatening the livelihoods of thousands of U.S. airline employees in the process.

Americans for Fair Skies, which paid for the radio spots, has a similar campaign running in newspapers, TV and online. Its president, Capt. Lee Moak, says it's time to “level the playing field” and stop letting the two wealthy monarchies abuse the open skies agreements they signed long ago with the U.S. Department of Transportation.

“In carrying out their dramatic and subsidized expansion, the UAE and Qatar have turned Open Skies on its head and violated both its letter and spirit,” said Moak, a former Delta Airlines pilot. “Instead of letting the market determine prices, frequencies and routes, the Gulf airlines rely on their governments' subsidies and largesse to compete unfairly, including their expansion into markets that would not otherwise be accessible through fair market-based competition, rendering U.S. airlines and their employees a mere regional jet service for the Gulf carriers' massive global network.”

The three airlines financing Moak's campaign are American, United and Delta, while its targets are three hugely profitable Gulf-based carriers: Etihad Airways, based in Abu Dhabi; Qatar Airways, headquartered in the Qatari capital of Doha, and Emirates, based in Dubai - which in addition to boasting the world's tallest building can now claim to have the world's busiest international airport.

In 2014, DXB handled 70.5 million passengers, surpassing London's Heathrow; the brand-new Emirates terminal alone, built at a cost of $8 billion, is the world's second-largest building by floor space and has a capacity for more than 47 million passengers - easily more than the combined passenger volume at Dulles International Airport (21.6 million) and Ronald Reagan Washington National Airport (20.8 million) last year.

All three Gulf carriers serve Dulles with nonstop flights, though the vast majority of passengers originating at Dulles aren't traveling to the UAE or Qatar as a final destination; rather they're flying to India, Pakistan, Bangladesh and points beyond.

In early June, the CEO of Qatar Airways, Akbar al-Baker, threatened to quit the oneworld alliance, a group of 15 airlines that share resources and frequent-flier programs.

“If a major airline that invited us to join oneworld is today restricting us from operating into that country, then I don't need to be part of this alliance. I can do it alone,” Baker said at the International Air Transport Association's annual meeting in Miami. Hours earlier, he warned IATA officials that “any rollback of liberal market access and open skies policies reverberate across the whole world and will lead to retaliatory protectionism.”

American, along with Delta and United, is accusing Qatar of bankrolling its national airline, which in May announced it would begin nonstop service from Doha to Atlanta, Boston and Los Angeles in 2016. In business for only 18 years, Qatar Airways has grown into a mega-airline flying 156 aircraft to 146 destinations around the world, including Abu Dhabi, Dubai, Hong Kong, Mumbai, New Delhi, Singapore and Jakarta - all with excellent connections from U.S. cities.

Tiny Qatar, one of the world's richest countries on a per-capita basis, is already embroiled in controversy over allegations that it bribed corrupt FIFA officials to select the burning hot desert emirate to host the 2022 Soccer World Cup. The three U.S. airlines have written a letter to the secretaries of state, commerce and transportation, expressing dismay that Qatar Airways, along with the UAE's Emirates and Etihad, have been allowed to add new U.S. destinations to their route maps despite the ongoing investigation into the three airlines.

“These aggressive actions make requesting a freeze pending resolution even more urgent, because with every new U.S. flight, the Gulf carriers not only harm U.S. airlines and workers but also make reaching a negotiated solution more difficult,” said the letter, whose sentiments are shared by two European carriers, KLM Royal Dutch Airlines and Lufthansa.

Since 1992, the U.S. Department of Transportation has negotiated some 111 open-skies agreements with foreign governments, but Moak's Americans for Fair Skies says it has problems only with Qatar and the UAE.

Etihad, whose shareholder is the government of Abu Dhabi, insists that “investing in success is not a crime” - especially in an industry that has such high entry costs and slim profit margins. Last year, Etihad, founded in 2003, carried 14.8 million passengers.

“The dark clouds of protectionism are gathering over Europe and the United States,” said the airline's president and CEO, James Hogan, in a recent speech in London. “Five mega-carriers are trying to pull the ladder up after years of having it their way. The people that will really lose if these giant legacy airlines are successful are the millions of travelers benefitting from new choice in the global air travel market.”

Ronen Paldi is the owner of Ya'lla Tours, an Oregon-based agency that brings foreign tourists to Abu Dhabi, Bahrain, Dubai, Oman and other Middle East destinations. He agrees the subsidy argument is nonsense.

“Emirates, which we mostly use for our traffic to the Gulf region and beyond, is a top airline with excellent service. They bring back the meaning of service - both when we deal with them in the U.S. and certainly while on board. That's why they are so successful,” Paldi told The Diplomat.

“The U.S. carriers have lost touch, so when they have a viable alternative, consumers will go where they are treated like royalty. Instead of looking what they have done wrong and Emirates is doing right, the U.S. carriers blame others.”

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