Open Skies Campaign Renewed to Rein in Gulf Carriers By Airlines in the United States

M any of the players are different; but the campaign known as the Open Skies debate to rein in the three main carriers based in the Persian Gulf region by the three largest airlines based in the United States continues, as executives seek to meet with Rex Tillerson — who has just been confirmed and sworn in as the new secretary of state in the United States.

Open Skies Campaign Renewed to Rein in Gulf Carriers By Airlines in the United States

“The issue took on new urgency last month when one of the fast-growing Middle Eastern carriers, Emirates, announced plans to begin a new route between Athens, Greece, and Newark, New Jersey, just outside New York City”, according to this article written by David Koenig of the Associated Press. “Such flights would entirely bypass Emirates’ home nation, the United Arab Emirates.”

Doug Parker — who is the chief executive officer of American Airlines — is reportedly concerned that if the carriers based in the Persian Gulf are permitted to fly routes such as Dallas-Fort Worth to Paris, “it makes our ability to fly that route incredibly difficult,” and shorter flights that feed passengers to Dallas-to-Paris airplanes could also “begin to unwind,” according to the aforementioned article. Allowing carriers based in the Persian Gulf to “operate more such flights would pose a threat to U.S. airlines.”

Casualties have already occurred. Delta Air Lines was forced to cancel operating flights between Atlanta and Dubai effective as of Thursday, February 11, 2016. According to this article written by Kate Modolo of Delta News Hub for Delta Air Lines, “The announcement comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and heavily subsidized airlines, and less than a month after Delta reduced service between the world’s busiest airport and the Middle East’s largest hub.”

The Open Skies Debate

The three legacy airlines of the United States have alleged almost two years ago that Qatar Airways, Emirates Airline and Etihad Airways received greater than $42 billion in supposed illegal subsidies from their respective governments in order to grow their airlines, resulting in enabling those airlines to offer artificially lower fares and “violating so-called open-skies treaties” — and the Open Skies debate has been rather scrappy at times, with allegations launched from both sides.

Spokespeople for Qatar Airways, Emirates Airline and Etihad Airways have repeatedly denied receiving government subsidies; and they have formed alliances with carriers such as JetBlue Airways, which was awarded the government contract for 2016 on the Washington-Dubai route and the government contract for the New York-Milan route — but those routes are actually serviced by Emirates Airline, as neither Dubai nor Milan are destinations served by JetBlue Airways, which reportedly opposes renegotiating the airline treaties.

Emirates Airline launched service on the flight route between Milan and New York back in 2013; but the airline did not add other flights after the airlines in the United States voiced their claims of unfair government subsidies.

The Partnership for Open & Fair Skies — which lobbies for American Airlines, Delta Air Lines and United Airlines in their fight against the troika of Mideast Gulf carriers known as Emirates Airline, Etihad Airways and Qatar Airways — had accused the General Services Administration of the federal government of the United States of violating a law known as the Fly America Act against air travel for government employees funded by taxpayers.

Trouble on the Horizon for Persian Gulf Carriers?

In this article, I wrote that “Perhaps I am naïve; but whatever ‘subsidies’ Qatar Airways, Emirates Airline and Etihad Airways might be receiving will not last forever; as no entity has an unlimited amount of funds. I actually agree that if the airlines of the United States — which are generally currently enjoying record profits of billions of dollars per quarter — and Europe want to face off with those three airlines, then they need to improve the products and services they offer to match theirs.”

I have also written about the possibility that lower oil prices may be a crucial test for the viability of carriers based in the Persian Gulf.

The “cracks” are already starting to show: Etihad Airways experienced substantial losses to due to the global expansion strategy of James Hogan — whose departure from Etihad Airways as its chief executive officer has been recently announced — during which Etihad entered into expensive equity investments in several international airlines around the world — including Alitalia, airberlin, Air Serbia, Jet Airways, Air Seychelles, and Etihad Regional.

When James Hogan became the chief executive officer of Etihad Airways in 2006, the airline had a fleet of 22 airplanes. Today, the number of airplanes in the fleet of Etihad Airways totals greater than 700.

According to this article written by Benjamin Zhang of Business Insider, “Hogan — along with CFO James Rigney — will leave Etihad in the second half of 2017 to join an as-yet-unnamed investment firm.” The article also cites cheap oil prices and the appointment of Donald Trump as president of the United States as other factors which may impede upon the success of Etihad Airways.

Summary

Some consumer advocates side with the carriers based in the Persian Gulf, claiming that competition leads to lower fares — and that may be true…

…but I am a firm believer in letting the free market determine the fates and futures of airlines — no matter which “side” they are on — and the inequities alleged by carriers based in the United States seem to show signs of weakening without intervention by the federal government of the United States.

Even if Qatar Airways, Emirates Airline and Etihad Airways are subsidized by their respective governments, those subsidies are not unlimited and will not last forever.

If Qatar Airways, Emirates Airline and Etihad Airways are perceived by customers to be superior when compared to airlines based in the United States, then perhaps American Airlines, Delta Air Lines and United Airlines should further improve the products and services they offer to customers to narrow the playing field.

As I wrote in this article on Thursday, March 19, 2015:

I have recently flown as a passenger seated in the economy class cabin on both Etihad Airways and Delta Air Lines — both on transatlantic flights. In terms of product and certain aspects of service, I would have to give the nod to Etihad Airways — but it does not exactly blow the product offered by Delta Air Lines “completely out of the water.” In terms of customer service both on and off of the airplane, Delta Air Lines is the clear winner, in my opinion.

What I am attempting to say is that each airline should compete based on its strengths — whether they be service, price, product, frequent flier loyalty program or other factors. Stop involving governments and wasting the time and money of taxpayers to further agendas intended to artificially affect the commercial aviation market and just get down to the business of serving your passengers safely, comfortably and efficiently…

…and this goes for airlines on all sides of the Open Skies debate.

To the airlines based in the United States: how about taking some more of those profits and further reinvesting them to be more competitive with the carriers based in the Persian Gulf?

Better yet, how about funneling some more money into improving information technology to avoid system meltdowns and interruptions — such as this one by Delta Air Lines in August of last year; this one by United Airlines last month; and this one by Delta Air Lines earlier this week? “All airlines are having problems with their Information Technology (IT) systems”, according to this article written by Charlie Leocha, who is the chairman and founder of Travelers United, which is an advocacy membership organization that represents all travelers. “In the last six months, American, Delta, Southwest, and United have all faced airline IT failures. The biggest disasters struck Delta Air Lines as they were forced to ground all flights twice during this period. The “wake-up call” has not seemed to work.”

In any case, I do not believe that Delta Air Lines, United Airlines or American Airlines should fear the Middle East carriers as much as has been expressed over the past couple of years.

Photograph ©2015 by Brian Cohen.

One thought on “Open Skies Campaign Renewed to Rein in Gulf Carriers By Airlines in the United States”

  1. GUWondee says:

    The US3 see a protectionist (at least in rhetoric) US President as an ally to enable them to fleece American consumers by further restricting competition.

    EU-US online travel booking searches seem to have fallen this week over comparable periods, and that is despite the macroeconomic situation having been pretty stable in the eurozone. The US3 may find that they don’t need politics to try to chase away the GCC3 in part, but the economics alone of a more competitive market won’t satisfy them. That and they know that Trump is looking for another opportunity to tweet to the world that he is saving American jobs — even when he isn’t.

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