Persian Gulf Carriers

Big U.S. Airlines Lobby Against Persian Gulf Carriers

Persian Gulf Carriers

Chief executives of the three largest U.S. airlines said they are pressing the U.S. government to modify or kill air treaties with two Persian Gulf nations because of what they say are subsidies and government industrial policies for three fast-growing carriers from the region that are distorting global air transportation.

The heads of American Airlines Group Inc., United Continental Holdings Inc. and Delta Air Lines Inc., said in a joint interview on Thursday that the three state-owned Gulf airlines have received $42.3 billion in subsidies since 2004. The executives say that has helped Emirates Airline, Etihad Airways, and Qatar Airways to expand globally by stimulating traffic through their hubs–and, lately, by targeting growth to U.S. airports, where they can fly and set rates freely thanks to “open skies” treaties with the United Arab Emirates and Qatar.

The routes from Qatar, Abu Dhabi and Dubai to the U.S. haven’t produced a meaningful increase in passenger traffic, the U.S. airlines said in a 55-page briefing paper being circulated on Capitol Hill. Instead, the new routes “merely serve to displace the market share of U.S. airlines.”

Emirates President Tim Clark said in a recent interview that the U.S. airlines’ claims are “outrageous, unsubstantiated (and) incorrect.” He said his company isn’t dumping capacity or selling below cost, and is profitable on every route it operates to the U.S. “Tell us where the subsidies are,” he said. Etihad and Qatar declined to comment.

U.S. airlines have been alarmed by the Gulf carriers since at least 2012, worried about losing some of their most lucrative International passengers and alarmed by the big buildup of U.S. routes targeted by their rivals. United, Delta, the U.S. trade group Airlines for America and the largest U.S. pilot union, Air Line Pilots Association International, during 2013 launched a barrage of legal and political challenges, and Delta suggested that the U.S. revisit its air treaties.

But this latest effort, sponsored by the three leading international U.S. airlines, is the loudest and most direct response to what they see as a growing threat.

Jeff Smisek, CEO of United, said the three Gulf carriers “are not normal airlines. They’re arms of the state.” Open-skies treaties, of which the U.S. has signed some 111 since 1992, are premised on airlines on both sides receiving access, but on a level playing field and free of subsidies, he said.

Airlines in Europe already have been hurt by the rapid growth into their markets by the Gulf airlines, said Doug Parker, CEO of American. “We don’t want to see it get to the point (in the U.S.) where it is in Europe.”

Richard Anderson, CEO of Delta, said the U.S. airlines’ efforts are like those by steelmakers trying to stop imports of deeply subsidized steel, or agriculture companies trying to stamp out subsidized imports. He said the U.S. airline initiative is “tried and true” trade-policy remedy.

The three U.S. CEOs said they met last week with representatives of the White House, U.S. Trade Representative and the Departments of Transportation, State and Commerce. Those agencies weren’t immediately available for comment. United’s Mr. Smisek said the meetings went well and follow-ups are being scheduled.

Mr. Smisek said it has taken a couple of years for the airlines “to scour the planet” with forensic accounting to document the three Gulf airlines’ financial records. The U.S. airlines say they have identified government grants, interest-free loans, free land, passenger-fee exemptions, subsidized airport infrastructure and corporate-tax holidays that, they claim, has enabled the Gulf airlines to surmount huge accumulated losses and order huge numbers of new widebody jetliners.

The information “is new…and compelling and clearly shows there has been subsidization of these carriers,” said American’s Mr. Parker.

Emirates, now the No. 1 international airline by capacity, has said often that it files its financial statements every year, audited by Price Waterhouse Coopers. Qatar and Etihad deny that they are subsidized.


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