Qatar Airways, the national airline of the Persian Gulf sheikdom, arrived June 26, 2007, at Newark Liberty International Airport for the first time from the tiny nation’s capital of Doha.
“We want to bridge the Mideast with the United States,” said Akbar al-Baker, Qatar Airways’ chief executive at the time.
Since then, the carrier has done just that, with the Persian Gulf state carriers Emirates Airlines and Etihad Airways from the United Arab Emirates.
But now the three largest U.S. carriers and some of their counterparts in Europe are alleging that the three Persian Gulf carriers unfairly built bridges to India, Africa and Asia and are grabbing market share on a global scale while benefiting from government subsidies that may violate so-called Open Skies international agreements.
American, Delta and United said this year that they have completed a two-year investigation of their Persian Gulf rivals and have discovered that the growing carriers have received more than $42 billion in subsidies in the past decade from their governments, an accusation they deny.
The U.S. carriers have delivered their complaints to the State Department, the Transportation Department and other agencies. The U.S. carriers want the federal government to restrict the growth of the Persian Gulf airlines.
“The information in the financial records already in the possession of the U.S. government provides indisputable proof that Qatar and the United Arab Emirates are funneling massive amounts of money into their state-owned airlines in a calculated effort to undermine Open Skies policy and any semblance of fair competition,” Jill Zuckman, spokeswoman for the Partnership for Open &Fair Skies, said in a statement last week.
The partnership is a coalition of the three major U.S. airlines and the leadership of seven unions that represent those airlines’ employees. Its accusations have sparked debate among different camps in the U.S. travel industry, with consumer advocates, air cargo haulers and hotels lining up against the U.S. carriers. The dispute has also created a rift between airlines in Europe, where British Airways, Iberia Airlines and Air Berlin, have withdrawn from a European industry trade lobby over the organization’s stance in support of reining in the Persian Gulf carriers.
In recent years, Qatar and the United Arab Emirates, which would like to diversify their economies, have invested heavily in tourism, real estate and aviation.
Six years ago, a shopping mall with 502,000 square feet of retail space plus an ice rink and underwater zoo opened in Dubai, which derives less than 5 percent of its income from oil.
Abu Dhabi, one of the Emirates, is home to the Abu Dhabi Securities Exchange, the Central Bank of the United Arab Emirates and many multinational corporations. Although, Abu Dhabi is a large oil producer, it has been expanding in financial services and tourism.
Qatar is the world’s wealthiest country per capita because of its oil and natural gas wealth, but it also a growing hub of international commerce and finance.
All three Persian Gulf airlines are geographically well positioned as global aviation hubs because they can reach most of the populated world, nonstop, with Boeing 777s. Emirates flies to nine U.S. cities, Qatar flies to seven, and Etihad to six. Industry experts say the Gulf carriers generally have a price advantage compared with U.S. carriers, and that the service is more attentive.
These airlines have the big three U.S. airlines concerned about plans to expand their reach in the Americas, while also linking European cities with Asia and Africa through their Middle Eastern hubs. Mainly, however, at least so far, they’ve been taking market share from Air France-KLM and Lufthansa, industry experts say.
“The United States carriers are saying there are differences in the Persian Gulf carriers’ relationship with their government, compared with U.S. carriers,” said Mike Boyd, an aviation consultant in Colorado. “The U.S. carriers are saying they have a cost advantage. It may be the Gulf carriers are getting de facto subsidies. We haven’t seen their data yet.
“This could be more than just a little squabble between a few airlines. It could turn into a more global dispute.
Boyd noted that British Airways and American Airlines, which coordinate their service in the North Atlantic with antitrust immunity, are on different sides on the issue.
Emirates recently started service from Dubai to Boston, from where its code-sharing partner JetBlue flies to Detroit, which has a large Arab population. The route has been so successful that Emirates plans to add a second daily Dubai-to-Boston flight, said John Byerly, a former State Department official who headed Open Skies negotiations with the European Union and has became a registered lobbyist for Emirates Airlines.
Similarly, Emirates partners with Alaskan Airlines in Seattle, which allows Emirates customers arriving from Dubai to connect with cities throughout the Northwest.
In 2013, Emirates started flying from Milan to New York, its first trans-Atlantic service.
Qatar Airways, a member of the Oneworld global alliance, has code-sharing agreements with Oneworld member American Airlines and domestic carrier JetBlue at John F. Kennedy International Airport in New York. This allows Qatar to send its customers arriving from Doha to cities throughout the United States with one connecting flight.
Emirates Airlines, founded in 1985, is the world’s largest carrier by international seating capacity and has one of the world’s most modern fleets, according to Bloomberg News, which cited data from carriers. It is the biggest operator of Boeing 777s and Airbus A380s. Qatar Airways ranked 10th last year by international capacity, and Etihad ranked 13th.
Byerly described the Big Three U.S. carriers’ complaints against Emirates as spurious.
“Emirates will show they are not subsidized,” Byerly said in a telephone interview in which he emphasized he was speaking for himself and not on behalf of Emirates. He said Emirates is preparing a “careful, point-by-point rebuttal” to the American carriers’ charges, to be presented “as soon as the analysis can be completed, I hope by early summer.”
The largest U.S. carriers “have attempted to argue that trade law concepts — like those that may apply to solar panels from China — apply to air service agreements,” Byerly said. “They do not.”
“This anti-Open Skies campaign has been brewing for a while,” said Byerly. “Delta has been a prime mover, pressing for a national airline policy where the U.S. would give special preference to the success of its airlines and ignore the tourism and cargo industries and those who want lower fares and better connectivity. That way of thinking is the antithesis of open skies.”
American Airlines, Delta Air Lines and United Airlines did not respond to requests for comment.
Qatar Airways declined to comment, Emirates did not respond to questions, and Etihad could not be reached.
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