For the three global U.S. airlines, the Gulf carriers became a high priority issue because they are taking record deliveries of new widebody aircraft and need to put them somewhere and have decided on the U.S.
American, Delta and United cannot go after the Open Skies treaties that enable this growth, even though the Gulf carriers take advantage of ridiculous deals in which U.S. carriers get to fly to Doha and Abu Dhabi and Gulf carriers get to fly to Chicago, Dallas, Los Angeles, New York and anyplace else they choose.
So the U.S. carriers go after subsidies. They produced a carefully researched report, documenting the subsidies, a masterpiece of investigative accounting. For the past two weeks, the report has been sitting out there for all the world to see. So far, not a single person has disputed a single portion of it in any substantive way.
But so what?
Even though the Gulf carriers absurdly proclaim that they receive no subsidies and that U.S. bankruptcy law is a form of subsidy, and even though the U.S. government does little to nothing to help U.S. airlines financially, subsidy battles are tough to win. Many countries have historically subsidized airlines, particularly startups. The U.S. enabled the birth of our airline industry through contracts to carry mail.
The real question then is can a deal be made. The answer is always.
Despite the rancor, this week Emirates President Tim Clark and Etihad CEO James Hogan both declared during U.S. visits that they have sought cooperation with U.S. carriers. “When I first took over as CEO, we looked into our options for the global alliances – to find we had none,” Hogan said. No global alliance “wanted a Gulf member at that time,” he said.
Clark said that before American’s bankruptcy, Emirates approached the U.S. carrier about a partnership and was rejected, although he did not offer specifics.
Also, regarding Emirates’ controversial Milan-JFK flight, Clark seemed to indicate it doesn’t mean that much to Emirates, declaring that it is “not part of the main facet of our business model.”
That is good because the flight provides a wonderful example of everything that is wrong here. It is a case of an airline that got too much free money, used it to buy too many airplanes with too many seats, and stuck them on routes incompatible with the airline's supposed mission, where they enable fares to fall to unsustainable levels.
That is to say, unsustainable for airlines that must make a profit. It is great for airlines for whom promoting growth in UAE and Qatar is a cause, buying aircraft is a trophy hunt and making money is a whatever.
Here we must ask ourselves, why do we even have three Gulf airlines all doing exactly the same thing?
It is only a rhetorical question. Our aviation world is divided into threes. We have three global alliances with three global U.S. airlines, three major European airlines and three trans-Atlantic joint ventures. It is all so tidy.
It will be tidier still when Qatar, 10% owner of British Airways, joins Oneworld and its JV; Gulf leader Emirates and U.S. leader Delta join Skyteam and its JV, and Etihad joins Star/United/Lufthansa because who wouldn’t want to partner with the operators of the best European hub, the best East Coast hub and the best West Coast hub.
The U.S. government should help by delaying the U.S. growth of the Gulf carriers for a while because unfair competition violates Open Skies deals. One indication is that, at the moment, Gulf carriers seem to have little desire to be in equal partnerships where flying is shared and where capacity can be jointly ramped down during times of slack demand. But let’s be real. Wouldn’t unsubsidized carriers jump at the chance?
Also, let’s get rid of that crazy Milan-JFK flight.
Either it is just chest-pounding by Emirates, operating simply because it can. Or perhaps it is a cry for acceptance into the global airline club.
The solution: Invite them to the party. Spending their subsidies, they have bought their way in.
