GULF COUNTRIES: Gulf Airlines Concede Huge Subsidies

Delta Air Lines (Atlanta) is striking back with a new rebuttal in the on-going dispute over alleged government subsidies between the U.S. “Big Three” (American, Delta and United) and the Gulf “Big Three” (Emirates, Etihad and Qatar). Here is Delta’s new statement:

Gulf carriers have effectively conceded they have received tens of billions of dollars in subsidies and other benefits from their governments. That’s just part of what the Partnership for Open & Fair Skies revealed Monday in its 400-page response to the U.S. Department of Transportation that disproves statements to the contrary by Emirates, Etihad Airways and Qatar Airways, and demonstrates real harm to U.S. carriers and jobs.

The Wall Street Journal reported Monday, “The Abu Dhabi government last year injected $2.5 billion into Etihad Airways … in violation of air treaties with the U.S. government. The previously undisclosed cash injection is detailed in state-owned Etihad’s financial statements, which were made public on Monday by the Partnership.”

The article quoted Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies that represents Delta, American, United and several labor groups, including the Air Line Pilots Association.

“Etihad’s own financials prove that it is not a commercially viable enterprise and owes its continued existence to massive government subsidies from the United Arab Emirates,” Zuckman said.

The Street on Tuesday also cited the Partnership’s filing when it reported on harm Gulf carriers are causing U.S. airlines and their partners.

“In four U.S. gateway cities – Boston, Dallas, Seattle and Washington, D.C. – the combined decline in the year after Emirates began service to its Dubai hub ranged between 8 and 21 percent,” the article stated.

Zuckman again was quoted: “Not only have the Gulf carriers failed to meaningfully stimulate new traffic, but the data clearly show losses — that entry by a Gulf carrier into a U.S. gateway city is followed by an actual decline in U.S. carrier bookings. The subsidized Gulf carriers are distorting the global marketplace, harming the U.S. airline industry and threatening American jobs and airline service to communities across the U.S.”

In a Q&A with Politico this week, Delta CEO Richard Anderson explained how long-standing U.S. trade policy is relevant to this issue:

Normally when you have a bilateral trade relationship, whether it’s for aviation or steel or agricultural products, two countries enter into a bilateral trade negotiation so that both of them can stimulate the marketplace and enjoy access and enjoy the opportunity in kind of a roughly equal way, both parties. Their economies end up improving.

In this case, it’s been almost all a predominant share shift away from U.S. carriers onto the United Arab Emirates and Qatar traveling over Dubai, Abu Dhabi and Qatar to the Far East, to India and the Southeast.

Do you think it would be a whole lot better if we let foreign countries dump their agricultural products in here? Grocery prices would be lower, right? And why don’t we let steel companies? Why do we take any action? … And if we let steel in, General Motors’ and Ford’s car prices will go down.

That’s not been our trade policy. What our trade policy has been is to try to find that reasonable middle ground to make sure you don’t have any outliers in terms of dumping because of government-subsidized capacity. That’s why I think there’s a reasonable accommodation here with our government.

In January the Partnership issued a report illustrating that the three Gulf carriers have received more than $42 billion in subsidies and other benefits over the past decade from their home governments in violation of bilateral Open Skies policies.

The departments of Transportation and Commerce opened an official docket to collect public comment on the issue in June, to which thousands of submissions were made by the Aug. 3 deadline, including those by Gulf carriers that attempted to rebut, but did not disprove, massive government subsidies and other benefits.

Over the past several months an array of stakeholders including airline employees, mayors, governors, prominent aviation economists, business leaders, and members of Congress have weighed in, calling for the U.S. government to quickly open consultations with the United Arab Emirates and Qatar to ensure Open Skies agreements are being adhered to so all airlines can compete on a level playing field.