Executive Briefings

Big Three U.S. Air Carriers Square Off Against Top Three Persian Gulf Airlines Over Open Skies Agreements

What began as a slow-simmering disagreement over the use of government subsidies - one that has lasted for years - has recently mushroomed into a thunderhead of angry rhetoric, threats of lawsuits and proposed legislative action to roll back open skies agreements. The major U.S.-based carriers continue to accuse Middle Eastern airlines of exploiting the American market with an unfair advantage.

Big Three U.S. Air Carriers Square Off Against Top Three Persian Gulf Airlines Over Open Skies Agreements

The debate is centered on six major airlines: the top three legacy carriers in the U.S. (American, Delta and United) vs. the three rapidly expanding Persian Gulf-based carriers (Emirates, Qatar Airways and Etihad). While most of the routes in question involve passenger aircraft, the amount of belly space being used to carry cargo is enough to have a profound impact on how airfreight is imported and exported throughout the rest of the world.

In February, representatives from the American carriers met with U.S. government officials to express their discontent with Emirates, Etihad and Qatar Airways, complaining that these "Big Three" Gulf carriers have received $40bn in interest-free loans from their home countries of United Arab Emirates and Qatar since 2004. The Air Line Pilots Association International, the Allied Pilots Association and the Association of Professional Flight Attendants, joined the U.S. carriers in Washington, D.C., to campaign against the Gulf carriers.

The U.S. carriers proposed action to alter the government’s current open skies agreements with the Gulf carriers to limit their ability to operate in the U.S. market. They claim Qatar Airways benefited from billions of dollars in unsecured loans from the state that do not have to be repaid; that Etihad received $6.3bn in direct equity, plus $4.6bn in interest-free loans; and that Emirates was allowed to remove $2.4bn in 2014 oil hedging losses from its books while it received $2.3bn in subsidies for airport expansion in Dubai.

Emirates, Qatar and Etihad have repeatedly denied charges that they receive illegal subsidies.

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The debate is centered on six major airlines: the top three legacy carriers in the U.S. (American, Delta and United) vs. the three rapidly expanding Persian Gulf-based carriers (Emirates, Qatar Airways and Etihad). While most of the routes in question involve passenger aircraft, the amount of belly space being used to carry cargo is enough to have a profound impact on how airfreight is imported and exported throughout the rest of the world.

In February, representatives from the American carriers met with U.S. government officials to express their discontent with Emirates, Etihad and Qatar Airways, complaining that these "Big Three" Gulf carriers have received $40bn in interest-free loans from their home countries of United Arab Emirates and Qatar since 2004. The Air Line Pilots Association International, the Allied Pilots Association and the Association of Professional Flight Attendants, joined the U.S. carriers in Washington, D.C., to campaign against the Gulf carriers.

The U.S. carriers proposed action to alter the government’s current open skies agreements with the Gulf carriers to limit their ability to operate in the U.S. market. They claim Qatar Airways benefited from billions of dollars in unsecured loans from the state that do not have to be repaid; that Etihad received $6.3bn in direct equity, plus $4.6bn in interest-free loans; and that Emirates was allowed to remove $2.4bn in 2014 oil hedging losses from its books while it received $2.3bn in subsidies for airport expansion in Dubai.

Emirates, Qatar and Etihad have repeatedly denied charges that they receive illegal subsidies.

Read Full Article

Big Three U.S. Air Carriers Square Off Against Top Three Persian Gulf Airlines Over Open Skies Agreements