It looks like American, Delta, and United are getting a little nervous about those fast-growing carriers in the Middle East. It’s bad enough that the three have now banded together to push on the US government to renegotiate open skies treaties with those countries. From what’s known publicly, this seems like a bad idea. So either they’re dumb, or they know more than we do.
The US has been the world’s biggest advocate of open skies treaties for two decades. It has signed more than 100 of them since 1992. What does that mean? An open skies agreement means that airlines of one country have the right to fly to the other country without restriction* and vice versa. I put an asterisk there because there are always non-governmental restrictions that get in the way, like slot scarcity at JFK or something like that.
But the point is that you lift the shackles of government regulation off the air traffic between two countries and let airlines compete on an equal footing. EQUAL is the word that American, Delta, and United are currently fighting about.
Open skies agreements have been very successful in growing traffic. Think about the silly restrictions that only allowed a limited number of flights on two US carriers and two British carriers between Heathrow and the US before the current open skies agreement with the European Union was signed.
Or, more importantly for this post, think about how traffic has exploded between the US and both Qatar and the United Arab Emirates. Of course, most of that growth has come from carriers based in those countries and not from the US. But it has certainly added a ton of capacity and travelers have benefited greatly.
It’s that huge, one-sided growth that has the US carriers crying foul. Were this any other airline in any other country with even more questionable underlying finances, the US carriers wouldn’t care because there wouldn’t be a credible threat. But this? This is going to get a ton of attention because of what’s at stake.
The argument from the US carriers presumably centers entirely on the issue of a FAIR and EQUAL competitive playing field. They say that these Middle East carriers (Emirates, Etihad, and Qatar) are highly subsidized and have huge advantages. With those structural advantages, it’s just not fair competition.
On the surface, this argument seems rather weak. While Etihad has certainly had gobs of subsidies, Emirates is really just benefiting from coming from a country that strongly supports aviation. There is a huge tax advantage to being based in the UAE, and labor is cheaper. (While flight crews tend to make good money over there, the people on the ground don’t.) It’s hard to argue that different environments make something inherently unfair. Besides, those exist everywhere.
Look at the list of open skies agreements and you can pick out plenty. There’s Jordan, Singapore, Taiwan, El Salvador, Guatemala, Malaysia, Uzbekistan, Pakistan, Burkina Faso, oh hell, you get the point. Companies in one country will always have structural differences than those in another country. Sometimes it’s an advantage, and sometimes it’s a disadvantage. But the US carriers have never complained about these other ones for the obvious reasons I mentioned. There isn’t a threat.
But, especially in the case of Emirates, it’s hard to see how this is a strong argument. And that’s why I assume there’s something that the US carriers know that we don’t. Maybe they’ve uncovered a smoking gun. If not, then they’re wasting our time.
From a customer perspective, the gulf carriers are great. Someone in Seattle today now has a whole world of new single-stop options that didn’t exist before Emirates arrived. You can really say the same for even big cities in the US. The number of places you can fly via Dubai, Abu Dhabi, and Doha is astounding. And the fares are often very good. So travelers love it.
The opposite end of the spectrum is that garbage we see in Canada. Canada is downright draconian when it comes to allowing access to gulf carriers. Etihad, Emirates, and Qatar have 3 flights a week to the entire country. (Etihad and Emirates serve their hubs from Toronto while Qatar serves its hub from Montreal.) They want more access but the Canadian government refuses. That doesn’t seem good.
The US carriers knows that the federal government cares about how the general public will feel about any move. So if the airlines are really making a full court press here, then they really must know something we don’t. The timing is probably also not a coincidence.
Sure, gulf carriers can take a lot of traffic for people going from the US to Africa, Central Asia, India, and Southeast Asia. But to Europe, Asia, and anywhere within the Americas, they aren’t a threat. Or are they?
Emirates started a Dubai-Milan-New York flight that the US and European carriers have been fighting. But Emirates recently won its appeal and the route will continue. Remember, Etihad has been pouring money into failing carriers as well. That means airlines like Alitalia and Air Berlin now have Etihad propping them up. Meanwhile, Qatar bought a sizable stake in British Airways’ parent company IAG. This is just the tip of the iceberg, and it’s why US carriers are so scared. (European carriers have been scared for years.)
What exactly the US carriers are hoping to achieve with this isn’t entirely clear, but we’re going to see a lot of friction in the coming years. The battle has just begun. Let’s see if the US carriers actually have uncovered anything to help their cause.
[Original shark photo and original buoy photo via Shutterstock]
