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Open Skies Battle Illustrates Contradictions Among Industry Players

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Open Skies Battle Illustrates Contradictions Among Industry Players

Open Skies Battle Illustrates Contradictions Among Industry Players
July 09
08:00 2015

MIAMI — Here in Washington, D.C., there’s an old saying politics makes strange bedfellows. And in the battle between the Big Three U.S. versus the Big Three Gulf airlines, this saying is being fully manifested.

More than 300 comments have sent in responses to the U.S. Departments of Commerce, State, and Transportation, which are reviewing claims that three Gulf airlines—Emirates Airline, Etihad Airways, and Qatar Airways—have received and are benefitting from subsidies from their respective governments of the UAE and Qatar that are distorting the global aviation market.

Among the more interesting comments came from airports and local communities, some with conflicting views. Chicago O’Hare International Airport, home of and major hub for United Airlines, announced new service to Dubai on Emirates beginning on August 5, 2014. In a press release announcing the new flight, Mayor Rahm Emanuel said: “Chicago welcomes Emirates, one of the world’s largest international airlines, to our city. Air transport links are critical for trade and tourism, and Emirates’ non-stop daily flights to Dubai will only add to our global connectivity and further our goal to host 55 million visitors by 2020, in turn generating jobs not only at the airport but across Chicago’s travel and hospitality industries.”

(Credits: Masakatsu Ukon)

(Credits: Masakatsu Ukon)

And when Qatar Airways started O’Hare flights on April 13, 2013, Emanuel said in a press release:”Chicago is pleased to welcome Qatar Airways’ world-class service to our global gateway, O’Hare International Airport. This new international air service creates additional economic opportunities, increases tourism to our city and strengthens Chicago’s cultural and business connection to the world. This service will generate more than $200 million in annual economic impact and will connect passengers from Chicago to destinations across India, Africa, the Middle East and Asia.”

Qatar_Airways_Boeing_787-8_Dreamliner_A7-BCA_MUC_2015_06

(Credits: Julian Herzog)

But in a May 7, 2015, letter submitted to the docket, Emanuel wrote that while he welcomed the expansion of Qatar and Emirates to O’Hare and continued to encourage international airlines to bring their flights and passengers to our city, he had serious concerns about the unfair government subsidies and benefits the Middle East carriers have received and the impact on the U.S. airlines. “I strongly believe that every airline flying into O’Hare must play by the same set of rules, but currently, that’s not what is happening,” he wrote. “It’s been reported that the Gulf carriers have received over $42 billion in subsidies and other unfair benefits from their governments – subsidies that I know you are aware American carriers do not receive from our government.”

Emanuel wrote that it’s imperative that the U.S. government stand up to protect the domestic aviation industry, which is so important to the economy and the livelihood of hundreds of thousands of workers across the nation. “The three major U.S. airlines employ over 25,000 people in the Chicago area, while the Gulf carriers employ less than 50. Standing by American carriers means standing by hardworking Americans,” he said. “I strongly urge you to open consultations with Qatar and the United Arab Emirates to address this flow of subsidized flights into the United States. Additionally, while the discussions are ongoing, I think it’s important that a freeze is put in place on new routes by the Middle East carriers.

“Left unchecked, these disruptions to the international economy will harm the U.S. aviation industry, leading to service reductions in important hub markets like Chicago and a loss of good American jobs,” wrote Emanuel. “As the burden of competing in an unfair market forces U.S. carriers to cut international routes, the airlines will eventually have to make sacrifices here at home.”

But the city of Orlando, which will receive a flight to Dubai on Emirates beginning September 1, 2015, is supporting the Gulf carriers. In the March 24, 2015, press release announcing the new service, Frank Kruppenbacher, chairman of the Greater Orlando Aviation Authority (GOAA), said “The benefits of this new service will be measured not only financially with a $100 million economic impact annually to the region, but also for decades to come as our business community takes advantage of efficient access to new destinations on several continents.”

(Credits: Julian Herzog)

(Credits: Julian Herzog)

Airport Executive Director Phil Brown called the flight “a landmark new route for Orlando that for the first time offers our customers non-stop service to the high-growth Middle East region with convenient connections to India, China, Africa, and Southeast Asia.” And Gov. Rick Scott (R) said  “We know our tourism industry helps grow our economy and that is why we are investing $145 million at the Orlando International Airport to expand the South Terminal Complex so we can continue to increase domestic and international air service – like the new Emirates flight.”
In a May 1, 2015, letter, GOAA’s Brown and Kruppenbacher wrote that  it is imperative the decision in this matter is guided by the national economic interest , not the narrow self-interest of a few companies.

“Simply put, the ability of Orlando International Airport to attract international passengers and so benefit the Central Florida economy is inextricably linked to Open Skies. Any policy decision which limits or restricts Open Skies access to the U.S. is unwise in our view,” said the letter. “Literally, Open Skies has enabled Orlando to become a global tourism and trade destination with non-stop air service links to Europe, Canada, Mexico, and Central and South America.

“In the absence of this free air service trade policy, Orlando International Airport would be unable to provide the access for international visitors that our local tourism attractions require to sustain the area economy, support tens of thousands of jobs, and realize Central Florida’s potential as the premier leisure destination in the world.”

Within the span of a week in December 2013, Dallas/Fort Worth International Airport — headquarters and major hub for American Airlines — announced flights from Qatar Airways and Etihad; service from Emirates was announced on April 3, 2014. Here are DFW CEO Sean Donohue’s statements on the new flights:

  • “This new flight from Etihad Airways demonstrates that the Dallas/Fort Worth region continues to grow as one of the most vital business and tourism centers in the world, and it demonstrates the continuing benefit of having a world-class airport to help drive international growth. We are confident the combination of DFW Airport and Etihad Airways will create an outstanding travel experience for customers.”
  • “The arrival of Qatar Airways at DFW next year marks more tremendous news for our region and for our Airport, as we welcome another highly regarded international carrier to DFW. The new service from Qatar Airways will create more opportunities for business and leisure travel into the Middle East, and it positions DFW Airport for more international passenger growth.”
  • “The arrival of the [Emirates] A380 is a testament to the strength of the travel market here at Dallas/Fort Worth and the growing stature of DFW International Airport as a pre-eminent global hub,” said Sean Donohue, CEO of DFW Airport. “As the first scheduled A380 at DFW, it will provide over 83% more capacity on the DFW to Dubai route, which is especially important for travellers heading to the Middle East, India and Africa. As a mid-continent hub, DFW has outstanding connectivity and is just four hours from every major city in the continental U.S., Canada and Mexico.

Dallas Mayor Mike Rawlings called the arrival of the Emirates’ Airbus A380 “truly a ‘big thing’ for the Dallas-Fort Worth area. Fort Worth Mayor Betsy Price noted the Emirates’ service having a $31.6 billion economic impact in the region, creating more business connections from DFW.

As of July 8, the airport has not weighed in with comments to the docket. But local officials were quick to weigh in. “I am asking you to recommend that the U.S. government open consultations with Qatar and the United Arab Emirates (UAE) in order to address the massive, market-distorting subsidies that those nations provide their state-owned airlines,” wrote Mayor Price. “To be clear, I firmly support Open Skies and recognize the considerable benefits that the policy has brought to American travelers and the U.S. economy. I am not seeking to end the agreements with Qatar and the UAE, nor are we raising concerns with regard to any of the more than one hundred other Open Skies agreements.”

These subsidies are altering the free market framework established by Open Skies and they will ultimately have a negative economic impact here in the United States, she wrote. “Heavy subsidization by the Gulf carriers is contributing to excess capacity, which draws passengers and revenue from United States airlines. If U.S. based airlines continue to lose market share, it will lead to service cuts and ultimately American job losses,” she added.

American-Delta-United

(Credits: Airways)

In a similar letter, Beth Van Duyne, mayor of Irving, Texas, echoed what Price wrote, adding: “Unfair business practices and government assistance could enable some Gulf States’ carriers to drive down ticket prices and contribute to excess capacity, both of which will decrease revenue and load factors for U.S. airlines. If airlines such as American continue to lose market share, it will lead to service cuts, job losses, and hamper economic development.”

Comments for Docket DOT-OST-2015-0082 are being taken through August. 3.

 

 

 

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About Author

Benét J. Wilson

Benét J. Wilson

Mother, Aviation Queen, Veteran Aviation Journalist, AVgeek since age six, number one fan of the Boeing 747 and Student pilot (can't stick my landings). I would actually pay rent to live in an airport. bwilson@airwaysmag.com @AVQueenBenet

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