Lee Moak’s Response to Air Transport World

In the January 21st Air Transport World op-ed urging U.S. airlines to “stop whining” about unfair competition from the three Gulf carriers – Emirates, Qatar and Etihad – the editor suggests that a vital U.S. industry sit idly by in the face of these airlines’ government subsidized expansion that is inflicting undue harm on U.S. airlines and American jobs.

On it’s face, today’s international air service market may appear to simply be the byproduct of two decades of Open Skies policy. What is lost with this view, however, is that Open Skies was predicated on the belief that governments should get out of the way of controlling and subsidizing their country’s airlines and instead let market forces and competition determine routes, frequencies and prices. This may have been the understanding of the U.S. and the Gulf States when these agreements were signed in the 1990s. But today, the Gulf States, which are radically different countries from those we signed agreements with in the 90s, have turned Open Skies on its head. The philosophy of liberalization, with the byproduct of Open Skies, doesn’t work as intended when one side is playing by it’s own set of rules.

The heart of the matter is that the Gulf carriers are heavily subsidized by their governments – Dubai, Abu Dhabi and Qatar – in amounts nobody could have possibly fathomed 20 years ago. Over the past decade alone these three Gulf States have conferred tens of billions in subsidies to their three state supported airlines. This staggering level of support means that the Gulf carriers need not worry about earning returns sufficient to cover the costs of capital nor do the Gulf airlines need to post debilitating losses on their balance sheets. They can – and do – simply transfer those losses to their governments and continue their global expansion.

With tens of billions of dollars in government subsidies and the ability to operate without regard to market constraints, the Gulf State carriers have flooded the skies with an increasing number of wide-body aircraft. The three Gulf carriers combined have an astounding 596 wide-body orders pending, nearly three times the number of all U.S. airlines’ wide-body aircraft on order today. Given their existing order books, it’s no surprise that the Gulf carriers’ share of the international air market will soon dramatically exceed our own. In fact, the Gulf airlines are expected to grow capacity at more than 3 times the growth rate in global GDP.

The Dresner paper cited in the editor’s op-ed reiterates the Gulf governments’ assertion that their increasing presence on the world stage helps stimulate international air traffic. But this “rising tide lifts all ships” thinking simply isn’t borne out by the facts. According to O&D data, the Gulf carriers aren’t adding passengers to the international air market in any meaningful way. Instead, they’re abusing Open Skies, relying on their governments’ largesse, and stealing passengers from U.S. airlines and our alliance partners. That’s not fair competition. It’s market distortion and predatory behavior by the Gulf governments.

Our airlines and the tens of thousands of men and women who work in the industry today can compete against any airline in the world. But we need a level playing field to do so. The aviation policies pursued by the Gulf States are unfair, fundamentally incompatible with Open Skies and harmful to the U.S. airline industry and American jobs. That’s why it is wrong to relish the status quo liberalization policy and why our government needs to help restore balance to the few agreements that are no longer working for U.S. airlines and their employees.

Captain Lee Moak
Americans for Fair Skies

In response to: “US carriers should tread carefully in their anti-Gulf carrier campaign” Editorial on ATW.com