The Gulf Airline Trade Dispute: The Bad News Keeps on Coming

Recently, United Airlines announced that in January it will end its nonstop Washington-Dubai flights, a service it successfully flew for seven years. United’s news adds another proof point to the mass of evidence that the hugely-subsidized Gulf airlines, Emirates, Etihad Airways, and Qatar Airways, are harming the U.S. aviation industry and violating the terms of the “Open Skies” agreements. U.S. airlines can compete in the global marketplace, but not in markets distorted by billions of dollars in unfair subsidies and benefits that the Gulf trio have received from their government sponsors. This news should inspire the Obama administration to address the rigged playing field and open up talks with the United Arab Emirates (UAE) and Qatar.

Unfortunately, there’s much more to the United story. One of the key reasons for United’s withdrawal was their loss of a sizable contract to fly U.S. government employees and contractors to Dubai – more than 15,000 per year, including active duty military personnel. The winner? JetBlue, which operates no international long-haul service whatsoever, much less 7,000 miles across the Atlantic. They have no long-range aircraft. JetBlue has a “codesharing” partnership with Emirates, meaning that JetBlue sells Emirates-operated flights with the “B6” JetBlue code. This partnership allowed JetBlue to bid for the U.S. government’s business to Dubai, even though Emirates will do all of the Washington-Dubai flying and thus get virtually all the revenue. Although United also uses codeshare relationships for some of its government contract flying, it is a global carrier with an extensive international network and is capable of operating any of those routes on its own, that is, without codesharing. That is not the case with JetBlue, which must rely 100 percent on Emirates to meet its obligations to the U.S. government.

And it gets worse: the contract, awarded by the General Services Administration (GSA), the U.S. government’s procurement arm, is subject to a law called the Fly America Act, which expressly prevents the U.S. government from buying airline services directly from a non-U.S. carrier. So JetBlue will really just be the bag man, collecting the payments and remitting them to Dubai. Thus, GSA appears to have disregarded historical precedent that forbids such codeshare arrangements under the Fly America Act.

United’s Dubai cancellation comes just six weeks after Delta announced it was withdrawing from the Atlanta-Dubai market in February 2016. In its announcement, Delta also blamed the market distortion of the subsidized Emirates and the two other Gulf carriers, which are clearly “dumping” seat capacity in the U.S. market.

While the Gulf carriers continue to grow and threaten domestic carriers around the world with unfair competition, foreign governments are stepping up to ensure their domestic carriers are not left behind. Just two days before the United announcement, the European Commission, the executive arm of the EU, released a new aviation strategy that included a commitment to creating a level competitive playing field for EU carriers. The strategy paper recommends important mechanisms to address airline subsidies and unfair practices that have a “significant negative impact on the competitiveness of the EU aviation industry.” European Transport Commissioner Violeta Bulc specifically asked EU governments for authority to negotiate aviation agreements with the six countries of the Gulf Cooperation Council, with a goal of eliminating market-distorting aid to Emirates, Etihad, and Qatar Airways.

It’s time for action. And despite the arm-waving and mischaracterization by the Gulf carriers, the U.S. airlines’ “ask” has always been modest: the U.S. should open consultations with the UAE and Qatar to level the playing field for American workers, U.S. companies, and our aviation industry as a whole.

Originally published on

americans4fairskies2015The Gulf Airline Trade Dispute: The Bad News Keeps on Coming