Earlier this month, at a press conference in Los Angeles, the CEO of Qatar Airways, His Excellency Mr. Akbar Al Baker, once again said he and his airline were being “bullied” by U.S. airlines, notably American and Delta. The notion that he and his lavishly subsidized, state-owned carrier from one of the richest countries on earth could be bullied is silly; worse, misusing the term “bully” trivializes a serious issue for children and adolescents worldwide. As someone who 1) understands the airline business and 2) got beat up fairly often as a kid, he’s not being bullied.

Reducing the rhetoric from nasty and hyperbolic to calm and factual, the issue is quite clear. U.S. airlines and seven unions, backed by scores of U.S. Senators and members of Congress, asked the Obama administration last year to consult with the governments of Qatar and the United Arab Emirates to address the massive subsidies provided to their state-owned airlines. For a year now, the U.S. carriers have proven that the massive government subsidies have enabled the Gulf carriers to expand rapidly in the U.S., Europe, and across the globe.

A painstaking global investigation revealed the $42 billion in cash and unfair benefits the three Gulf carriers have received over the last decade from their government sponsors. An investigation of this magnitude was the only way to unearth the truth because the three Gulf airlines do not publish financial statements that meet Western standards for transparency and completeness. The wheelbarrows of cash violate the “Open Skies” aviation agreements that the governments of the United Arab Emirates and Qatar signed with the U.S., pacts that prohibit subsidies and mandate a level competitive playing field. This unfair competition has damaged U.S. airlines (and their European partners) and threatened good-paying U.S. jobs.

Some airline observers believe that Mr. Al Baker lashes out precisely because he’s not credible. Three examples: first, at the Paris Air Show last June, he announced that Qatar Airways earned a profit of $103 million in its previous financial year. Just a soundbite, no details. Revenues? Total expenses? Return on equity? Mr. Al Baker didn’t offer those salient details.

Second, in response to the proof that Qatar Airways had received subsidies and other unfair benefits totaling more than $17 billion since 2004 (about 40% of the total for the three Gulf airlines), he has repeatedly denied the state support without offering a shred of independently-verifiable financial data. “Trust me” seems to be his modus operandi. If he’s got contrary evidence, why not produce it?

Third, he has repeatedly tried to convince the marketplace and the media that his employees are treated fairly. However, the UN’s International Labor Office and others have shown clear patterns of abuse and inequity in a workforce comprised of 90 percent migrants, mostly from poor countries. At Qatar Airways, a flight attendant can be fired for positioning her hat incorrectly, or applying too much hair gel. More broadly, the Gulf carriers’ labor strategy is suspiciously simple: hire lots of people (mostly attractive young women) from poor countries, give them a short, fixed-term contract, treat them badly, dismiss them easily (sometimes without a ticket home), and repeat. To Mr. Al Baker and his counterparts at Emirates and Etihad, the supply of job candidates is virtually unlimited. Now that looks more like bullying, and on a global scale.

Not only does Mr. Al Baker lack credibility, but his behavior is threatening and abrasive. Three more examples. First, on a 2015 trip to the Netherlands, he saidthat European companies would win Qatari state contracts only if their governments allowed Qatar Airways to expand. To their credit, the Dutch authorities promptly said “no thanks” to further Qatar growth at Amsterdam, one of the first times a nation has stood up to Mr. Al Baker. At a time when all three Gulf mega-carriers are attempting to convince us that they are not instruments of the state, Mr. Al Baker’s quid-pro-quo threat clearly suggested otherwise.

Second, his criticism of U.S. and European airlines is extreme and mean-spirited. At a recent Los Angeles press conference, he mocked Delta, noting that his airline doesn’t “fly old, crap, second-hand airplanes.” And this from a 2012 speech on the eve of new service from Montreal: “My crew, my cabin crew, is a maximum of 35 years old. Not 65 years old, you are used to in [sic] flying American carriers.”

Third, his continuing personal attacks on Delta Air Lines CEO Richard Anderson are totally unwarranted. Among other nastiness, Mr. Al Baker said: “He’s just a bully. And he’s a liar . . . He has no dignity, he has no ethics.”

Arm-waving and rhetorical fireworks won’t resolve this issue. Instead, the Obama administration should invite officials from the UAE and Qatar to discuss the matter and put American jobs ahead of endless government subsidies. U.S. airlines seek no special favors, no “protection” from a bully – only a competitive environment on a level playing field.

Originally Published on Huffington Post.

By Ted Reed

Not surprisingly, when Gulf carriers enter a U.S. market, they take passengers from U.S. airlines and their joint venture partners. A new report quantified the decline in Chicago, San Francisco and Orlando.

The report was prepared for the Partnership for Open and Fair Skies, which representsAmerican (AAL – Get Report), Delta (DAL – Get Report)  , United (UAL – Get Report) and their unions. It said that in the months following the entry of one of the three subsidized Gulf carriers into a market, U.S. and partner traffic to select destinations in the Middle East, Africa and Asia fell 8.8% in Chicago, 13.1% in San Francisco and 13.3% in Orlando.

“The numbers don’t lie.” said partnership spokeswoman Jill Zuckman. “It is undeniable that the billions of dollars in subsidies funneled to Emirates, Etihad Airways andQatar Airways are harming American businesses and jobs and it will only get worse the longer the U.S. government waits to act.”
The problem is that subsidies enable Gulf carriers to price below cost on U.S. routes. The result is that U.S. carriers either lose traffic or reduce flying, resulting in a loss of jobs to carriers that appears to violate provisions of the Open Skies treaties that enable their flying to multiple U.S. cities, in return for which U.S. carriers can fly to Dubai and Abu Dhabi.

United flew its final flight to Dubai on Jan. 23, from Washington Dulles, with the last Dubai departure on Jan. 25; Delta will end Atlanta-Dubai service next month; American does not fly to Dubai or Abu Dhabi.

The total number of lost passengers annually is in the tens of thousands in each city, according to study results provided to TheStreet.

The statistics include flights to Mideast destinations except for Israel; to Indian subcontinent countries India, Pakistan, Bangladesh, Nepal, Maldives and Sri Lanka; and ASEAN countries Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. In every case, these destinations are reached via connecting flights.

In Chicago, the report looked at the traffic decline after Qatar began service in April 2013 and Emirates began service in August 2014; it does not consider the impact of Etihad service that began in 2009, which also had a significant impact. Generally, Chicago passengers to Africa, the Mideast and Asia would begin their journeys with a trans-Atlantic flight.

Study results indicated that in Chicago, losers include hub carriers American and United, United partner Lufthansa, and Delta.

In San Francisco, the study measured the impact of an Etihad flight that began in November 2014, but doesn’t consider the significant impact of the start of Emirates service in 2008. Passengers to the select destinations could fly either across the Pacific, most likely connecting in Tokyo, or across the Atlantic, most likely connecting in Frankfurt or London.

In San Francisco, hub carrier United and American partner British Airways have lost the most traffic, the study indicated.

In Orlando, Emirates began service in September 2015. Delta and United lost the most traffic. British Airways, which flies non-stop to London, also lost traffic, but far less than Delta and United.

Results of an earlier report, released in July 2015, indicated that in four U.S. gateway cities — Boston, Dallas, Seattle and Washington, D.C. — the combined decline in the year after Emirates began service to its Dubai hub ranged between 8% and 21%.

Originally found on TheStreet.com

United Airlines is still in a fighting mood.

As will become clear in new data expected to be released tomorrow, Chicago-based United hasn’t back off of a heated battle with no fewer than three major international carriers based in the Middle East, including Emirates, Etihad Airways and Qatar Airways, all of which fly nonstop from Chicago’s O’Hare International Airport to various destinations in the Gulf region and via connections, to just about every major market in Europe, Africa and Asia.

United Airlines is one of three United States-based airlines battling lavishly-funded Gulf region airlines that are rapidly expanding.

United, along with American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL) and a number of labor unions representing pilots, flight attendants and other workers in the airline industry, recently formed the Partnership for Open & Fair Skies, to collectively fight the Gulf region airlines as they rapidly become a major force on the international travel scene and siphon off business from U.S. airlines, thereby forcing the U.S.-based carriers to cut jobs.

The three major Gulf carriers are using lavishly-outfitted premium cabins on their fleets, luxurious airport lounges and rapidly-growing global route systems to entice more travelers on to their aircraft, while U.S.-based carriers such as United are, for the most part, just trying to play catch-up as they rebound from years of huge loses caused, in part at least, by a deep and prolonged recession and sky-high fuel prices.

The Partnership’s stated goal is to pressure the Barack Obama administration to open talks with government officials in Qatar and the United Arab Emirates about the competitive threat posed by the Gulf carriers operating from the region to Chicago and other markets in the United States. The U.S. airlines claim the Gulf region carriers are not honoring Open Skies agreements, while receiving billions in subsidies from their oil-rich governments — thereby making it impossible for carriers such as United Airlines to compete internationally on a level playing field.

So far the Obama administration has not signaled it is prepared to do the Partnership’s bidding. And it remains to be seen if the Partnership can make their case convincing enough to get Obama to bite.
Meanwhile, Emirates, Etihad and Qatar Airways, understandably, are loudly refuting the arguments made by United and the rest of the U.S. airlines and labor unions that are part of the Partnership for Open & Fair Skies. The Gulf carriers’ future success is at stake as well.

Only one thing appears certain at this point — the final shots in this war have not been fired.
United Airlines is a unit of United Continental Holdings (NYSE: UAL).

Originally Published on Chicago Business Journal.

By Rob Britton

As we enter a new year, massive subsidies to the Gulf airlines – Emirates, Etihad Airways, and Qatar Airways – continue, while carriers around the globe are facing unfair competition. We’ve seen in recent months that a stark contrast is building: Washington remains silent and other countries across the globe are stepping up and taking action.

One prominent example is Europe. Looking back on 2015, the EU first expressed concern about the more than $42 billion in unfair subsidies in March. They followed up in December with a new aviation strategy that included a commitment to creating a level competitive playing field for EU carriers, including a specific request to negotiate new agreements with the Gulf states that would end the subsidies. Acting on their own, the Netherlands froze Gulf airline expansion at Amsterdam in May.

The most recent example of European backbone was a decision of the German Federal Aviation Office, part of the national Transport Ministry, to prohibit Etihad from code sharing with Air Berlin (of which Etihad owns 30 percent) on 31 routes. The action turned on specific technical details in the bilateral aviation agreement between the UAE and Germany, but the clear underlying concern was how state-owned Etihad is distorting competition. In late December, an administrative court upheld the decision, which Etihad is now urgently appealing. The court decision noted that the Germany-UAE aviation agreement was clear and specific about cities that UAE carriers could serve on their own or via codesharing arrangements, and chastised Etihad for trying to expand its access to more German markets “through the back door.”

In early January, just after the court decision, Etihad CEO James Hogan predictably accused Lufthansa of “protectionism,” and questioned Germany’s commitment to the security of foreign investment. Mr. Hogan described Lufthansa as “the national airline,” a connotation contradicting its privatization in 1994 (unlike Etihad, which continues to get wheelbarrows of cash, and resorts to accounting tricks to purport profit). Since the Open Skies dispute began, one of the cardinal tactics of the Gulf airlines and their backers has been to use loaded words such as “protectionism,” along with exaggerations and mischaracterizations to mask the real argument: that subsidies distort competition, just as they do in the trade of manufactured goods, agricultural produce, and other things.

Happily, in Germany and elsewhere in Europe, most observers see through the smokescreen. Handelsblatt, Germany’s highly-regarded daily business newspaper, suggested that Mr. Hogan had overreacted, calling it a “surprising attack,” and questioning his tactics, especially his criticism of the court decision – in modern Germany, courts are universally respected for their independence from both politics and company influence. The paper got it right when they said the Etihad CEO was leaning weit aus dem Fenster – far out of the window.

It’s time for Secretary Kerry, Secretary Foxx, and others in the Obama administration to join their European counterparts and take action. The “ask” of American Airlines, Delta Air Lines, and United Airlines is modest: for the U.S. to open consultations with the governments of the United Arab Emirates (UAE) and Qatar, and not to allow their airlines to add flights to the U.S. until the talks begin. We need Washington to level the playing field for American workers. Why not invite Qatar and the UAE to the table to discuss the matter? That just doesn’t seem like a hard thing to do. And in this New Year, it would be a fine resolution.

Originally published on HuffingtonPost.com

It is a strategy that has won James Hogan, the chief executive of Etihad Airways, plaudits from the across the airline industry.

Shackled by restrictive traffic-rights agreements, Abu Dhabi’s Etihad has in recent years gone on a shopping spree across Europe. Equity stakes in Alitalia (49%), Air Serbia (49%), Switzerland’s Darwin Airline (33%) and Germany’s Air Berlin (29%) have allowed the Gulf carrier to pursue backdoor expansion across the continent, swapping traffic with local partners and restructuring their networks to feed Abu Dhabi.

The investment model has narrowed the gap between Etihad and its two older, larger Gulf rivals – Dubai’s Emirates Airline and Qatar Airways – contributing an estimated $1.1 billion to the newcomer’s top line in 2014.

All three of these so-called Gulf super-connectors are growing their businesses off the back of intercontinental transfer traffic – poaching market share from European hubs that were long considered the default stopovers on East-to-West journeys. Relentless double-digit growth by Emirates has allowed Dubai to overtake London Heathrow Airport as the world’s busiest international hub.

But the Gulf’s gain could be Europe’s loss, and German authorities are now pulling down the shutters on one of Etihad’s most cherished investments: Air Berlin, the perennially loss-making (but operationally mature) German carrier.

In December, the Administrative Court of Braunschweig upheld a decision by Germany’s Transport Ministry to revoke 29 codeshare agreements between Etihad and Air Berlin. Those accords, which allow Etihad to book passengers onto Air Berlin-operated flights, will expire on January 15th (notwithstanding ongoing legal action by both carriers). Their loss will nearly halve the number of services that Air Berlin operates in conjunction with Etihad, significantly curbing the potential for traffic swapping at its Berlin and Dusseldorf hubs.

The bone of contention between Germany and Abu Dhabi is the ambiguously-worded bilateral air services agreement that both governments have signed.

Under the terms of the agreement, Etihad is permitted to fly from to four destinations in Germany with its own metal, while also placing its code on three other services. Two of those existing codeshare entitlements – Abu Dhabi-Berlin and Abu Dhabi-Stuttgart, both operated by Air Berlin – have now been revoked, purportedly because they are not explicitly named in the bilateral treaty. The remainder of the canceled codeshares are connecting services over Germany; lucrative intra-European flights that the partners use to synergistically grow revenues.

In December, the Administrative Court of Braunschweig upheld a decision by Germany’s Transport Ministry to revoke 29 codeshare agreements between Etihad and Air Berlin. Those accords, which allow Etihad to book passengers onto Air Berlin-operated flights, will expire on January 15th (notwithstanding ongoing legal action by both carriers). Their loss will nearly halve the number of services that Air Berlin operates in conjunction with Etihad, significantly curbing the potential for traffic swapping at its Berlin and Dusseldorf hubs.

The bone of contention between Germany and Abu Dhabi is the ambiguously-worded bilateral air services agreement that both governments have signed.

Under the terms of the agreement, Etihad is permitted to fly from to four destinations in Germany with its own metal, while also placing its code on three other services. Two of those existing codeshare entitlements – Abu Dhabi-Berlin and Abu Dhabi-Stuttgart, both operated by Air Berlin – have now been revoked, purportedly because they are not explicitly named in the bilateral treaty. The remainder of the canceled codeshares are connecting services over Germany; lucrative intra-European flights that the partners use to synergistically grow revenues.

Originally found on Forbes.Com

BRUSSELS — The European Union is seeking tough limits on public subsidies to airlines and the option of revoking their traffic rights as part of new commercial aviation agreements it wants to negotiate with several countries including Turkey and the United Arab Emirates.

A draft “fair competition clause”, seen by Reuters, which the EU executive wants to include in air transport agreements, lists the forms of public support that could be considered unfair, such as protection from bankruptcy, provision of capital, tax relief and cross-subsidisation.

The clause proposes a consultation period of 30 days in cases of disputes over unfair subsidies to an airline. Should talks fail, the complaining country would be able to suspend or revoke the airline’s air traffic rights as well as impose duties.

The European Commission is seeking a mandate from EU governments to begin talks on air transport agreements with a number of countries including China, Turkey, United Arab Emirates, Kuwait and Qatar.

Such agreements, at the moment often done on a bilateral basis between the governments of two countries, would set out where and how often foreign airlines could fly into the EU, and vice versa.

The issue has become politically charged since some European legacy carriers, notably Lufthansa and Air France KLM, as well as major U.S. airlines, have accused Gulf carriers of receiving unfair state subsidies, allegations they have rejected.

Europe’s aviation industry, which contributes 110 billion euros ($124.60 billion) to EU gross domestic product, has been hit by the rapid expansion of Gulf airlines, such as Emirates and Etihad, and shifting traffic flows to Asia.

A spokesman for the Commission said it supported the objective of ensuring fair and open competition in the aviation sector by promoting EU-level air transport agreements and considering new measures to address unfair practices outside the 28-member bloc.

“Each contracting party shall eliminate all forms of discrimination or unfair practices which would adversely affect the fair and equal opportunity of the airlines of the other contracting party to compete in providing air transport services,” the clause says.

Public subsidies or any other form of support should be made transparent by the receiving airline, including by identifying or separating it clearly in its accounts, the clause says.

The setting off of operational losses, foregoing a normal return on public funds invested or discriminatory access to airport services would also count as unfair public subsidies, the document says.

(Reporting by Julia Fioretti; editing by Susan Thomas)

Originally found on: NYT.com

The Business Travel Coalition’s (BTC) Kevin Mitchell recently wrote an op-ed on The Hill’s Congress Blog titled “Delta Air Lines’ campaign against Gulf carrier subsidies is built on house of cards” (Dec. 14) that is short on facts and long on hyperbole.

Mitchell outrageously compares Delta’s involvement in the Open Skies debate to Kevin Spacey’s underhanded character Frank Underwood in “House of Cards.” However, it is the BTC that is diverting attention from the issue with hysterical accusations. The governments of the United Arab Emirates (UAE) and Qatar have pumped more than $42 billion in subsidies and unfair benefits to the Gulf carriers, distorting the aviation market and violating Open Skies agreements. The cash infusions have allowed the Gulf carriers to expand rapidly into the U.S. market, putting American jobs and air service at risk.

Domestically, U.S. airlines are losing market share by astonishing numbers in cities that the Gulf carriers have entered. Bookings on U.S. carriers dropped an average of 10.8 percent in Boston, 7.6 percent in Dallas-Fort Worth, 21.4 percent in Seattle and 14.3 percent in Washington, D.C. Mitchell fails to understand that the subsidies affect communities across the U.S.
The harmful impact of the subsidies is evident in the service cuts coming from the last few months. Delta announced the termination of its service between Atlanta and Dubai after losing $5 million on that route during the first 10 months of 2015, citing unfair competition with the Gulf carriers. And United Airlines announced that it is discontinuing its Washington Dulles to Dubai route, pointing to the Gulf carriers’ subsidies as a key factor.

For every route lost to a Gulf carrier, more than 1,500 American aviation jobs are lost. The subsidies, essentially blank government checks, make it virtually impossible for the U.S. airlines to stay competitive. The hard-working pilots, flight attendants and hundreds of thousands of other workers who rely on a strong aviation industry should be offended by Mitchell’s disregard for this issue and the devastating impact that inaction is having.

It’s time for the U.S. government to enforce the Open Skies agreements with the UAE and Qatar and level the playing field for American businesses and workers.

From Jill Zuckman, chief spokesman, the Partnership for Open & Fair Skies, Washington, D.C.

Originally published on TheHill.com