The Gulf Airline Trade Dispute: Action in Europe, Silence in the U.S.

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

americans4fairskies2015The Gulf Airline Trade Dispute: Action in Europe, Silence in the U.S.