While the battle between three major U.S. airlines and their Middle Eastern competitors over alleged government subsidies has drifted out of the public eye after dominating headlines last year, the issue is still very much on the radar for American Airlines CEO Doug Parker.
“This is the biggest threat I’ve ever seen to commercial aviation in the United States,” Parker said during a speech at an aviation maintenance conference in Dallas on Wednesday. “I’m sure that sounds like hyperbole, but it’s not. What’s happening is those two countries are subsidizing those three airlines to a point where they don’t need to be profitable.”
The two countries Parker referenced are United Arab Emirates and Qatar; the three airlines are Emirates, Etihad Airways and Qatar Airways.
Officials at American as well as United Airlines and Delta Air Lines launched a public lobbying effort last year pushing the U.S. government to revisit Open Skies agreements with United Arab Emirates and Qatar over concerns that those countries were providing their airlines with billions in subsidies.
Officials from Emirates, Etihad Airways and Qatar Airways have fiercely denied the allegation, with Emirates’ CEO calling the accusations “repugnant” and “patently false” last June.
Despite the denials, Parker said some of the routes being flown by the three Middle Eastern carriers cannot possibly be profitable, pointing specifically to Emirates’ flight from New York’s JFK International Airport to Milan.
“I’ve been in this business long enough and know what the numbers are, and it can’t be done,” Parker said. “They add routes that cannot be profitable, but they don’t care because they’re subsidized.”
So far, the encroachment of Middle Eastern carriers into the U.S. has been limited, with the New York-to-Milan flight the only route involving U.S. destinations that doesn’t pass through one of the foreign carriers’ respective hubs in Dubai, Abu Dhabi or Doha.
But Parker said the allegedly uneven playing field limits U.S. airlines’ ability to compete in certain foreign markets, like India, and threatens to undermine the hub and spoke model that American, Delta and United all use.
“The entire hub and spoke network particularly, for us large global airlines, is based on our ability to have fair competition across international markets,” Parker said.
His comments came during a question-and-answer session following his speech at Aviation Week’s MRO Americas conference in Dallas.
The majority of the speech dealt with American’s need to adapt how it deals with employees and invests in its product to compete in a transformed airline industry, a pitch that Parker has made to American employees and Wall Street investors in recent months.
Originally Published on The Dallas Morning News.