Slurs about Gulf carriers’ success show US airlines as primitive protectionists

Frank Kane discusses Delta Air Lines raking up the tired old issue of subsidies to Etihad, Emirates and Qatar.

They must getting too close to the fumes from all that aviation fuel. How else can you explain the increasingly hysterical noises coming from American airline executives about their rivals in the Arabian Gulf?

First there was a refrain of the old, and often disproved rant about alleged subsidies by the governments of Qatar, Abu Dhabi and Dubai to their airlines, backed up by what was described as fresh research supposedly giving details of the supposed subsidies.

Then came the wild allegations by the Delta Air Lines chief executive Richard Anderson about the role of “Arabian peninsula” people in the attacks of 9/11.

Whatever next? It’s hard to see how much further Mr Anderson can go after the last smear, for which he only partially apologised. But there is a long tradition on the part of some Americans to invoke the “terrorism” threat whenever their business interests are (legitimately) challenged from this part of the world.

Look at the slurs DP World had to endure in 2006 when it was taking over P&O ports in the United States. So don’t be surprised if further far-fetched claims surface.

The 9/11 links were dismissed by most sane people for what they were – transparent and baseless smears. But the allegations about subsidies and other unfair commercial practices should be answered seriously.

Or at least they should be if they were presented seriously. Delta claimed that the allegations were contained in a “55-page white paper”, without giving many further details of how the document was prepared.

Delta is obviously reluctant to share the document with media in the Gulf region. It’s a sensitive issue. When I asked the London press office (which deals with Middle East press inquiries) if I could see it, like the American newspapers and news agencies which have been given copies, I was told it would have to be checked and approved in the US.

By the time of publication of this column, 72 hours after my initial call to Delta, no “55-page white paper” had been forthcoming. It was not “broadly available just yet”, emailed a Delta spokesman from the US.

But judging by reports of the contents, Delta seems to be mainly harping on again about the tired old issue of subsidies to Emirates, Etihad and Qatar.

Emirates points out that it received US$10 million in 1984 as its seed capital, and has ever since relied on internally generated cash to fuel its expansion plan. The airline makes profits of more than $1 billion and – in these days of sophisticated aircraft leasing packages – this is more than enough to fund fleet expansion for years to come.

The others have equally plausible explanations for their finances. The basic premise is this: as the Arabian Gulf airlines operate in a virtually unregulated labour environment, they make significant cost savings compared to the highly-unionised and rigidly hierarchical business models of the Americans.

That is the beauty of being a new entrant into an old market; you can make significant cost savings on traditional expenses such as wages, staff accommodation and allowances. What the Gulf airlines are doing is no more anti-competitive than what Uber, or Airbnb, are doing in their respective industries. They are remodelling the cost side of the equation.

Another allegation thrown at the Gulf carriers is that, as they are at the heart of an oil-rich region, they get cheap fuel from their governments. This is to simply misunderstand the economics of the oil market. The regional carriers have to buy their fuel on the global spot markets, just like any other carrier.

If there had been any aberrations in the accounting process, surely it would have been spotted by the auditors before they signed off the accounts? In fact, the Gulf airlines are audited by “Big Four” accounting firms, just like American and European airlines, to what we must assume are the highest standards.

The Americans’ aim is to persuade US federal authorities to review and revise “open skies” legislation, which has been the foundation of the remarkable expansion in global aviation over the past two decades.

They will probably be unsuccessful in this, but nonetheless have already proved themselves to be protectionist cavemen, determined to push back the aviation clock. If it requires legal action to prove the Gulf carriers’ case, as has been suggested, it should be vigorously pursued.

Follow The National's Business section on Twitter