Victory for Gulf airlines as US government ends Open Skies row with no further action

The US State Department said that while it looked seriously at allegations of Gulf carriers receiving unfair subsidies it has taken no formal action.

Gulf carriers, including Emirates, say they have contributed heavily to the US economy. AP Photo

The US government says talks over the Open Skies policy with Arabian Gulf carriers were constructive and ended without any formal action.

The US state department held talks with Qatar government officials on Monday and with the UAE the week before over charges levelled more than a year ago by the three largest US airlines alleging Emirates, Etihad Airways and Qatar Airways were competing unfairly.

The state department said, however, that while it looked seriously at the allegations it has taken no formal action.

Over the past week, the US and the UAE and Qatar “held informal technical discussions on our bilateral civil aviation relationship”, said senior state department spokeswoman Nicole Thompson.

The talks “were government-to-government only [and] we have not invoked the consultations provision of our bilateral Open Skies agreements”, she added.

The talks had been arranged for some time to address the concerns raised by the three biggest US carriers – American, United and Delta Air Lines – but the Obama administration had indicated that it was unlikely to take any formal action.

The heart of the US airlines’ claim was that the Gulf airlines were heavily subsidised by their host governments, charges that were robustly countered over the past year.

Etihad on Monday, for example, issued a report commissioned from the UK economics research organisation Oxford Economics, arguing that its contribution to the US economy, including all the business related to the passengers it ferries to six major US cities, was nearly US$11 billion a year.

The big three Gulf carriers are also the largest buyers of Boeing's new long-range aircraft – the 777X – outstripping their US rivals by far.

Ms Thompson said that while “the US government takes seriously the concerns raised by our airlines, we also remain committed to our US Open Skies policy, which has greatly benefited the travelling public, the US aviation industry, American cities and the broader US economy through increased travel and trade and job growth”.

Opinion among US industry had been divided, with some unions backing the three US airlines, but others, including the US Travel Association, and rival airlines such as JetBlue and Alaska Air, opposing the move as anti-competitive.

Roger Dow, chief of the USTA, last month argued that the US airlines’ move to freeze flights from the Gulf carriers “would essentially end our Open Skies agreements with the UAE and Qatar … [which have been] good for the economy, good for American jobs, and good for travellers both here and abroad.”

Given that the US airlines’ move to roll back the treaty stood little chance from the get-go, their motive other than to pressure the rising competition from their Gulf rivals was never clear, said John Strickland, an aviation expert and head of JLS Consultancy.

“The broad benefits of Open Skies are recognised and there is not likely to be a willingness to roll these back given the consumer benefits and other gains for US cities,” Mr Strickland said.

Mr Dow had also noted that there is very little direct competition between the US and Gulf airlines.

“Of the 1,700 routes flown by the Big Three and the Gulf carriers, they compete head-to-head on exactly two,” he pointed out. “Furthermore, according to a comprehensive study by Oxford Economics, only 0.7 per cent of passengers who flew on a Big Three flight to the US could have flown the same route on a Gulf carrier.”

Despite arguments by The Partnership for Open & Fair Skies, which lobbied for the US carriers, that Gulf governments had “provided US$42 billion in subsidies and other unfair benefits” to the three carriers over the past 12 years – which have been refuted – the initiative never really gained any traction and industry participants expect it will now fizzle out.

The one unknown, Mr Strickland notes, is what might happen if there were to be a Trump presidency after the autumn elections, given that Mr Trump has been vocal against international trade agreements in general and has shown a propensity toward protectionism.

Ms Thompson from the state department said that “the two sides intend to remain in contact on the topics covered in these discussions”.

OPEN SKIES DISPUTE TIMELINE

American Airlines, Delta and United began lobbying the US administration in January of 2015 to prevent Gulf carriers from adding extra routes to the US, pending a review of Open Skies agreements.

Emirates, Etihad Airways and Qatar Airways are accused of receiving US$42 billion in subsidies from their governments, contrary to Open Skies aviation agreements, in a 55-page document issued by the US carriers. They strongly deny the claims.

The Partnership for Open & Fair Skies coalition is formed by the US carriers and includes unions.

February 2015 In a TV interview, Delta chief executive Richard Anderson makes controversial comments about the 9/11 terror attacks and the Gulf. Akbar Al Baker, the Qatar Airways chief, says Mr Anderson should be "ashamed".

April 2015 The US departments of state, commerce and transportation set up an open forum, or "docket", to receive feedback before any decision is made over the claims.

May 2015 A report from Etihad shows that the three US carriers have received more than $70bn in government and court-sanctioned benefits over the past 15 years.

June 2015 Etihad's chief executive James Hogan says it will not "stand by idly" while its rivals attempt to malign the airline as it submits its formal response to the claims. Alaska Airlines, Hawaiian Airlines and JetBlue Airways come out in support of the Gulf carriers.

July 2015 Emirates issues a 193-page point-by-point response. Qatar Airways also submits its formal response.

August 2015 Delta says it is reducing flights between Atlanta and Dubai because of overcapacity caused by the Gulf carriers. Emirates calls this a "political play".

Docket is closed.

January 2016 US airlines claim bookings fall 13 per cent because of Gulf carriers. Emirates says that they should focus on improving their services.

February 2016 Emirates launches A380 service to Washington.

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