Henderson, Nev. - As
the three biggest U.S. airlines publicly prod the federal government to revisit
Open Skies agreements with the United Arab Emirates and Qatar, their biggest
obstacle might be quelling "slippery slope" arguments that would make
the government reticent to act.
Representatives of American Airlines, Delta Air Lines and
Etihad debated the Gulf carrier dispute last week here at the CAPA Americas
Aviation Summit 2015. The U.S. airlines claim Etihad, Emirates and Qatar
Airways are receiving an unfair competitive advantage via government
subsidies and benefits, thereby skewing the market in violation of Open Skies.
The Gulf carriers counter that the subsidies and benefits cited by U.S.
carriers do not qualify as such and that U.S. carriers are attempting to bar
new competitors from the market.
As it stands, the U.S. departments of State, Transportation
and Commerce last month agreed to collect commentary on the issue en
route to deciding whether to open consultations with the two Middle Eastern
nations. U.S. carrier representatives were confident that would happen.
"If you don't ask for consultations on this volume of
evidence on this issue in this particular place, when would you ever ask for
consultations?" asked AA senior vice president of government affairs Will
Ris. "If we don't do anything, what message does that send?"
Etihad general counsel and company secretary Jim Callaghan, maintaining
that Etihad is not subsidized, said consultations were unwarranted because
there is no evidence of harm. U.S. airlines would need to show "prices
that are artificially low due to indirect or direct government or support,"
he said. "Airlines can't simply go to the government because they don't
like the competitor."
Whether the U.S. government opens consultations—and agrees
to U.S. airlines' request to freeze Gulf carriers' new entries into the country
until the matter is decided—remains to be seen, but several third-party members
of the CAPA panel said it could open Pandora's box.
Both U.S. Travel Association president and CEO Roger Dow and
World Travel & Tourism Council president and CEO David Scowsill said
revisiting Open Skies with the two nations could spur other countries to open
similar discussions—in effect dismembering Open Skies. It also could distract
from U.S. government attention to airport infrastructure, air traffic control
technology and other concerns and could stifle travel to the United States,
they said.
Dow cited travel between the United States and India, which
Gulf carriers' Middle Eastern hubs accommodate, while U.S. carriers offer only
a handful of direct flights to India. "How do we meet the needs of another
17 million visitors from around the world from many places the U.S. carriers
don't serve or prefer not to serve?" Dow said. "This potentially is a
slippery slope that opens a trade war of epic proportions. You look at the
shipping industry that tried protectionism: We don't have a shipping industry
in the United States anymore."
U.S. airline representatives said capacity would continue to
meet demand if the agreements were revisited. "India is a huge market, and
we are foreclosed from serving India nonstop by the Gulf carriers," Delta
Air Lines executive vice president and chief legal officer Ben Hirst said. "We
are not serving those markets because of subsidized flow. While the Gulf
carriers have added service from the U.S., they have not stimulated U.S.
traffic; it has been diverted from U.S. traffic."
Opposition also has come from outside the travel industry.
FedEx Express senior vice president and general counsel Rush O'Keefe fears that
changing Open Skies with Qatar and the UAE would prompt those governments to
revisit cargo agreements, though Ris said the United States would make it clear
from the onset that is off the table.
"I don't think it will be successful for the U.S. to
say, 'Let's keep everything we like but not what we don't like,' " O'Keefe
said. "This is a significant issue for us and other cargo carriers, and
there are plenty of countries around the world watching this entire proceeding."
The panelists referenced an even stickier issue: national
security and Middle Eastern politics. They referenced commercial airline
landing rights disputes between Canada and the United Arab Emirates from a few
years ago that resulted in Canada's loss of a lease on a strategic military
base in Dubai.
"The Middle East is not particularly friendly territory
for the United States right now, but it sure is [friendly territory] in Qatar, and it sure is in the UAE," said Pillsbury law firm partner Kenneth Quinn.
So, where will it end? The general attitude around the
conference was that the ado would end with little impact to the passenger
aviation industry. CAPA executive chairman Peter Harbison at the conference's
onset predicted that the issue "is not going to last a lot longer than
this year because it doesn't seem to lead anywhere."
Maintaining that consultations would occur, Delta's Hirst said
the issue in a few years "will be past us," following a "pragmatic
resolution." WTTC's Scowsill struck a similar tone. "When you get
past the stage of the debate, there will be some sort of compromise. The
possibility of the U.S. and the Gulf States entering into bilateral severance
over the agreement is so enormous that it's not going to happen."
The dispute would thaw into a deeper relationship as the Gulf carriers continue their growth, Harbison said. Etihad, after all, already codeshares with AA, and Qatar Airways is a member of the Oneworld alliance, he said. "Even though it's not a logical industry, I suspect the logic will prevail. Within two years, at least one of the big three will be in a partnership with one of the carriers in the Middle East."