The three largest U.S. airlines and a handful of airline
trade organizations, which are asking the Obama administration to open review
of Open Skies agreements with Qatar and the United Arab Emirates, on Thursday
released a detailed report citing $42 billion in "quantifiable subsidies
and other unfair benefits" transferred during the past decade to airlines
in those countries, which they say are a violation of those agreements.
The U.S. carriers during the past few months have used the
media to lob vague charges of unfair competition against rapidly expanding Gulf
carriers Emirates, Etihad and Qatar Airways. That push includes Delta Air Lines
CEO Richard Anderson's poorly received February comments on CNN regarding
terrorism. He later apologized.
On Thursday, the carriers and the unions announced a new
coalition, the Partnership for Open & Fair Skies, and made public the
evidence they have been gathering against the Gulf carriers in hopes of
spurring U.S. government action.
In a press conference, American Airlines senior vice
president for government affairs Will Ris said the "sheer magnitude"
of subsidies that Gulf states pay to their local carriers violated Open Skies
policies by creating a "government distortion of the market."
"This is not questioning Open Skies," Ris said. "American,
Delta, United and the major unions continue to be supporters of Open Skies. It's
an effort to ensure the fundamental Open Skies policies are enforced."
While Emirates has released financial statements since 2002,
neither Etihad Airways nor Qatar Airways provides public financial records. For
those carriers, the coalition cobbled together data using financial filings
required by certain local regulators, including those in Singapore, Australia
and New Zealand, said David Ross, a trade negotiation specialist from law firm
WilmerHale who serves as counsel for the coalition.
Since 2004, both Qatar and the UAE have granted $39.2
billion in "quantified subsidies," which Ross defined as a transfer
of resources from the government under better-than-commercial terms to their
airlines, according to the data presented by the coalition. They also advanced
$3.1 billion in what the coalition calls "unfair benefits," which
include savings from low labor costs that resulted from the two countries' bans
on unions.
For Qatar Airways, the coalition cited more than $17 billion
in subsidies and other benefits, including $7.8 billion in interest-free loans
and shareholder advances and $6.8 billion in avoided interest from government
loan guarantees. It cited a similar level of subsidies and benefits for Etihad
Airways, including $6.3 billion in "equity infusions" from 2007
through 2013 and $4.6 billion in interest-free, no-obligation loans. Neither
airline would be commercially viable without those subsidies, according to
Ross.
For Emirates, the coalition cited a more modest $6 billion
in subsidies and benefits, largely from a $2.4 billion government assumption of
fuel-hedging losses and $2.3 billion in subsidized airport charges.
"We're all about competing, but this is an example of
unfair competition," said Mark Anderson, senior vice president for
corporate and government affairs for United Airlines. "We're not competing
against air carriers; we're competing against government treasuries."
Such subsidies have enabled "skyrocketing capacity"
at the three carriers, Ross said. Emirates, ranked 30th in terms of available
international seat miles in 1998, now ranks at the top, while Qatar Airways has
risen from 90th to 10th, he said. Given current aircraft orders by the three
carriers, their available international seat miles, which now are on par with
those available at the three U.S. carriers, will be about 46 percent greater
than the U.S. carriers' in 2020, according to the coalition.
The Gulf carriers during the recent dust-ups have countered
that U.S. carriers are attempting to block competition and should concentrate
on improving their own services. Emirates president Tim Clark plans to meet later
this month with senior U.S. political leaders to respond to the accusations
from U.S. carriers, according to Bloomberg.
U.S. travel industry advocates, including the U.S. Travel
Association, also have been critical of U.S. carriers' attempts to revisit
those agreements. U.S. Travel Association president and CEO Roger Dow in
February said limiting Gulf carrier expansion into the U.S. would "fly in
the face of competition and consumer choice and ultimately harm demand for
travel to the U.S."