Stirring the hornets nest in the US3/ME3 subsidy debate


There is no doubt that American Airlines, Delta Air Lines and United Airlines expected action when they initiated their “Fair Skies” lobbying efforts. But I’m pretty sure this is not the sort of action they were going for. In the past few weeks Emirates and Qatar Airways have announced significant expansion in US markets, essentially taunting the US3 with more flights and more destinations. Of course, business is business and it is not all fighting amongst the crowd, but it is an interesting set of developments to consider.

Hornets
Hornets by Mike, on Flickr CC 2.0 BY

Emirates is going double daily to Boston, leveraging the codeshare partnership it has with JetBlue to help provide feed on that route. JetBlue has also suggested that the Emirates flights helped justify expanded business travel routes in Boston. The relationship is symbiotic and Emirates’ new service to Orlando may benefit similarly. Seattle will also see double daily service on Emirates.

For Qatar Airways the expansion is even broader. The carrier is adding Boston (16 March 2016), Los Angeles (1 January 2016) and Atlanta (1 July 2016) to its route map and also doubling up in New York City (1 March 2016), well behind the 4x daily A380s Emirates will have there. Two of the destinations, Boston and JFK, will see the A350, offering the newest and nicest business class product Qatar Airways has flying.

Read More: The fight over Open Skies: Business as Usual

And then there is the increased cooperation between American Airlines and Etihad, with a growing codeshare partnership and more closely aligned frequent flyer reciprocity. Indeed, for all the rhetoric involved, American is most tightly tied to the ME3 in terms of business operations and meeting customer needs.

Not surprisingly the US3 lobbyists are painting the moves as furthering illegally subsidized service into the US market as seen in this statement released on Monday:

This is yet another example of the Gulf carriers racing against the clock to dump more subsidized capacity on the U.S. and diverting passengers away from the U.S. airlines.

It is also interesting to note that IAG, the parent company of British Airways and Iberia, has chosen to leave the largest EU lobbying organization in large part over that group’s stance on the topic. Air Berlin also left the group though that is less surprising given the Etihad ownership stake in the organization.

Like most things I’m more or less convinced that reality sits somewhere in between the very loud lobbying positions of both sides. And also that, at the end of the day, more competition is usually better for consumers than not. Especially given that the markets the ME3 provide easier access to – especially in South Asia – are so poorly served by the US3. Easing access to explore and discover more of the world is a very, very good thing to me.

 

 

Never miss another post: Sign up for email alerts and get only the content you want direct to your inbox.


Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, LinkedIn and .

8 Comments

  1. The Gulf lobby is far stronger than the US3 lobby, even in Europe. The GCC countries, specially UAE and Qatar, are pretty much invested in every important aspect of the Western life from media outlets (like Fox News, WSJ, Washington Post, Sky News, Aljazeera, CNN Arabic, etc) to real estate (Chrysler building, Harrod stores, etc.), airlines, tech, sports, and more. The GCC approach to the Western world has pretty much been: if you can’t fight their capitalism then join it. So far it’s been paying handsomely for both sides, especially during 2008 crisis when the massive reserves of the GCC countries translated to huge investments/favors that helped otherwise bankrupt businesses and prevented even more job losses. Though the US3 are putting an interesting fight, I think they’re bound to lose and they will soon have to learn to live with it instead of instigating it further.

  2. Of course nobody wants to talk about the elephant in the room. That the government owners of the ME3 are authoritarian oligarchies whose elite have a horrible tendency to support and fund a bunch of people who want to do harm to the citizens of the United States.

    1. Business is business. There are definitely a lot of unethical and immoral businesses in every sector in the US but that doesnt mean we should label every American business as such. The US foreign policy in the ME hasnt always been a peaceful one either yet you still see people in ME drinking coke and eating dominos. The only countries in the world that prevent American businesses from operating on their land are: Cuba, North America, and Iraq (before 2003). Would you like to join these countries in mixing politics and business?

      1. I can assure you that it is much easier for ME and Asian companies to do business in the US than it is for a US multi-national to do business there. I worked for a fortune 5 company that had a sizable footprint in China, and I can assure you we were not allowed to do business there unless we had a Chinese “partner”, (Otherwise known as a state run company that the local party officials were using to get amass wealth)

        No business is not business. It is all political.

    2. ‘Cause the government of the US3 has had the biggest “hands off” policy in the world, huh? And in fact, it has backed and supported many of those authoritarian oligarchies to its own benefit and to the detriment of the people there…

      1. Red Herring. The question is – should the government of the United States favor these companies who are effectively arms of their respective governments over US companies. Especially when these governments rulers have been implicated in supporting some pretty awful people who seem to want to do the US harm.

  3. I don’t know but could the very fleixble joint ventures and anti-trust immunities that the US/Asian/EU governing bodies gave to many legacy carriers be viewed as a form of collusion (albeit legal), which gives the airlines the ability to compete collectively as one entity (I.E. AA/IB/BA/FY in the TATL/Middle East market), which the ME airlines do not have and have to compete against the combined behemoths on their own?

    If they want to argue capacity dumping – wouldn’t AA/BA’s massive JFK-LHR operation take the cake? Or having 4X daily LAX-LHR frequencies vs only 2 DXB flights for EK and 1 for the other ME carriers.

    To be honest, I am having a hard time wrapping my head around the capacity dumping argument being made by the US3, Air Canada, and some EU carriers, when they have significantly more capacity between markets through their partners under the joint ventures and ATI waivers.

    Now for subsidies – that is a hard one to argue when both sides enjoy them in many different forms (direct funding, tax breaks, subsidized services – BA’s BWI-LHR and EAS markets come to mind, etc.) how do you determine where is the line?

  4. IAG withdrew from the AEA because QR (who owns 10% of IAG) made a valid point 😉

    That said the AEA representing the EU3 was taking the approach of throttling the existing bilateral. The US3 don’t have that tool in their toolkit 🙂

Comments are closed.

BoardingArea