Persian Gulf airlines rebut 'Open Skies' allegations

Jim Hogan, CEO of Etihad Airways, and Tim Clark, president of Emirates Airline. (Nadine Hutton/Alessia Pierdomenico/Bloomberg)

Top executives of state-owned Persian Gulf airlines went on the offensive Tuesday against allegations, leveled by three U.S. airlines, of unfair business practices and billions in subsidies that breach "Open Skies" agreements.

Jim Hogan, CEO of Etihad Airways, and Tim Clark, president of Emirates Airline, were in Washington to meet with transportation and administration officials and rebut claims made against them by American Airlines, Delta Air Lines, and United Airlines that they have benefited from $42 billion in foreign government subsidies over the last decade.

Speaking to an annual aviation conference, Hogan said Etihad "was a David who's been facing Goliaths since 2003, when we started." Though the Abu Dhabi government provided "initial equity investment" and "shareholder loans," he said, the airline is "fully compliant with international financial-reporting standards."

Emirates, Etihad, and Qatar Airways, which flies daily nonstop between the Qatari capital of Doha and Philadelphia, have denied the allegations, suggesting that U.S. airlines have lost passengers because of inferior service.

"Our secret recipe of success is incredible customer service, delivered on modern new aircraft, at competitive prices, on the routes people want to fly," said Hogan, who started the debate at the U.S. Chamber of Commerce-sponsored conference.

American, which merged with US Airways and has a hub in Philadelphia, argues along with Delta, United, and labor unions that the governments of Qatar and the United Arab Emirates are violating aviation trade agreements by providing "enormous subsidies that are unprecedented in the history of international trade," CEO Doug Parker said at the conference.

"Emirates, Etihad, and Qatar are among the fastest-growing airlines in the world, and will soon have more wide-body capacity in their fleets" than all U.S. commercial airlines combined, Parker said.

"The Gulf carriers are flooding international routes to the United States, with more and more subsidized flights," Parker said. "Because they don't have to worry about a bottom line, they don't need more passenger traffic to justify more service."

The U.S. carriers have asked the Obama administration to renegotiate or scale back Open Skies agreements with the U.A.E. and Qatar.

Speaking at a news conference at the National Press Club, Clark denied that Emirates receives government subsidies. Its 84 flights a week to nine U.S. cities are "unsubsidized," he said. "We get no support for the operation. We are required to make money."

In 2014, he said, Emirates flew 1.7 million passengers to the United States from India, Pakistan, Bangladesh, Iran, Sri Lanka, and multiple points in Africa - locations not served by U.S. airlines.

"I struggle with their allegations about market share, when they don't fly to the places we fly," Clark said. "Frankly, the smart thing for these guys to do is work with us, not against us."

Hogan said Etihad delivered 180,000 passengers onto the networks of Delta, United and American last year. Etihad is a major customer of Boeing Co. and General Electric, he said, noting, "Our commitment to the U.S. economy supports more than 200,000 jobs."

Open Skies has been "a model of success," Hogan said. He warned against action that would restrict competitive choice for air travelers in markets U.S. airlines have chosen not to serve.

Both sides have lined up Washington lawyers and lobbyists to argue their case to U.S. regulators.

"We are simply asking for consultations on our Open Skies trade agreements with Qatar and the U.A.E.," said Parker, who called on Gulf carriers to open their financial records. "If, in fact, the playing field really is level, those consultations will come to that conclusion. We just don't believe that will be the case."

 


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