Middle East Airline Executives Set to Clash with U.S., European Counterparts

MIAMI—Airline executives from the Middle East, who are poised to clash face-to-face with their U.S. and European counterparts in Miami this week in the multibillion-dollar battle over subsidy claims and market access, began by arguing over how widespread the dispute has become.

At stake are traffic rights into the U.S. and Europe and billion of dollars in Aircraft orders to Boeing Co. and Airbus Group SE as well as wider global trade issues, said John Strickland, director of Aviation Advisory JLS Consulting.

The three major U.S. carriers—Delta Air Lines, United Airlines and American Airlines—and Europe's Air France-KLM and Deutsche Lufthansa, have urged their governments to block further market access to a trio of Middle East carriers they accuse of receiving $42 billion in government backing. The subsidies allow them to compete unfairly, the critics charge. 
Emirates Airline, Qatar Airways and Etihad Airways deny they are subsidized and say their rivals have received hefty handouts.

Airline representatives from around 150 carriers are gathering Monday and Tuesday in Miami for the annual meeting of the  International Air Transport Association, the Airline industry's biggest trade group, amid intensifying acrimony between  the Persian Gulf carriers and their critics.

"This has now become a global debate," said Carsten Spohr, chief executive of Lufthansa, which has long argued for curbs on growth of the Persian Gulf rival. Having the U.S. Airlines join the German carrier's argument "makes our discussion more credible," he told reporters on the eve of the gathering.

Mr. Spohr said competition isn't fair because the Gulf carriers are state backed. He suggested that Airlines look at World Trade Organization dispute-resolution models as a way to create a level playing field. "There needs to be a rebalancing mechanism," he said.

James Hogan, chief executive of Etihad Airways argues opponents of the Mideast carriers are a minority. "It is two Airlines in Europe and it is three Airlines in the U.S.A. Does that represent the world of Aviation?," he said in an interview on Sunday.

The Abu Dhabi-based last month responded to a U.S. government request for comment on the issue of traffic rights. Mr. Hogan dismissed the challenge from the U.S. as a "narrow attack" aimed at protecting their trans-Atlantic traffic. "We have certainly not in any way damaged the U.S. carriers," he said.
Middle East carriers are trying to navigate the political minefield with a carrot-and-stick approach, highlighting the economic returns they generate for Europe and the U.S. through large jetliner purchases and by offering flight connections not provided by their rivals, while warning of consequences if they are shut out from growing.

Rather than costing the U.S. jobs, Etihad has created them, Mr. Hogan said.

Emirates Airline President Tim Clark, in a letter to Chicago Mayor Rahm Emanuel—who is backing the U.S. carriers—said the Dubai-based Airline generated $200 million annually in economic benefits for the city and was buying lots of planes from Chicago-based Boeing.

Qatar Airways chief executive Akbar Al Baker said last month in Amsterdam that Dutch companies could face repercussions after the Netherlands moved to temporarily stop granting additional slots to carriers from the Persian Gulf. Dutch companies may be shut out from $150 billion in planned infrastructure contracts planned by the Qatari government, the boss of the state-owned Doha-based Airline said.

The Dutch government said it has stopped granting new travel rights to the Middle East Airlines as it waits on the European Union to negotiate a broader Aviation accord with Persian Gulf states.

How the U.S. and European governments proceed is uncertain. Mr. Strickland said "There are so many potential ramifications. It is hard to predict the outcome."

Eesha Rohida [ MBA Mktg ]
Aviation News Editor