In the bigger scheme of things, 4.3 million seats remains a drop in the ocean compared to the size of the total US market
carriers offer many connections, the US trio barely registers, although American will start LA-Sydney in December, in partnership with Qantas. The simple truth is that the three US giants stay overwhelmingly close to home – each has domestic capacity making up over 75 per cent of their total, accord- ing to CAPA, with Delta’s being nearer 85 per cent. Where the Middle East is concerned, their problem is firstly the distance – nearly 16 hours’ flying from Dubai to Atlanta. Second, unlike the Gulf carriers, they do not have many nations’ premium traffic feeding into them to offset the low-yield passengers that dominate these routes. No wonder the US airlines prefer to serve these destinations with the help of a partner in Europe. Over in Europe, the reaction to the Gulf carriers has varied from one airline to another. International Airlines Group (IAG), parent company of British Airways and Iberia has been at one end of the spec- trum: IAG chief executive Willie Walsh in a submission to the US government, said the “outdated concept of ownership of passenger traffic must be rejected by all governments”. He also resigned IAG’s membership of the Association of Eu- ropean Airlines (AEA), citing the AEA’s support for the other end of the spectrum – in the form of Air France/KLM and Lufthansa, both of which want restrictions on the Gulf airlines similar to their US counterparts. Critics might point out that Qatar Airways now owns 10 per cent of IAG, but Walsh’s stance was well-known many years before the transaction. There is also support for the Gulf carriers from US-based Business Travel Coalition (BTC), which points out that their entry to the US has stimulated demand, offered consumers more choice, lowered fares and pressured US airlines to improve their product and service. BTC
BUYINGBUSINESSTRAVEL.COM
founder Kevin Mitchell says: “These are all telltale signs of a functioning competi- tion and an Open Skies policy delivering anticipated outcomes.”
The BTC is locked in battle with the Big
Three and several industry unions, who have united under the Partnership for Open and Fair Skies banner. The partner- ship’s spokesperson, Jill Zuckman, says the Gulf carriers are racing against the clock to add more and more subsidised flights before the issue is resolved. She is emphatic about the issue of
subsidy: “The issue is that the Open Skies agreement says your flights can’t be sub- sidised. They don’t have to operate in the real-life market place. We’re just asking for consultations, it’s a pretty minimal ask.” Zuckman rejects suggestions that bankruptcy protection was a subsidy: “Ask the hundreds of thousands of employees whose salaries were slashed and pensions frozen. There was no influx of capital.” We will likely wait some months for the outcome following a consultation process that ended in May. Congress must now decide whether the Gulf carriers have breached the terms of the Open Skies agreement and bar further expansion pending an enquiry. Just as the issue was due to come under scrutiny in Washington, the Gulf carriers’ case may have been set back by the blatant threat of Qatar Airways’ boss Akbar Al Baker towards the Netherlands, who told the country it could not expect commercial contracts from his govern- ment if he was not given more landing rights in Amsterdam – something that will not go down well in Congress. When it comes to free trade, both sides, it seems, have a very fluid interpretation of what that constitutes.
War and peace
HAVE THERE BEEN SIMILAR EPISODES IN THE PAST? Yes. In 2006, Congress complained about Dubai’s DP World owning six key US ports during the ‘war on terror’. DP World acquired them as part of a takeover of P&O’s port business, and reluctantly agreed to sell them after Congress threatened to block the takeover.
WILL WE SEE A SIMILAR ROW IN THE UK? No, that point has passed. The Middle East carriers have dozens of daily flights from many UK airports, and because of slot restrictions at Heathrow are now expanding outside the South East, most recently being Qatar Airways’ move into Edinburgh. Moreover, BA and American, and Virgin and Delta have joint
transatlantic partnerships; so can hardly complain about decreased competition.
THE THREAT TO BUSINESS TRAVEL Anyone doing business in the Middle East and the US will value the non-stop links that the Gulf carriers have established. The row means that further proposed links from these airlines may not go ahead – and there seems no appetite from the US side to establish them.
THE ALTERNATIVE Apart from putting up and shutting up, the other solution, which none of the US carriers are saying publicly, is for a firmer partnership with a Gulf carrier. The most obvious is for American, Qatar Airways and Etihad to go beyond their current codeshares, but a lot of bad blood will be spilled first and it may take time to patch things up.
BBT JULY/AUGUST 2015 59
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