Delta Air Lines and Atlanta are in the middle of a global fight that could affect competition in international air travel for years to come.
The tension heated up when Qatar Airways announced plans to launch a route from Doha to Atlanta next year — right at the doorstep of Delta Air Lines. Delta has led opposition to subsidized Gulf carriers including Qatar that are expanding in the United States.
The dispute has been marked by increasing acrimony, particularly between Qatar Airways CEO Akbar Al Baker and Delta CEO Richard Anderson.
Al Baker, at a press conference last week, called the opposition by U.S. carriers to state-owned Gulf carriers’ growth “a real example of the bullying tactic that is being taken against us.” He also said U.S. carriers provide “crap service.”
At issue are international aviation trade pacts, known as Open Skies agreements, that lift restrictions on service between two countries. Delta, United and American argue that Gulf carriers Emirates, Qatar Airways and Etihad have gotten more than $42 billion in subsidies from their governments, which the U.S. carriers say are not allowed under Open Skies.
The U.S. government said it is reviewing the claims.
Others, including the U.S. Travel Association representing the travel industry, argue that U.S. carriers are attempting to quash competition that could help to lower fares and increase consumer choice.
The battle culminated with dueling press conferences last week in Washington D.C.
Al Baker said Qatar’s plan for Atlanta service is not just due to the dispute with Delta, citing demand for the service. The carrier also plans new service to Los Angeles and Boston.
Al Baker said U.S. airlines have consolidated and reduced capacity “to keep prices high against the interests of the customers,” while also doing poorly on service.
In a targeted jab, Al Baker said: “Ironically Delta is complaining about our subsidy while fighting with the state of Georgia about the continuation of its fuel tax breaks.”
Flying barbs
It’s not the first time Al Baker and Anderson, both highly competitive and unapologetically aggressive chief executives, have flung barbs at each other.
Earlier this year, Gulf carriers had lobbed accusations that some U.S. airlines received their own subsidies in the form of Chapter 11 bankruptcy and federal loan guarantees and aid after the Sept. 11 terrorist attacks. On Friday, Gulf carrier Etihad issued a press release claiming that the value of such aid totaled about $70 billion, including about $15 billion to Delta.
U.S. airlines have countered that bankruptcy is not a subsidy, and the restructuring process is transparent.
Anderson in February told CNN: “It’s a great irony to have the United Arab Emirates from the Arabian peninsula talk about [bailouts for U.S. airlines] given the fact that our industry was really shocked by the terrorism of 9-11 which came from terrorists from the Arabian peninsula that caused us to go through a massive restructuring.”
Al Baker retorted: “I think he should be ashamed to bring the issue of terrorism to try to cover his inefficiency in running an airline,” he told the cable network.
Uneven playing field?
Qatar and other Middle Eastern airlines are not well known to most Americans, but they are growing. Dubai International Airport is a potential candidate to become the world’s biggest.
A coalition of the big U.S. airlines and their unions say the Gulf carriers are on a “quest to dominate international aviation,” and the coalition has asked the Obama Administration to freeze additional service and request formal consultations.
The subsidies, U.S. airlines argue, enable the Gulf carriers to place huge orders for planes and expand around the world.
In its own press release Friday, the U.S. industry’s Partnership for Open and Fair Skies said Gulf carriers’ claims of expanding new markets is bogus. Instead, they “are diverting passengers from U.S. airlines while not stimulating new passenger demand, contrary to their claims. This subsidized competition is seriously harming U.S. airlines and costing American jobs.”
Some say the subsidies also enable Gulf carriers to offer luxurious amenities U.S. carriers cannot match.
“I think Qatar Airways is trying to bedazzle us travelers with subsidized routes that give the appearance of increasing competition,” said Sara Nelson, international president of the Association of Flight Attendants, which is part of the coalition.
The Gulf carriers are “infusing capacity that the U.S. industry can’t compete with, because it’s not a level playing field,” Nelson said. “If the U.S. carriers can’t compete… they’re going to have to pull back in other areas, and that means potential destruction to the U.S. route structure that our U.S. economy is built on.”
She said each new Gulf carrier route costs the U.S. 800 jobs.
The Georgia Chamber of Commerce submitted a letter to the U.S. Departments of State and Transportation supporting Delta’s and the other U.S. airlines’ position.
“It’s time to take a stand against governments that don’t play by the rules at the expense of those who do,” wrote Georgia Chamber CEO Chris Clark.
Increased competition
Critics and some consumer advocates say the U.S. airlines are arguing for protectionism.
The U.S. Travel Association said the Gulf carriers have brought thousands of new visitors to the United States, and “that benefits the entire industry and economy,” according to the group’s executive vice president of public affairs, Jonathan Grella.
Travelers in Atlanta are also pushing for more options from foreign carriers. Other than Delta and its alliance partners — Air France, KLM, Korean Air and Virgin Atlantic — the only foreign passenger carriers at Hartsfield-Jackson International are Air Canada, British Airways and Lufthansa. The world’s busiest airport no longer has nonstop passenger flights to China or India.
“Competition brings better service,” said Jerish Augustine, president of the Greater Atlanta Malayalee Association representing the local Indian and South Asian community. U.S. carriers “don’t like competition,” he said.
John Grant, executive vice president at aviation intelligence firm OAG, said U.S. airlines are taking up this issue as they face more international competition amid growth in Asia and the Middle East, and work to re-position themselves in the world.
The growing young airlines have “new ideas and new ways of doing things that are challenging the status quo,” Grant said. “If you are the status quo, that’s always an uncomfortable position to be in.”
Grella said his travel group’s aim is not to attack the U.S. industry, but he likened the emergence of the Gulf carriers to shakeups of the cable and taxi industries.
Companies “have been taught an important lesson on the desire for competition and what happens when consumers feel taken for granted or neglected or mistreated,” Grella said.
When a new competitor comes in as a disruptor, “Then the entrenched incumbent who has perhaps gotten a little complacent tries to starve the disruptor of oxygen, and that seems to be where we are now.”
At a National Press Club luncheon Friday, Anderson said U.S. carriers won’t back off.
“We’re going to continue the battle,” he said, “because it’s about the future of an industry that’s vital to our country.”
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