Middle East-US Airline war of words — There are no winners.

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By TESTCustomwebLP TESTCustomwebLP May 18, 2015 14:45

Middle East-US Airline war of words — There are no winners.

The CEOs of American Airlines Group, Delta Air Lines, and United Continental Holdings made a joint appearance on Friday at the National Press Club in Washington DC to detail their claims that Emirates, Etihad Airways and Qatar Airways have expanded service to the USA by 25% since January 2015. The US big three airlines used the platform to show that the Middle East majors are rushing to expand before Capitol Hill blocks new flights.

United’s Jeff Smisek stated that US airlines can compete against foreign rivals and have no problem in doing do, but they cannot compete against the governments of Qatar and the United Arab Emirates.

The US airlines claim the Middle Eastern carriers have stayed afloat by receiving more than $42bn in subsidies between them from their respective governments since 2004, and as such they want the US Government to renegotiate treaties that allow airlines from Qatar and the United Arab Emirates to fly to the US, in the process blocking any additional flights.

The US airline “get together” in Washington followed an Etihad report released last Thursday accusing the US airlines of hypocrisy. The Etihad study claimed that American, Delta and United have received US$71.48bn in government help since 2000.

It is not all bad for US carriers: JetBlue Airways remains very quiet on the whole issue with its partnerships with Emirates, Etihad and Qatar doing very well indeed in feeding its popular MINT product.

The Etihad report includes money that went to US airlines with which the three carriers have merged and the majority of the funds are related to restructuring under US Chapter 11. The report, researched and compiled by international consultancy firm, The Risk Advisory Group under a commission from Etihad, identified that the majority of benefits which accrued to Delta, United and American came from restructuring under Chapter 11 of the US Federal Bankruptcy Code, yielding them at least $35.46 billion, and additional pension fund bailouts totaling $29.4 billion from the US government’s Pension Benefit Guaranty Corp. United received the most with combined benefits estimated at $44.4 billion; followed by Delta at $15.02 billion; and American Airlines at $12.05 billion. United gained a one-time bankruptcy debt relief of around $26bn, and pension termination benefits totaling $16.8bn; Delta saw bankruptcy debt relief totaling $7.9bn, and pension termination benefits totaling $4.55bn; and American saw bankruptcy debt relief totaling $1.56bn, and pension termination benefits of $8.08bn.

Etihad stated that it does not question the legitimacy of benefits provided to US carriers by the US government and the bankruptcy courts. “We simply wish to highlight the fact that US carriers have been benefitting and continue to benefit from a highly favorable legal regime, such as bankruptcy protection and pension guarantees, exemptions from certain taxes, and various other benefits”.

In this argument, much like the Boeing Airbus WTO argument that continues to this day, there are no winners, no right or wrong and all involved, are to a point both in the right and the wrong on differing aspects, and depending on your point of view you can come down in support of one or both parties. The only difference between the two sides is this: We can prove what the US airlines have received over the years and it is all open and free information, we however cannot prove what the Middle East Airlines may or may not have received, thus the US majors do not have a smoking gun with which to go to Capitol Hill and lobby the US Government. Until that time the US majors are going to get nowhere fast in this argument and they need to concentrate efforts, maybe jointly, on how best to take-on and compete with the Middle East carriers and the Chinese big three who are in fact slightly more worrying in terms of the damage they can do to US international passenger growth.

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By TESTCustomwebLP TESTCustomwebLP May 18, 2015 14:45