As we have discussed previously in this course, international carriers such as Qatar, Emirates and Etihad Airlines are dominating the international market. U.S airlines are claiming that they have an unfair advantage by receiving government subsidies. According to Delta Airlines Etihad, and Qatar Airways have received "42 billion dollars in subsidies from their home governments" (Weisman 2015). They also claim that they are using the subsidies to eliminate competition by lowering prices, and offering services such as showers, beds and full service bars at the company's expense. That's the reason why the CEO's of the American carriers are "pushing for American action against the Gulf carriers because they believe that they are receiving illegal subsidies from their respective governments, and violates the open sky agreement which promotes trade jobs and economic growth" (Oatis 2015).
Recently the American carriers announced that they will be abandoning most of their flights to the Middle East. Delta announced that it will abandon its only flight from Atlanta to Dubai in February, while United announced that it will stop flying to Dubai in January. The American Cariers are claiming that competition from the gulf careers are causing them to abandon most flights to the middle east and India because they can't compete (Mouawad 2015). As of late U.S airlines are demanding that the Gulf carriers freeze their expansion into routes originating in the United States (Safo 2015). According to the New York Times "American Airlines have pressed the administration to freeze all new flights from their three foreign rivals-Emirates, Etihad, Qatar" (Mouawad 2015).
According to the Hill "Based on earlier years of unprofitable operations, Delta and the other U.S. major network carriers have used huge NOL carry-forwards to eliminate tax liability on the record profits that they have earned more recently. Importantly, now that NOL carry-forwards are nearly exhausted and record profits continue to roll in, news accounts indicate that Delta is cleverly cooking up a tax avoidance scheme to limit its future U.S. tax liability" (Kevin 2015). Just for clarification "U.S. tax law permits corporations, even those that have discharged their debts and wiped out losses through Chapter 11 bankruptcy, to carry-forward net operating losses (NOL) to offset future earnings and thereby eliminate or reduce tax liability" (Kevin 2015).
To make matters worse Etihad is claiming that American, United and Delta Airlines have "received a combined total of 71.48 billion in government benefits over the last 15 years" (Fricke 2015). It's kind of hard to call for government action when you are doing the same thing that you are complaining about. While American carriers are complaining about 42 billion dollars in government subsidies given to Emirates and Qatar they have forgotten about the american aviation industry receiving "155 billion in direct spending from 1918 to 1998" (Shaal 2015). That is not including any government subsidies given in the last 17 years, or bailouts and bankruptcy proceedings. As you see there are always two sides to a story, I personally think that both American and Middle Eastern Airlines are guilty in receiving government subsidies.
As the U.S airlines continues to dump millions of dollars in an attempt to slow the growth of the Gulf carriers, Qatar CEO Akbar Al Baker announced earlier this month "new routes to Philadelphia and Los Angeles starting Jan. 1, to Boston March 16, and to Atlanta June 1" (Trejos 2015). He didn't stop there, he also called out Delta's CEO Richard Anderson saying "I think that this is only baloney. It's nonsense," Al Baker said, of Anderson's complaints. "And it is just to protect his backside so he can swindle American passengers more and more, reduce capacity, and keep on increasing his market share" (Trejos 2015).
Airlines such as Delta and United are complaining about foreign airlines such as Emirates benefiting from below market interest rates that are unavailable to them from the governments export credit agency. Even though it may sound unfair to american airlines, you must keep in mind that international airlines are using that money to buy Boeing aircraft instead of Airbus. Boeing officials believe that the Export-Import bank allows them to sell hundreds of airplanes and compete with the European market, and with out it they will lose billions of dollars in revenue. Boeing also believes without the low interest rates airlines such as Emirates would deal with European credit agencies to purchase jets from Airbus
( Weisman 2015).
No I don't believe that the global playing field of long haul careers is fair, but it's fair enough for airlines to compete with one another. I also believe that people are forgetting that airlines don't play fair, and that applies to all airlines not just the gulf carriers. With that being said I think that it's a good thing that the Gulf carriers are expanding their airline's, simply because they are offering more flights to places such as Africa and Asia. Even though some airlines don't like the competition, customers are benefiting greatly from this, whether it's more flights available to them or simply reduced ticket prices. After writing this blog I discovered that American Airlines have been receiving subsidies since 1918, and once they started feeling the heat they wanted to call foul. I think it's a joke that people mention the open sky agreement when we all know that airlines don't play by the rules, they never did and never will, it's just the nature of the business.
Fricke, P. (2015, May 15). Gulf Airline Blasts US For Aviation Subsidies. Retrieved October 26, 2015, from http://dailycaller.com/2015/05/15/gulf-airline-blasts-us-for-aviation-subsidies/
Mitchell, K. (2015, December 14). Delta Air Lines' campaign against Gulf carrier subsidies is built on house of cards. Retrieved December 18, 2015, from http://thehill.com/blogs/congress-blog/economy-budget/262967-delta-air-lines-campaign-against-gulf-carrier-subsidies-is
Mouawad, J. (2015, December 14). U.S. Airlines Face Uphill Struggle Against Mideast Rivals. Retrieved December 18, 2015, from http://www.nytimes.com/2015/12/15/business/us-airlines-face-uphill-struggle-against-mideast-rivals.html?_r=0
Safo, N. (2015, November 16). U.S. airlines battle Persian Gulf carriers. Retrieved December 18, 2015, from http://www.marketplace.org/2015/11/16/world/us-airlines-battle-persian-gulf-carriers
Oatis, J. (Ed.). (2015, September 17). U.S. airline CEOs to meet with Kerry on Gulf carriers. Retrieved September 27, 2015. from http://www.businessinsider.com/r-us-airline-ceos-to-meet-with-kerry-on-gulf-carriers-2015-9
Schaal, D. "WikiLeaks Disclosure Shows U.S. Airlines Received Billions in Subsidies." Skift. 9 Apr. 2015. Web. 27 Oct. 2015, http://skift.com/2015/04/09/wikileaks-disclosure-shows-u-s-airlines-received-billions-in-subsidies/
Trejos, N. (2015, December 9). Qatar Airways chief slams Delta CEO on 'baloney' claims. Retrieved December 18, 2015, from http://www.usatoday.com/story/travel/flights/todayinthesky/2015/12/09/qatar-airways-airbus-a350-doha-jfk/77052088
Weisman, J. "Boeing and Delta Spend Millions in Fight Over Export-Import Bank’s Existence." The New York Times. The New York Times, 6 Apr. 2015. Web. 27 Oct. 2015, http://www.nytimes.com/2015/04/07/business/boeing-delta-air-lines-export-import-bank.html?_r=0
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