Wednesday, March 18, 2015

American’s Parker calls Gulf carrier subsidy ‘unprecedented’ as feud escalates

American Airlines CEO Doug Parker today said the airline subsidy evidence against Qatar and the United Arab Emirates was “overwhelming” and “unprecedented.”

Delivering a keynote Tuesday at the US Chamber of Commerce Foundation 14th Annual Aviation Summit in Washington DC, Parker was the latest in a string of speakers who addressed the growing feud between the three major US airlines and the three Gulf carriers over Open Skies and subsidies.

American Airlines, Delta Air Lines and United Airlines are leading the campaign against Gulf rivals Emirates Airline, Etihad Airways and Qatar Airways. In a white paper, they allege the Gulf carriers benefit from more than $40 billion in subsidies from their government owners, distorting the competitive marketplace.

In his keynote today, however, Parker seemed careful to turn the focus on to the Gulf nations concerned rather than on the airlines.

“We believe there is now overwhelming evidence that the governments of Qatar and the UAE are violating the aviation trade agreements between the US and those countries by providing enormous subsidies to Qatar Airways, Emirates Airline and Etihad Airways—subsidies in amounts that are unprecedented in the history of international trade,” Parker said.

“To be clear, we aren’t challenging the motivations of these airlines. But what we are saying is that the policies of these two governments are inconsistent with the foundation of the Open Skies trade agreements, and that these actions distort the competitive marketplace in a way that is wholly inconsistent with the trade and transportation polices of the United States.

“And these are no small subsidies. We have provided to the US government clear and strong evidence that Qatar and the UAE have provided these three airlines at least $42 billion in subsidies over the past decade. We believe this is the largest subsidy case ever presented to the US government.”

Parker added that the Gulf airlines “certainly aren’t independent companies. They are not just owned by their governments—these airlines are arms of the state.”

On the sidelines of the conference, Parker told reporters that the US airlines’ request for consultations was with the Obama administration, but he did not know when a response would occur.  “It’s their process now; we are in regular contact, but it’s their process,” he said.

Parker’s comments came on a day that several other CEOs commented on the Gulf carrier feud, both at the summit and elsewhere in DC.

Lufthansa Group CEO Carsten Spohr, the summit’s opening keynote, said the US carriers were “very much in line with what we have been saying in recent years." He said Open Skies agreements are based on fairness and the Gulf carriers need to be brought back into fair competition framework.
Spohr said if only half of what was in the US white paper was true, it was a serious breach of fairness rules.

Spohr added he was meeting with US Departments of Transportation and Commerce and Congressional officials Tuesday afternoon to give them the European view on this issue.

“WTO rules mean no capacity dumping, no price dumping and no subsidies. Gulf carriers must comply with those principles,” he told ATW on the sidelines of the summit. "I'm not afraid of competition, but I can't compete with states."

Etihad president and CEO James Hogan, meanwhile, gave a strong defense of his airline and its policies in another keynote summit. He said his airline had been built from scratch since 2003 and he would not apologize for anything.

United president and CEO Jeff Smisek also weighed in on the issue, talking with reporters on the sidelines of the summit.

“Recognize that we are not attacking Open Skies. Open Skies treaties have been wonderful and very good for our customers. There are 114 treaties and we are focused on just two that are being abused by governments. “

Smisek said the Gulf carriers were “good airlines,” but his airline could not compete against treasuries. He said he was “highly confident” that their case would be recognized and that what he wanted to see was government-to-government talks to explore and address the issue.

Boeing Commercial Airplanes president and CEO Ray Conner, speaking at the summit, would not be drawn on the issue, pointing out his company has customers on both sides. But he did say it was a government-to-government issue. “We are about expanding aviation and growth and historically Open Skies have been a big proponent of that. It’s best left to the governments to consult on this; these are country-to-country agreements,” he said.

At a separate press briefing Tuesday in Washington DC, Emirates president Tim Clark responded to the controversy by saying, “All we ask is that Emirates be given the chance to respond. We will rebut all of the things said about us. I suspect once we do that we’ll be given the benefit of an apology from those who have made these allegations.”

He added, “We are not here to try to take down other carriers. Delta, United and American are hugely powerful carriers.”

Clark said he met with DOT officials this week and had “very constructive” talks. He promised a “line by line response” to the US carriers’ report. “We will do it in a very methodical, clinical manner. My goodness, it was two years in the making, so give us some time. Believe me—I don’t expect to take a lot of time on this.”

(Karen Walker - ATWOnline News)

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