United Airlines President Scott Kirby believes that the United States government will eventually come around to “do the right thing” and make a decision against the three Middle Eastern airlines which are flooding the market with cheap fares.
“Our political system in the United States is messy and often frustrating, but the great thing about this country is at the end of the day, we do the right thing,” Kirby announced at the Boyd Group’s International Aviation Forecast Summit in Las Vegas.
“This is so clearly the right thing. I don’t know when or exactly how it will happen but I believe that we will get to a world where we get fair competition,” Kirby added.
Through a trade group they finance, American Airlines, Delta Air Lines and United are accusing the three largest Gulf carriers — Etihad Airways, Emirates airline, and Qatar Airways — of having received $52 billion in government subsidies since 2004.
This is a problem, the U.S. carriers say, because treaties that permit the Gulf airlines to fly U.S. routes prohibit them from receiving certain types of government assistance. U.S airlines claim that the Gulf airlines are in clear violation of the agreements, and they have requested U.S. officials to “review” the nation’s aviation treaties with Qatar and the United Arab Emirates.
The Gulf carriers have long denied the charges, reasoning that the assistance they receive from their governments is no different than what many U.S. and European airlines get. The Gulf carriers argue they’re not violating Open Skies agreements and at one point, Emirates President Tim Clark described the U.S. airline allegations “surprising and frankly, repugnant.”
However, not all U.S. interests are aligned with American, Delta and United. Several U.S. companies, including Hawaiian Airlines, JetBlue Airways and Fedex, back Emirates, Etihad and Qatar and oppose the United States’ plans to renegotiate its aviation agreements with the United Arab Emirates and Qatar. Fedex potentially would be hurt most by lessened access to Gulf countries, because it relies on the same agreements to operate a shipping hub in Dubai.
But Kirby, like his rivals at American and Delta, has a different perspective on the issue. He said Emirates, Etihad and Qatar often act unreasonably, and too often undercut U.S. airlines, and their European partners, in terms of price. The big U.S. airlines say they likely would have a bigger presence in India and the Middle East if not for the allegedly subsidized competition.
Asked during the conference session if he thought the Gulf carriers were receiving backdoor subsidies, Kirby said he believes the issue is more complex.
“I think it’s a front door, back door, side door, windows,” Kirby said. “I think they are just getting subsidies across the board. When we first started this, you would go in to meet with a regulator and a politician and people were very skeptical and thought here come the big airlines whining about not having to compete. You walk out and no one even debates about whether they are subsidized or not. The only debate is what should we do about it.”
Kirby also shared that he is disappointed with Emirates’ new flight from Athens to Newark, a United hub. Emirates is allowed to fly it under the U.S.-United Arab Emirates aviation treaty, but Kirby said few travelers want to go between Newark and Athens. Historically, in winter, Kirby said about 100 passengers each day fly between the two cities. But Emirates is flying a jet with more than 350 seats.
“Even if they got 100 percent of the market, it’s still a 33 percent load factor,” Kirby said. “To them, it’s completely irrelevant. Of course they are going to lose money.”