Delta CEO Again Cries Foul with Gulf Carriers Subsidies, Despite Best Summer Traffic Ever

For a while now, the three major US airlines, American, Delta, and United, have been in a bit of a rivalry with the Gulf carriers. Their protest mostly centers around the idea that it’s uncompetitive for US airlines of fly to Abu Dhabi, Doha, and Dubai, because the gulf carriers are heavily subsidized. US airlines have been profitable, but they were arguing for protection against Emirates, Etihad, and Qatar.

Essentially, the US carriers claimed that the Gulf carriers have received over $42 billion in government subsidies since 2004. They posits that subsidies are a violation of the Open Skies agreement, which prohibits airlines from charging “prices that are artificially low due to direct or indirect government subsidiary or support.” The Gulf carriers fought back, saying that they are for-profit businesses, and that they received investments, not subsidies. Emirates even released a long report (link to PDF) about their opposition on airline subsidies.

Emirates A380

Emirates A380

The fight between the US and Gulf carriers got a bit nasty. In early 2015, then Delta CEO Richard Anderson even insinuated that the gulf carriers were linked to the 9/11 attack, though Delta later apologized for the remarks. Just last month, American CEO Doug Parker said a Gulf carrier shouldn’t be allowed to fly US-Europe route, a direct jab at Emirates, the only Gulf carrier that flies one such route.

Now, it’s worth noting that US carriers receive subsidies themselves. In 2015, a WikiLeaks document revealed that the US carriers receive $155 billion in subsidy from the US government from 1918 to 1999. Just last month, we reported that United Airlines received a $12 million deal just to keep a US-Europe route to Belfast open. Additionally, American Airlines and Qatar Airways are both part of oneworld, and American also partners with Etihad.

In late July, the US government held constructive talks with the Qatari and UAE governments. They discussed the allegations of unfair competitive made by US carriers, in respect to the Open Skies agreement. The State Department said that they looked seriously at the allegations, but decided to take no formal action. For a little bit, the cry of “unfair” from US carriers died down for the most part.

Delta CEO Ed Bastian at Delta Sky Club in Atlanta

Delta CEO Ed Bastian at Delta Sky Club in Atlanta

That is, until this past Friday, when Delta CEO Ed Bastian sort of reignited the vocal rivalry at a company event in New York. From Reuters:

Etihad Airways and Emirates airline had received $50 billion in illegal subsidies, financing that allows the carriers to offer some 30 flights a day to the United States at fares substantially below what U.S. airlines can offer.

The United Arab Emirates and Qatar together have a population the size of the U.S. state of Ohio, but “they have more widebodies on order than all the Chinese airlines and U.S. airlines combined,” Bastian said at an event in New York. “That doesn’t sound fair, that doesn’t sound free,” he said.

There should be fair competitions between airlines, but I’d argue that we should focus on a fact-based debate on subsidies, rather than an emotional one; something sounding fair isn’t the same as something being fair. By the same token, while I made comparisons about airlines allegedly receiving subsidies, one entity receiving subsidy isn’t a license for another to do to the same.

Interestingly, in the same event, Bastian mentioned that Delta has had their best summer traffic in the airline’s history. Three days in July even “set all-time records in terms of volume of traffic and volume of passenger flows.” This best-ever summer was achieved despite a major systemwide outage in early August, where hundreds of flights were cancelled.

Bastian’s comment came just before Qatar Airways officially announced a deal with Boeing, which would see Qatar buying up to 100 aircrafts in an $18 billion agreement.

Comments

  1. I guess when Delta charges $7000 to $10000 for a business class seat, or that amount to upgrade, it seems that it is just common sense for consumers to look for a better deal.
    Another absurd accusation from Delta was them halting their direct US to Dubai flight, because they were losing money! Myself, along with several other co-workers flew that flight and it was always full every time! Oh yeah, good luck trying to use your SkyMiles to upgrade on those flights!!!!

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