US airlines' claims challenge Gulf aviation hub

09 March 2015

Trio say Gulf airlines received $42bn of state support

  • American Airlines, Delta Airlines and United Airlines demand action against Gulf carriers
  • Trio claim Emirates, Etihad Airways and Qatar Airways have received $42bn of state support
  • Gulf has emerged as a global aviation hub over the past decade

A campaign by airlines in the US demanding that Washington take action against state-supported Gulf airlines could threaten the region’s growing position as one of the world’s leading aviation hubs.

The concerns raised by the US’ three main international airlines focus on Gulf airlines receiving $42bn of financial support from their governments, violating open skies agreements.

Open skies agreements, or air transport agreements, are bilateral agreements that promote free trade and air traffic between two countries. Qatar signed an open skies agreement with the US in 2001, followed by the UAE in 2003.

American Airlines, Delta Airlines and United Airlines say that Emirates has received $6.8bn of unfair benefits, Etihad Airways $17bn and Qatar Airways $17bn.

The trio alleges the Dubai government has taken on $2.4bn of fuel hedging losses and provided Emirates with artificially low airport charges. It adds that Etihad received an injection of $6.3bn in equity infusions from Abu Dhabi, together with $4.6bn in interest-free loans and $4.2bn of other subsidies. Emirates has consistently denied that it receives state support and says it competes fairly with other airlines.

Like Etihad, the US airlines say Qatar Airways has received $7.7bn in interest-free loans from the Qatari government, and $6.8bn in reduced interest costs, which result from loans being sovereign guaranteed.

The Gulf airlines have remained largely quiet on the issue, although it is reported that Emirates’ president Tim Clarke is planning to fly to the US to put forward his airline’s case with the department of transport.

Washington says it is taking the demands of the US airlines seriously and, while it could result in flights between the Gulf and the US being cancelled, a more likely scenario could be less new routes being opened in the future – if any action is taken at all. Gulf airlines also have supporters in the US. The Gulf airlines are major customers of US aircraft manufacturer Boeing, and any severe action taken by Washington could threaten new aircraft orders.

The US is just one part of the Gulf aviation story. It is strategically located on the axis of several major trade routes, and has been able to successfully develop itself as a transit hub for passengers and cargo. Key routes connect Europe with the Far East and Australia, Asia and Africa, and the Subcontinent with Europe and the rest of the world.

Over the past decade, Dubai, Abu Dhabi and Doha have been developing themselves as global aviation hubs with rapidly expanding airlines and new large-scale airport terminals. Dubai International airport overtook London’s Heathrow to become the world’s busiest airport for international travel in 2014 with 69.9 million passengers.

The expansion plans are ongoing with billions of dollars of new aircrafts on order, and new construction projects that will greatly increase the capacity of the three Gulf cities’ airports. The largest project by far is the ambitious programme planned for Al-Maktoum International airport in Dubai, which will make it the biggest airport in the world by 2050 with the capacity to handle 255 million passengers a year.

At Abu Dhabi International airport, construction work is ongoing on the midfield terminal complex, which together with other expansion works will increase the number of passengers the airport can handle from 12 million to 32 million a year.

Despite having finally opened Hamad International Airport last year, Doha is expected to tender a major construction contract on the airport this year. The work involves the development of concourses D and E and will include more gates, as well as additional retail and business facilities, and a hotel.

It is not the first time the Gulf airlines have faced difficulties in North America. In 2009, Canadian transport regulator Transport Canada did not allow more flights between the UAE and Canada, prompting a series of counter measures from Dubai and Abu Dhabi throughout 2010, including visa restrictions on Canadian citizens entering the UAE.

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