Other U.S. Airlines Oppose Big 3 in Gulf Subsidies Dispute

 - June 9, 2015, 3:42 PM
Atlas Air, which leases Boeing 747 freighters, said action against Gulf carriers would be poorly received. (Photo: Atlas Worldwide Holdings)

U.S. cargo and other airlines do not support the Big 3 U.S. carriers in their campaign to check the expansion of Persian Gulf airlines over allegations of improper subsidies. Several airlines have filed comments calling on the U.S. government to leave intact the “open skies” agreements it has with UAE and Qatar—the nations United, American and Delta airlines accuse of propping up their airlines.

In April, the U.S. departments of State, Commerce and Transportation invited comments from interested parties on the claims the Big 3 carriers have made against state-owned Qatar Airways and UAE airlines Emirates and Etihad Airways. United, American and Delta want the U.S. government to request a formal consultation with UAE and Qatar over their complaints and to freeze additional flights or capacity increases by the Gulf carriers at January levels until the dispute is resolved.

Cargo carrier FedEx is at the forefront of U.S. airlines opposing a freeze and arguing that open skies agreements should be preserved. In an 11-page filing signed by Nancy Sparks, FedEx managing director for regulatory affairs, the cargo carrier argues that it stands to lose most from any retaliation that might result from a U.S. action involving UAE in particular. FedEx said it operates 44 flights each week through Dubai International Airport, connecting to destinations in Europe, China and India, whereas Delta and United each operate a single daily flight to Dubai.

“FedEx is being put at risk by the request for unilateral action from a small group of U.S. airlines,” the carrier stated. A freeze would violate the current open skies pact and “would invite retaliation or renunciation of their agreement by the UAE. In either case, as the U.S. airline with the most flights to and from the UAE, we believe that we would potentially be subject to the greatest harm. FedEx strongly urges the U.S. not to take this or any other action on a unilateral basis.”

A key aspect of open skies agreements between nations is the “fifth freedom” right to deliver cargo to third-party countries on flights to and from a carrier’s home country, FedEx said. “With Fifth Freedoms, used in combination with other open skies provisions…FedEx has been able to export its hub-and-spoke system and thus extend its network globally,” the carrier said. “[L]ike the Big 3, we use Fifth Freedoms to support our global network. However, we use ours to fly our own aircraft, not to hand over U.S. traffic to foreign airline partners via code-share marketing magic.”

Also opposing U.S. government action was Atlas Air Worldwide Holdings, of Purchase, N.Y., representing its U.S. subsidiaries Atlas Air and Polar Air Cargo Worldwide. Those airlines, which lease or operate Boeing 747 freighters, “benefit substantially” from both fifth and seventh freedom traffic rights—the right to carry cargo between third-party countries without stopping in the carrier’s home country. “Unilateral U.S. action would be ill-chosen and received poorly by important strategic allies,” Atlas argued.

The Cargo Airline Association, representing ABX Air, Atlas Air, FedEx Express, Kalitta Air, and UPS, said its member carriers “are extremely concerned with any actions that may result in a return to unnecessary government protectionism and that in turn will have a negative impact on all-cargo operations and the entire world economy…The government must avoid such consequences in dealing with allegations about the Gulf carriers.”

At least one major U.S. passenger carrier—JetBlue—opposes restricting the Gulf carriers. It said it benefits from connecting flights by Emirates, one of its codeshare partners.

“The views of the three complaining U.S. carriers, one of which, Delta, ironically enjoys a tremendous fifth-freedom franchise of its own in Japan, do not represent the views of the entire U.S. aviation industry,” stated JetBlue president and CEO Robin Hayes. “JetBlue and several other passenger and cargo airlines have a different perspective on Open Skies and the competitive benefits they produce.”