Comment
Old world carriers’ bias laid bare
June 1st 2015
Airlines advocate liberalized skies, open markets and the abolition of outdated rules and regulations – except when it does not suit them. Read More »
The latest example of this blinkered thinking is a heavy hitting campaign, orchestrated by North America’s American Airlines, Delta Airlines and United Airlines, to contain Gulf carrier expansion in the U.S.
The anti-Gulf onslaught centres around a U.S. government White Paper, which was published in April and largely researched by the Big Three American carriers over a two-year period. The paper argues that Emirates Airline, Etihad Airways and Qatar Airlines have been assisted in their rapid global expansion by Gulf government subsidies of at least US$40 billion and hence have an unfair operating advantage in the U.S. market.
But as our main story this month reveals, this may be only the beginning of the Northern American carriers’ competitive woes. They could soon be fighting a market war with not one, but two formidable foes: the big three airlines from the UAE and China’s Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines. All four Mainland airlines have made it clear building market share to the U.S. and beyond is a priority.
It appears, however, that North American airlines have one rule for the Gulf carriers and quite another for Mainland airlines. The question is why?
A decade ago, the same U.S. airlines that are protesting against a Gulf invasion were all for Open Skies with the People’s Republic of China. But China’s civil aviation authority resisted the U.S. government’s overtures when its representatives came courting in Beijing. China believed their young airline industry was not yet ready to compete against the then mighty U.S. in an Open Skies environment.
Fast forward to 2015 and Chinese airlines are in a very different place. Industry forecasts universally agree China will overtake the U.S. as the largest domestic airline market in the world in the near future – and that their global growth will be exponential.
In our main story, “Assault from the East” new statistics from consultancy, CAPA, reveal that for the first time in trans-Pacific airline history, China will have more seats into the U.S. in the peak season than U.S. airlines will have to China.
So why are North American airlines crying poor about Gulf competition and saying very little about a much larger threat, numerically, from across the Pacific?
Chinese airlines are subsidized. They make no secret of it. Collectively, they received a minimum of US$1 billion in subsidies from central and provincial governments and airports in 2014. Yet this “assistance” does not seem to bother American carriers in the same way it does when they attack Gulf competitors.
Could it be that Mainland China is critical to North American carrier’s expansion and therefore relationships must be nurtured rather fractured? Delta Airlines’ CEO, Richard Anderson, the most public face of the anti-Gulf campaign in the U.S., has made it clear he wants Shanghai to become a hub for his Atlanta-headquartered carrier. He has no such ambition in the Gulf.
Unfortunately, whatever the merits of the opposing arguments, this battle is not going to go away soon. In May, after a long period of lobbying by major European airlines against Gulf carrier growth into Europe, the Europeans reportedly have had a victory. The Netherlands media has said its government will freeze Gulf carrier route expansion into Amsterdam’s Schiphol Airport.
It is argued that the bankruptcy protection many U.S. carriers have enjoyed is a form of subsidy and saved them from extinction. So they should accept that if the industry, as a whole, wants to operate freely then their protectionist stance has no industry validity.
