USQBC Sends Letter to President Obama on Open Skies

We took the opportunity to comment in a letter to the White House this week concerning the petition by three American air carriers to “freeze” the Open Skies Agreement because of “unfair competition” from Qatar Airways and its sister Gulf carriers, Etihad and Emirates. We noted our considerable dismay at this rather strange campaign given that the airlines do not, in fact, compete. A recent study by Oxford Economics found that of the 1,700 routes the U.S. legacy carriers and Gulf carriers flew in April 2015, they only competed head-to-head on two. We noted, however, that the campaign, whatever its merits (and we do not believe it has merits) runs the risk of seriously damaging our relationships with two firm and close allies and important trading partners, Qatar and the United Arab Emirates. The letter reads as follows:   Honorable Barack Obama President of the United States of America The White House 1600 Pennsylvania Ave NW Washington, DC 20500   Dear Mr. President, I write to you on behalf of the US-Qatar Business Council urging you and your administration not to modify the Open Skies Agreement. We feel that such action will have significant, negative effects on bilateral trade relations between the United States and its Gulf Cooperation Council (GCC) allies, threaten core US economic interests and exports, harm American jobs, and leave the American consumer with fewer choices. In this letter I wish to highlight the troubling campaign being waged by American Airlines, Delta Air Lines, and United Airlines against the major Arabian Gulf carriers (Qatar Airways, Emirates, and Etihad) under the banner of “Americans for Fair Skies” (“AFS”).   Unfortunately, this campaign is arguing for the US government to stifle competition and reinstall protectionism in order to make it easier for them to operate against international airlines that are investing in their fleets to offer superior amenities, newer planes (most of them American-made), and more reliable services.

Inaccuracies in the Campaign

The AFS seeks to undermine the Open Skies Agreement by alleging that Qatar Airways, Emirates, and Etihad receive government subsidies. These allegations are untrue. The Gulf carriers are partly, and legally, owned by their respective government investment authorities. As with any shareholder, they have made capital investments to update and upgrade their aircraft fleets (most of them built here in the United States), and increase their service routes. They have not subsidized their airlines. Curiously, the American carriers’ definition of subsidy apparently does not include the Air Transportation Safety and System Stabilization Act, which gave nearly $15 billion to the failing airlines to turn them around. The American carriers use a very narrow definition of subsidy for their own operations yet a broad and misleading definition for Qatar Airways and the other Gulf carriers. American Airlines, Delta, and United argue that investments into Qatar Airways and the other Gulf carriers create unfair competition, allowing the airlines to offer cheaper tickets and risk American jobs. In reality, Qatar Airways’ tickets are most often considerably more expensive. The International Air Transport Association estimates that US and Canadian airlines will collectively earn a net profit of $13.2 billion in 2015, which is half of all projected airline profits for the entire world. Simply put, Delta, American, and United are each vastly more profitable than any of the GCC airlines. It is troubling that American carriers are seeking an unfair advantage against international carriers by singling out the Gulf Airlines because of their geographic origin in the Middle East.   At the heart of their campaign appears to be an unwillingness to reinvest their profits and grow their service offerings to meet changing preferences in air travel. The Big Three American carriers operate primarily domestic, low-frills flights on aging fleets. The Gulf and international carriers have operated internationally from the early stages of their formation. Now Qatar Airways and other Gulf and international carriers are beginning to land in more American cities, and into a territory that American carriers traditionally faced no competition.

Gulf and International Carriers are Good for America

Qatar Airways and the Gulf carriers are able to bring international destinations to cities where American carriers do not offer the same routes. Qatar Airways offers one-stop service to over 80 destinations not directly served by any of the Big Three US carriers. Emirates currently offers one-stop service to 57 destinations not served by any US carrier. With the help of carriers like Qatar Airways, more international destinations are accessible to Americans. Furthermore, American carriers still dominate domestic flights. This means Gulf carriers are actually helping American carriers by bringing them more international customers. Gulf carriers will also continue to create jobs for Americans, not take them away. Qatar Airways and the other Gulf carriers are continuing to invest in their fleets, and they are buying planes from Boeing and GulfStream. For example, Qatar Executive, a subsidiary of Qatar Airways, recently agreed to purchase up to 30 GulfStream jets. Qatar Airways currently has 67 Boeing airplanes in its fleet and over 114 additional Boeing jets on order, valued at over $42.5 billion. The Department of Commerce estimates that for every $1 billion of export goods, 5,359 direct and indirect jobs will be supported. This means Qatar Airways’ orders will support over 225,000 American jobs. In 2013, Emirates made the single largest aircraft order by value in the history of US commercial aviation with its order of 150 Boeing 777X aircraft. Emirates has $95 billion worth of Boeing airplanes on order; this order alone will support more than 400,000 US jobs. Etihad has 34 Boeing airplanes in its fleet, with another 71 on order. Not only are these purchases creating more jobs for Americans, but the maintenance they will need in the coming years means repeat service.

Moving Forward Together

The message from Congress and the US Administration to the Big Three should be: Compete! Changing the Open Skies Agreement will not affect US air carriers and Gulf air carriers but will affect the entire world. When one country puts in place protectionist tariffs, other countries follow. The principles of an open market are thrown out of balance and the loss falls on the consumer. If the US government takes action to alter Open Skies, it will limit the freedom of American and international consumers. American consumers will lose access to cities around the world where American carriers are not flying, and the freedom to choose the services they deem necessary and appropriate. American cities will lose international visitors for tourism and business. The Open Skies Agreement is about fair competition; the US government should not stifle that competition to benefit the three most profitable airlines in the world. Mr. President, I urge you and your administration not to take action to alter the Open Skies Agreement. Let the facts above speak for themselves. Qatar Airways, Emirates, and Etihad are not only competing fairly and affording consumers greater choice and freedom— they are investing in the United States and supporting America.   Sincerely,   Patrick N. Theros President & Executive Director