Op-Ed: Gulf stimulation of air travel unrecognized in Open Skies row

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On a tour last summer of Doha’s new Hamad International Airport, I was told something peculiar by my guide; every shop and restaurant, every lounge service and kiosk, all the parking lots and the one and only soon-to-be completed hotel is owned by Qatar Airways, which in turn is owned by the Qatari government. That’s not the way it’s done in most countries around the world, but for Qatar, everything associated with aviation is another revenue stream funding its explosive growth.

The various rivers of money flowing into the ocean-sized operating accounts of Qatar Airways and its neighbors to the southeast in the United Arab Emirates have been examined and complained about by the legacy airlines of North America, Europe and Asia Pacific for more than half a decade, but the latest argument – that the Gulf carriers are in violation of the United States Open Skies agreement – seems to be getting traction.

Under pressure from a coalition of airlines and labor, led by Lee Moak, the tenacious former head of the Air Line Pilots Association, the US Department of Transportation has agreed to examine the charge.

There is no shortage of hyperbole intended to stoke the interest of the traveling public in the dispute. Calling the activities of the Gulf airlines and their sponsoring governments, “the largest trade violation in history”, Lee Moak keeps the public statements contentious. “Enough is enough, the time for action is now,” he wrote in one of the near daily press statements issued by Americans for Fair Skies of which he is president. Ostensibly about aviation, in reality what is at stake is the transformation of economies of entire regions and shifts in their political power.

Little more than two decades ago, the Gulf countries that are home to Qatar, Etihad and Emirates realized they needed to diversify their economies. Taking advantage of their strategic position located between the two rising giants China and India, the UAE and later Qatar made financial commitments to develop new industries beyond oil and gas that would take them into the 21st Century. It is hard to imagine that the original creators of these plans could have anticipated just how successful the three airlines would become. But certainly the ratification of Open Skies was a boon, granting participating airlines access to previously restricted markets.

In their argument to the DOT, the coalition of American carriers says the government money provided to kick start and keep Emirates, Etihad and Qatar flying is an illegal government subsidy that makes for unfair competition. It is not a level playing field, critics say.

But the field was never level.

Long-haul air travel provides significant benefits to the nations that are home to successful international carriers, as demonstrated by the unlikely success of Abu Dhabi and Dubai as tourist and business centers today. That’s always been the relationship between air access and national economics. Aviation pioneers were the original beneficiaries some of which still fly today; United Airlines and British Airways, to name just two. The Gulf carriers could not have taken on competition that well established without a vast bankroll. This is how and why their governments stepped in.

Boeing 777-300“To have any chance of success, Etihad Airways had to get to a size and scale that could compete against the networks of airlines that had not only been operating for years but had benefited from decades of government investment and infrastructure support themselves,” Etihad’s chief James Hogan told reporters in London late last month. With some glee, Hogan admitted his 12-year old Abu Dhabi-based airline, which flies to more than a 111 destinations, has cut into the “cake” of his North American and European competitors.

“They are getting a smaller slice, it is true, but it is a slice of a bigger cake,” he said. His point is valid. In none of the arguments I’ve read do the US carriers factor in the role of the Gulf airlines in stimulating an appetite for air travel, but surely they have.

So far, Etihad, Emirates and Qatar have batted away charges that government support allows them to enter markets with their big airplanes, flood the market with low price seats and undercut their competitors.

On 13 May, Qatar’s boss Akbar Al Baker will meet with journalists in Washington and he has promised to make news. It could be that the independent-minded Al Baker is going to cut his own deal with the US government.

Unlike Etihad and Emirates which have created their own networks of airline partnerships, Qatar is a member of oneworld, meaning it has a greater obligation to play well with American, Qantas and BA and the other members of the alliance. That could have some impact on Al Baker’s strategy.

What the Gulf state airlines have that the American and Europeans do not are governments that do not fight them at every turn. Governments there recognize the contribution of airlines to the labor market, to commerce, education, culture, well I could go on and on. Might America with its history of pestering airlines and the airlines with their propensity to complain not be better off trying to emulate the best parts of how the airlines work in the Gulf?

I know this for certain; a lot of time, money and brain power will be spent on this dispute. Refocusing that on developing ways to compete rather than defeat the Gulf carriers might be energy well spent and that goes for both the airlines and the government that regulates them.

[Photo at top of Doha airport: By MOs810 (Own work) via Wikimedia Commons]