The Wall Street Journal
By Scott McCartney
Nov. 5, 2014 5:29 p.m. ET
To
beaten-down U.S. fliers, it sounds like a fantasy: high-quality airline
service at lower prices. Travelers are finding just that on several
airlines based in the Persian Gulf, which have shaken up European and
Asian air travel and now are taking on the U.S.
In the past year,
Emirates, Qatar Airways and Etihad Airways have boosted the number of
U.S. flights by 47%, and now serve 11 cities. They are drawing
complaints of unfair competition from their stateside rivals, and more
growth is coming. Emirates can deliver more people each week from New
York’s Kennedy Airport to Dubai than American Airlines flies to London
or Delta Air Lines flies to Atlanta from JFK.
This year,
Doha-based Qatar began flying to Philadelphia, Miami and Dallas. And as
of next month, when Etihad adds Dallas nonstops from its home in Abu
Dhabi, all three Gulf airlines will compete head-to-head in four U.S.
cities.
They are spending big to build brand awareness in the
U.S. Emirates sponsored this year’s U.S. Open tennis championship and
became the official airline of the San Francisco Symphony. A performance
by Gloria Estefan headlined a Miami gala Qatar threw for its launch
there.
They are winning over customers with service reminiscent
of the early days of flying. That means hot towels in economy, plus
amenities like onboard showers in first class and a bar in business
class. Etihad has flight attendants trained as flying nannies who
entertain children from first class, business and economy cabins with
face-painting, games, crafts and contests during flights.
“There
will definitely be more” U.S. flights, Emirates Senior Vice President
Hubert Frach said in his Dubai office. “Some travelers might not be
happy and satisfied with the travel options they have today.”
U.S.
airline executives are increasingly questioning whether the government
should check the growth of the state-owned Persian Gulf carriers via
treaty, as Germany and Canada have done, rather than allowing the
current Open Skies allowance to fly anywhere.
“A number of those
carriers are not airlines. They are governments,” Richard Anderson ,
chief executive of Delta Air Lines, complained at a travel convention
this fall. The carriers note many airlines around the world have
government ownership.
What’s happening with the well-financed
Gulf carriers is nothing short of a revolution of global transportation.
The three big Persian Gulf carriers have the lion’s share of jumbo-jet
orders at Airbus and Boeing , putting most of the industry’s long-haul
international growth in their hands.
Those long-range jumbo jets,
which can fly halfway around the world nonstop, are reshaping air
travel. The Gulf airlines are now capable of offering a nonstop flight
from more than 80% of the world’s population. Increasingly those new
planes will fly to the U.S., the world’s largest aviation market and one
that the Gulf airlines have yet to penetrate deeply. The three carriers
have already siphoned off a good portion of the passengers into and out
of the Indian subcontinent and Africa, as well as between Europe and
Asia.
They are shifting traffic from traditional global hubs like
Singapore and Frankfurt. And they are now flying passengers from the
U.S. not only to their fast-growing home bases but also to India, Africa
and the Far East.
They have built giant airports with innovative
luxuries—Qatar’s new airport in Doha has a swimming pool above the
concourse for laps during layovers—and room to expand. Emirates has
turned Dubai into an airport so big it runs neck-and-neck with London
Heathrow for the crown of biggest airport in international passengers.
Announcements at the Dubai airport are made first in English, then
Arabic.
Etihad got the Abu Dhabi government to pay for a U.S.
Customs and Border Protection station in that emirate, pre-clearing U.S.
passengers so they don’t have to wait in massive lines at U.S.
airports. The budget-strapped CBP took Abu Dhabi up on the offer,
angering U.S. airlines and labor unions.
The Gulf carriers are
backed by cash-rich governments in Qatar and the United Arab Emirates.
(Dubai and Abu Dhabi are emirates within the U.A.E.) These countries are
using airlines for economic development and building a viable industry
for when their oil and gas run out, the Gulf airlines say. They have
taken advantage of cheap labor in many parts of the world and brought in
workers to follow their own housing, training and work rules, demanding
of them exacting service and long hours.
Dan Dodge, an El Paso,
Texas, pastor who went to Nepal last month on a medical mission with a
group of 19, flew Qatar because the fare of about $1,400 was $400
cheaper than that of any other airline. In coach, he enjoyed his
vegetarian dinner (one of three choices) and the fancy entertainment
system during the 14-hour flight from Dallas to Doha. “The good thing
about the Gulf airlines is they put service back in that America’s
airlines have forgotten,” he said. “It’s very good competition.”
Rivals
complain the government-owned Gulf airlines have huge financial
advantages that create an uneven playing field. The airlines work
closely with their regulatory agencies and even share ownership with
their airports and ancillary businesses, from hotels to liquor
distributors. Salaries and profits are tax-free. Airlines have long said
that Gulf carriers benefit from government subsidies and cheap
fuel—which the carriers vehemently deny.
Airlines also fume that
Emirates took advantage of international Open Skies treaties by starting
flights last year nonstop between New York and Milan, a significant
incursion into trans-Atlantic flying in direct competition with
American, Delta and Alitalia. These treaties have liberalized air
service over the past two decades by removing government limits on
airlines and routes they fly.
Jeff Smisek , chief executive of
United Airlines, called for U.S. government limits on Gulf airlines.
(The Obama administration has shown no signs of a policy change.) Mr.
Smisek’s counterpart at American, Doug Parker , told an airline
conference this fall that the Gulf carriers were his biggest business
concern.
Emirates says its only subsidy was $10 million to buy
three airplanes at its 1985 launch. It adds that it has been profitable
for 22 consecutive years and has paid $2.8 billion in dividends to its
owner, the Dubai government’s investment arm.
Qatar and Etihad
also deny receiving government subsidies and say they are profitable.
They add that any airline that flies to their home airports pays the
same local rates and taxes. When the government invests money in the
airline, it’s equity, not subsidy, they argue, no different from other
shareholders injecting capital in a business.
Akbar Al Baker,
Qatar’s chief executive, called an effort by United and Delta to push
the U.S. government to negotiate a new, restrictive air service treaty
with the U.A.E. and Qatar “a foolish way of tackling their inability to
serve this region.”
“If Emirates, Etihad and Qatar stopped
serving America, there would be a huge shortage of capacity to” the
Persian Gulf region, he added.
Analysts note that geography
offers more protection for U.S. airlines than their European
counterparts have. American and Delta have ceased all flights to India
in recent years because of added competition. But the Gulf airlines will
have a harder time competing for passengers going to the Far East and
especially Europe from the U.S.
The three Gulf airlines had 22 daily flights to the U.S. in July, up from 15 a year earlier and just 12 in July 2011.
PlaneStats,
the database run by consulting firm Oliver Wyman, counts more seats
each week at JFK for Emirates than for Air France now.
“Fundamentally,
this is an example of what is not good for other airlines is quite good
for passengers,” said consultant Craig Jenks, president of
Airline/Aircraft Projects Inc.
Emirates says it is already taking
U.S. passengers to destinations like Bangkok, going eastbound through
Dubai rather than the traditional westbound Pacific Ocean route. With
tailwinds instead of headwinds, an eastbound trip can sometimes be
faster. And Emirates often has shorter connecting times to reach Bangkok
because it has six daily flights to the Thai city from Dubai.
But
the rush of new capacity into the U.S. does pit the Gulf airlines
against each other. And some markets may not have enough passengers to
sustain so many flights. Consider Dallas-Fort Worth. Emirates started
with a Boeing 777 and recently upgraded to an Airbus A380, adding
another 100 seats a day. Qatar, which has an alliance partnership with
American, began Dallas flights this year with a 777. Etihad announced it
will start DFW flights next month three times a week, and daily flights
next year.
Kevin Knight, a former United executive who is now
Etihad’s chief strategy and planning officer, said a partnership with
Jet Airways in India actually helps fill flights like the one to Dallas.
So does the area’s high concentration of Fortune 500 companies and oil
and gas businesses. Executives from all three airlines say they’re
filling planes in all U.S. cities at a rapid pace. Still, so much
expansion may leave them in a three-way shootout.
“There is room for the fittest,” Qatar’s Mr. Al Baker said.
- Source: http://online.wsj.com
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