Friday, March 20, 2015

As American complains about Gulf carriers, Dallas/Fort Worth International Airport (KDFW) benefits




Every morning around 11 a.m., the south departure hall in Terminal D at Dallas/Fort Worth Airport fills up with hundreds of passengers heading to Dubai and beyond.

They’re waiting to board Emirates airline’s double-decker A380, which flies daily from DFW to Dubai, a route created as a result of the U.S. government’s “Open Skies” agreement with the United Arab Emirates. These flights and others have helped DFW log double-digit growth in international traffic in the past four years.

“Open Skies has been a grand slam for this region, and we wouldn’t want to see anything that would take away from Open Skies to afford us the ability to grow internationally,” airport CEO Sean Donohue said.

Now American Airlines, Delta Air Lines and United Airlines want the government to re-evaluate agreements with the UAE and Qatar that allow the Persian Gulf carriers to fly unfettered into the U.S.

The three U.S. carriers allege that Emirates, Etihad Airways and Qatar Airways have received over $42 billion in government subsidies and loans, giving them an unfair competitive edge.

“There’s no question U.S. carriers can compete against any airline in the world, but we can’t be expected to compete against foreign governments and their bottomless resources,” American CEO Doug Parker said recently at an aviation conference in Washington, D.C.

By not having to worry about making money, the airlines allege, the Gulf carriers have added flights all over the globe — including at DFW — and spent lavishly to attract business customers with in-flight services like personal chefs, nannies and shower spas.

“We are working as hard as we can to upgrade the service on our aircraft,” said Andrew Nocella, American’s chief marketing officer, noting that the Fort Worth-based airline is spending $2 billion on lie-flat seats, new interiors and better entertainment offerings. “We’re really proud of it, but we’re not in a position to offer showers. That’s something we just can’t get to make economic sense for our business.”

Competing against the Gulf carriers is exactly what American has to do. All three airlines now offer flights to the Middle East from North Texas, and traffic on those routes has more than doubled. At the same time, traffic to Europe from DFW is down almost 8 percent.

As the war of words heats up between the U.S. and Gulf carriers, American and DFW Airport are finding each other on opposite sides of the battlefield.

The allegations


Since the mid-1990s, the U.S. government has been replacing older aviation treaties with Open Skies agreements that lessen the red tape for airlines when they want to launch new routes.

But the U.S. carriers say the Gulf airlines have expanded their networks to American cities to stimulate the UAE and Qatar economies without any benefit to the U.S.

“The routes that these subsidized airlines operate to the United States have not meaningfully increased passenger traffic. They merely serve to displace the market share of U.S. airlines and to shift good U.S. aviation jobs overseas,” the three airlines said in a presentation to the Obama administration.

Gulf carriers serve 13 U.S. cities with about 22 daily flights. American carriers have only two daily flights to Dubai, in the UAE, and none to Abu Dhabi, also in the UAE, and Doha, in Qatar.

The U.S. airlines allege that the $42 billion in subsidies include interest-free government loans, free land, subsidized airport charges and government assumptions of fuel-hedging losses.

“The airlines from Qatar and the UAE aren’t bound by normal market forces, particularly the need to make profits,” Parker said. “The competitive playing field must be level, and this one decidedly is not.”

Speaking at the same conference, Etihad Airways CEO James Hogan rebutted the allegations and noted that many airlines have had government bailouts and loans and — in the case of U.S. carriers — have had debt discharged during bankruptcy or have shifted pension obligations to the government.

“As one of the newest national airlines anywhere in the world, we’ve had to create everything from scratch. Everything. Our product, our operations, our infrastructure,” Hogan said.

Gulf trio at DFW

At DFW, the Gulf carriers have been a significant part of the airport’s growth in recent years.

Emirates launched daily service to Dubai in February 2012 and last fall almost doubled its capacity on the route by switching to an Airbus A380. Qatar Airways started daily service to Doha in July, and Etihad began flying three times a week between DFW and Abu Dhabi in December.

In 2014, DFW’s international passenger traffic grew 7 percent to 7.1 million, and Gulf carriers made up 20 percent of that growth. And with fare sales that Emirates has been offering on its Dubai route, its passenger count is up 50 percent in January from the previous year.

“We are a massive proponent of Open Skies because it’s meant so much for this region,” Donohue said. “If it wasn’t for Open Skies, we wouldn’t have all this international service, and that includes American. It’s not just the foreign-flag carriers.”

American says that it’s a big supporter of Open Skies, too, but that Qatar and the UAE are violating the trade agreements by subsidizing the Gulf airlines.

It’s all about India

U.S. airlines are worried that the Gulf carriers will continue to grow in the U.S. and take a larger share of the lucrative international business market.

Oil workers heading to rigs off West Africa or businessmen traveling to India can more conveniently connect through the Gulf states, allowing those carriers to siphon off connecting traffic that used to move through Europe.

“If they’re going to serve 20 destinations in the U.S., it will be every big city and every big hub, and that will direct a lot of traffic that used to be carried by the U.S. airlines and their joint-venture partners,” airline industry analyst Bob Mann said.

At DFW, traffic to Europe has dropped 6 to 8 percent in the last three months from a year earlier, while traffic to the Middle East has more than doubled.

In 2014, both KLM and Lufthansa increased their passenger counts at DFW — by 2.5 percent and 2.6 percent, respectively. British Airways, which flies daily to London, saw its passenger traffic drop 2.5 percent last year.

Nocella said American Airlines is seeing a decline in passengers on its flights from DFW to London and has talked with its Oneworld alliance and joint business partner British Airways about the decrease in traffic on trans-Atlantic routes.

“That drop is getting worse over time,” Nocella said. “We have served India very efficiently via London for many, many years, and we’d like to continue to do so on an equal playing field.”

Original article can be found here: http://www.star-telegram.com

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