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Mystery swirls as heat on Gulf airline ‘subsidies’ mounts

April 22, 2015 Aviation, Headline News 1 Comment Email Email

egtmedia59Amid accusations of subsidies for Gulf airlines (which those airlines strongly deny) IAG, the parent company of British Airways and Spanish carrier Iberia, has chosen to leave the Association of European Airlines (AEA), a major trade body. German low-cost carrier airberlin has followed suit.

It all adds to a complex situation, with as many twists, turns, plots and intrigues as Game of Thrones.

IAG’s move is significant because Qatar Airways is now IAG’s biggest shareholder with a 9.99% stake. Lufthansa and Air France-KLM (both members of AEA) have suggested unfair government support for Etihad, Emirates and Qatar Airways, adding their voices to similar accusations by major American carriers.

IAG says “some important policy issues” lay behind its departure from AEA, without going into details. It later told airline industry publication Aviation Week: “Our position on some important policy issues is not aligned with many other AEA airlines.” IAG in particular believes “that global liberalisation of our industry is fundamental to our future growth and we are not willing to compromise on it.”

Airberlin felt similarly: “We see no future in a protectionist aviation policy in Europe,” said airberlin Chief Executive Officer, Stefan Pichler.

“On the contrary; the liberalisation of bilateral agreements will promote further consolidation and new, innovative business models, thereby benefitting all passengers. With its current focus and representation of interests, the AEA is not fulfilling these ideas, but allowing itself to be driven by airlines which desperately try to erect a new wall around Europe.”

A few points:

  • Eithad is the main shareholder of airberlin, owning about 30% of the carrier.
  • British Airways and Iberia are transatlantic and oneworld alliance partners of American Airlines. American Airlines is a co-signatory to a recent white paper calling on the US government to ditch its open skies agreements with the Gulf, citing unfair competition from airlines in the region.
  • American Airlines, Delta Air Lines and United Airlines claim unfair competition from Emirates, Etihad Airlines and Qatar Airways, which they say receive large government subsidies that put US domestic carriers at a disadvantage.
  • Qatar is also part of oneworld. Etihad or Emirates are not members of alliances.
  • Delta and United, which signed the white paper along with American, are members of Skyteam and Star Alliance respectively, as are Air France-KLM and Lufthansa.
  • Qatar Airways chief Akbar al-Baker recently accused Delta of flying “crap airplanes that are 35 years old”. He coupled this with a denial that his airline was receiving any government subsidies – yet another salvo in the current war of words between Gulf and American carriers.
  • Delta, American and United say that Qatar and UAE carriers have received USD 42 billion in unfair subsidies to wrest business away from competitors. The Middle Eastern carriers deny it.
  • European airlines have expressed similar concerns about Gulf carriers in the past. Qantas was once known to express them too. Qantas was an outspoken critic of Emirates, before its alliance with that carrier.
  • Etihad is a major shareholder of Qantas competitor Virgin Australia.
  • When Emirates signed an historic USD 9.2 billion deal with Rolls-Royce for Trent 900 engines and maintenance a few days ago, it proclaimed pointedly that the deal was part of its “ongoing investment into the UK and Europe”. That’s no small investment.

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. Geert Sciot says:

    Following the media reports about the Association of European Airlines’ (AEA) position on liberalisation of the market, AEA would like to clarify its policy on this issue as we feel that the opinion of the Association has been incorrectly reflected in recent statements to the media.

    AEA has been defending the interest of European airlines for over 60 years. Its views have always evolved in line with the evolution of the market. Without AEA’s continuous efforts, the market liberalisation that we see in Europe today would not exist. Consumers, airlines and Europe’s economy, mobility and cohesion benefit from it on a daily basis.

    As always, all positions taken by the Association are the result of discussions between its members. The position papers resulting from these discussions – the most recent dating back to July 2014 – are based on the common view of the members. The basic principle of the Association has always been fair competition so that the airlines can compete with each other at both European and international level.

    AEA and its members have taken the following positions with regard to market liberalisation, external relations, bilateral agreements, the relationship with Gulf countries, and ownership and control:

    – AEA airlines are committed to an open market for aviation where all actors are able to compete on a fair and equal basis and strongly support the view that the EU’s external aviation policy must ensure a level playing field for carriers in the European market.

    – AEA is in favour of market liberalisation and bilateral agreements with third countries, provided there is an added-value for European airlines.

    – AEA has consistently advocated the liberalisation of ownership and control. Ownership and control rules should evolve over time on the basis of reciprocity.

    – AEA has always supported the dialogue with the Gulf countries (EU-GCC Aviation Dialogue) which was also welcomed by the Gulf carriers. We believe this dialogue is of major importance for the EU industry.

    It is totally incorrect to portray AEA as a protectionist association that is creating a wall around Europe. None of the campaigns initiated by AEA on liberalisation, external relations, or ownership & control have advocated protectionism.

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