An Open Skies Agreement between two countries, allows
the respective country’s airline, either cargo or passenger operations, land at
a foreign airport without excessive interference from the foreign country's
government. Without the agreements, a single flight to a country can prove to
be a time consuming, rigorous annoyance. With the agreement, there are no
issues with, “commercial decisions of air carriers about routes, capacity, and
pricing, freeing carriers to provide more affordable, convenient, and efficient
air service for consumers.” (“Open Skies Agreements”, n.d.) The Open Skies
Agreement between the United States, and the United Arab Emirates is currently
experiencing issues. The three big US airlines, (Delta, American and United)
have experiences a reduction in fares on routes they share with the Middle
Eastern Gulf air carriers. This prompted an accusation by the US carriers,
claiming the gulf carriers are accepting government subsidies, and that it is
having anti-competitive effects. “The Americans alleged that Gulf governments
had provided $42 billion in subsidies to their airlines, contrary to open skies
aviation agreements.” (Kane, 2016). Emirates, Etihad Airways and Qatar Airways
are the airlines in question, yet they deny the claims of government
subsidization. Emirates seems to be unfazed by the accusations. They see the US
claims simply as a way for them to regain the customers they have been losing
to the gulf carriers. In a statement made by Emirates, they state:
“It is disturbing that Delta,
United and American presume they and their partners are entitled to their
existing share of traffic, as if they own their customers, when they don’t make
a corresponding effort to improve their service and product proposition to win
consumers’ hearts and wallets.” (Kane, 2016)
The Gulf region views the reaction of the big three US
carriers as a narrow-minded view, thinking only of their company, and not of
the economy as a whole.
The “Big Three” carriers have all their weight resting
on the claim that the gulf carriers are violating the open skies agreement by
accepting government subsidies, yet in Emirates’ rebuttal statement, they make
a counter claim that, “The Legacy Carriers come to this debate with unclean
hands.” (“Emirates’ Response to Claims”, n.d.) The statement of Emirates goes
into detail by saying the following:
They have received
billions of dollars of government support, including U.S. Government assumption
of airline pension obligations, airline stabilization grants, loan guarantees,
grandfathering of airport slots, bankruptcy relief from debt and other
obligations, direct grants and tax exemptions to support airport development,
grants of antitrust immunity to form market-dominant alliances, protection of
the U.S. market from foreign competition, and the prohibition against majority
foreign ownership. (“Emirates Response to Claims”, n.d.)
It is said that the US carriers have accepted over 100
billion dollars since 2002, proving that the United States is fighting against
something that they, themselves are guilty of.
Another complaint, and issue faced by domestic
airlines, is that foreign carriers are purchasing American aircraft, such as
Boeing products, below market interest rates, causing them to be saving about
12 million more than the domestic carriers, who do not have the same interest
rates available to them. This is made possible for the foreign carriers through
the Export-Import Bank. The purpose of the Bank is to promote the sale, and
facilitate the export of American goods, as to support American jobs, and
improve the American economy. The Export-Import Bank, or EXIM describe what
they do as:
EXIM fills in the gap for
American businesses by equipping them with the financing tools necessary to
compete for global sales. In doing so, the Bank levels the playing field for
U.S. goods and services going up against foreign competition in overseas
markets, so that American companies can create more good-paying American jobs.
(“About Us”, n.d.)
The Export-Import Bank performs its duty by making it
possible and providing incentive for foreign carriers to purchase American
aircraft. The US airlines are angry that they pay more per aircraft, yet the
whole system is in place, not to help an individual airline, but to put more
money into the United States economy.
After reviewing the information gathered above, it is
apparent that global “playing field” of the long-haul carriers is not fair. In business,
almost nothing is fair, and both the US carriers, and the gulf carriers are
global businesses. I do think the Open Skies Agreement should definitely make
the playing field more fair, as that is the purpose of it, but it is clear that
there are corners cut and misinterpretation of the agreement on the behalf of
both parties. The Export-Import Bank issue, itself, does not seem unfair to me.
As I stated, the purpose is to improve the US Economy, and it is doing just
that. It may place foreign carriers at an advantage on a global scale, but no
one is cheating the other in regards to the bank. Both the US Airlines and the
Middle Eastern Airlines are very successful businesses, but to become more
fair, I think they will have to find more respect for one another, yet the odds
of that are slim.
References
About Us. (n.d.). Retrieved from
http://www.exim.gov/about/
Emirates’
response to claims raised about state-owned airlines in Qatar and the United
Arab
Emirates.
(2015, June 29). Retrieved from http://content.emirates.com/downloads
/ek/pdfs/openskies_rebuttal/EK_Response_Main.pdf
Kane, F. (2016, January 30). Open skies dispute
between US and Gulf airlines escalates.
Retrieved
from http://www.thenational.ae/business/aviation/open-skies-dispute-between-
us-and-gulf-airlines-escalates
Open
Skies Agreements. (n.d.). Open skies agreements. Retrieved from http://www.state.gov/e/eb/tra/ata/
