U.S. airline CEOs: Europe made 'mistake' on Gulf carriers' access

Ben Mutzabaugh | USA TODAY

McLEAN, Va. -- Europe should have acted to keep the expansion of three big "Gulf carriers" in check, the CEOs of the three biggest U.S. airlines said Friday.

"I don't think they knew what we now know, that indeed there was subsidization going on" American Airlines CEO Doug Parker said when asked about why European regulators hadn't already acted on the claims now being made by the U.S. carriers.

Parker's comments came as he and the CEOs of the USA's two other biggest carriers – Delta Air Lines' Richard Anderson and United Airlines' Jeff Smisek – spoke to the USA TODAY Editorial Board Friday in McLean, Va. The U.S. airline CEOs reiterated their allegations that the big three state-owned rivals from the Persian Gulf – Emirates, Etihad Airways and Qatar Airways – each benefit from unfair subsidies. All three of the Gulf carriers have vehemently and repeatedly disputed those allegations.

The CEOs of the U.S. carriers are pushing for the U.S. government to freeze the Gulf airlines' flight rights to U.S. airports. The U.S. carriers also are pushing for the U.S. government to consider changes to the agreements that govern flights between the nations. The U.S. currently has a so-called "open skies" pact with both Qatar and the United Arab Emirates that allows airlines unrestricted flights between cities in each nation.

"There's nothing wrong with adding a bunch of airplanes and flying open skies, as long as you're doing it with fair trade. But once you know they're being subsidized, then all bets are off," Parker said, adding that the Europeans "didn't have the information" by not acting sooner to halt the growth of the Gulf carriers there.

Emirates, Etihad and Qatar Airways each have grown rapidly in Europe during the past decade, increasing their marketshare in Germany, France and elsewhere. Lufthansa, a strong partner of United, has been among the most vocal critics, calling for German and European regulators to put caps on the access the Gulf carriers have to European markets.

By increasing their presence in Europe, the Gulf carriers are increasingly flying passengers through their Gulf hubs to destinations in India and Asia that previously flew on the European airlines or their partners, European airlines say. Lufthansa has repeatedly said its profitability is being hurt by the expansion of the Gulf carriers.

"We also know how this movie ends," United's Smisek said about what will happen in the U.S. if it allows Gulf carriers to continue to expand in the U.S. as they have in Europe.

"Europe made a huge mistake. Europe let the Gulf carriers in pretty freely, and the result has been significant damage to the European carriers. To our partner Lufthansa at United. To (Delta's) partner, Air France/KLM."

Smisek described the Gulf carriers' continued U.S. growth as bringing "rapidly accelerating harm" to the U.S. airlines, adding "we know that ends badly."

American's Parker said Delta has led the effort by the U.S. carriers to curb the Gulf carriers. The three U.S. airlines have dramatically stepped up their campaign since late 2014, waging a public battle in the hopes of pressing the U.S. government into action.

Parker said "to the credit of Delta, who started this – (they) went and found the information. I can speak for American, I know that's when we got interested. For our perspective, you'd look at this and think: 'This can't make any sense. You can't keep flying this many airplanes around'."

In particular, Parker mentioned Emirates' JFK-Milan flight – a rare "point-to-point" in which Emirates is able to serve the United States directly from Europe.

"I know enough about this business to know you can't launch A380s from Milan to JFK," Parker said. "I don't care what your cost structure is, there's no possible way you can generate enough revenue on that to pay the cost of flying that airplane over."

Since the flight does not go through Emirates' hub, the carrier must market the flight to passengers looking for a nonstop between New York and Milan or a one-stop to Dubai via Milan. Emirates, however, would likely point to its partnership with JetBlue, which is one of the top carriers at New York JFK. JetBlue has a partnership with Emirates that allows it to funnel connecting passengers to and from Emirates' flights.

Going forward, the battle between the U.S. airlines and their Gulf rivals shows little sign of slowing down -- meaning more fireworks are likely.

Stay tuned ...