The next round in the Big 3 vs Big 3 slugathon: 0 – 3 to the visitors
Another round in the unending boxing match between the three biggest US carriers and the three biggest Middle East carriers about alleged subsidies and unfair competition played out on Thursday July 18. In the ring were the self-styled Partnership for Open & Fair Skies, represented by American Airlines CEO Doug Parker and United Airlines CEO Oscar Munoz, working as a tag-team, against Qatar Airways Group CEO Akbar Al Baker. The match was refereed by both President Donald Trump and vice-president Pence. Bystanders on the airline side were JetBlue Airways CEO Robin Hayes, FedEx CEO and chairman Fred Smith, and Atlas Air CEO Bill Flynn; and White House Chief of Staff Mick Mulvaney, National Security Advisor John Bolton, Director of the National Economic Council Larry Kudlow, and Peter Navarro, Director of the Office of Trade and Manufacturing Policy on the US government side. Each were allowed to throw an occasional punch, with or without gloves.
The ring was set up in the White House’s Oval Office.
Who chose the exclusive location remains the matter of rumour, claim and counter-claim. The Big US 3 and their Open & Fair Skies coalition claim POTUS acted on their call for a private meeting, while others assert the session arose from Trump’s meeting with the Emir of Qatar on July 9. At that meeting—at the White House—Qatar Airways finalised an order for five Boeing 777 freighters and Qatar Executive signed a deal for 14 Gulfstream G650ERs and four G500s; Sheikh Tamim Bin Hamad Al-Thani announced an additional defence investment with Raytheon and a joint venture of Qatar Petroleum with Chevron Phillips Chemical to develop an $8 billion petrochemicals complex in Qatar.
After all this investment and loyalty to the US economy and jobs—Trump himself acknowledged that much – why are we being accused of unfair market behaviour, Al Baker and the Emir must have pondered. In keeping with the President’s approach to such matters, he called the meeting to ‘sort the issue out himself’.
Box on.
Not that Trump was insensitive to the Big US 3’s concerns. Open & Fair Skies had used the president’s favorite communication channel to highlight ‘that @WhiteHouse’s Made in America Week is a chance to level the playing field for American workers. To do that, @realDonaldTrump should enforce our #OpenSkies agreements and hold Qatar accountable for its violations that put 1.2 million U.S. jobs at risk’. However, POTUS is above all a businessman. The $1.8 billion order for embattled Boeing, $1 billion for General Dynamics’s Gulfstream unit, and €3 billion in the Qatari funds flowing to his country’s industrial defence complex took front stage. Let’s not forget the thousands of US troops that are based in Qatar. Everybody has a limit to their hospitality, Trump must have thought, while also being keen not to repeat last year’s diplomatic faux pas when he publicly called Doha a ‘funder of terrorism at a very high level’. He patched things up with the Emir soon after that, but still.
The bell rang. All of the allocated rounds were completed. No Twitter storm; no commitment to remove the US from the open skies with Qatar, or with the UAE, home of Emirates and Etihad; no promise to curtail traffic rights. Instead, a simple and clear-cut advice to Parker and Munoz that, if they have a complaint about unfair competition, they should use the formal DOT review process. Knock-out! This is exactly what the Big 3 Middle East airlines have been asking for years. So far, however, the Partnership and its members have produced plenty of dazzling figures about subsidies but they have never, individually or collectively, filed a complaint under the International Air Transportation Fair Competitive Practices Act.
The situation is similar in Europe where Lufthansa and Air France-KLM continuously claim that the carriers from the Gulf states compete unfairly and damage the European aviation industry. In a recent response to a question of Dutch MEP Caroline Nagtegaal about improper state aid to Qatar Airways and its Middle Eastern mates, Transport Commissioner Violeta Bulc affirmed that the Commission ‘has, to date, not received any complaint about unfair competition from airlines based in the Middle East’.
The Partnership for Open & Fair Skies took their defeat on the chin, at least in the arena. The meeting was ‘productive’, its managing partner Scott Reed said. Trump, he added, ‘shares our concerns and instructed us to keep working with the US Department of Transportation, which we plan to do’. In the dressing room, the mood was less amicable. There was anger that Al Baker was present—euh, the President wanted him there; for sure he did not enter the Oval Office uninvited— and that Delta Air Lines CEO Ed Bastian had sent his cat.
The Atlanta-based airline’s comms team tried hard to deny press speculation that Bastian had refused the invitation and pointed out to CNBC that ‘Ed unfortunately had some previously scheduled travel that he was unable to reschedule’. This did not sit well with POTUS and his ego. Trump was not the only one to notice Bastian’s absence. Al Baker, never short of a quick quip, remarked that he had rescheduled his agenda and had flown all the way from Doha for the meeting. Bastian, some people told us, apparently was in Europe where his airline has already vast interests and is planning to add to its portfolio. Delta is eyeing a 10 to 15% stake in Alitalia, the Italian flag carrier that is flying thanks to a €900 million bridge loan from the Italian government and in which the Italian state plans to control and own the majority once it exits bankruptcy. In light of this, Bastian’s rhetoric against state ownership and state subsidies becomes difficult to support or even understand. And making a case against Sardinia-based Air Italy when he is about to take a shareholding in this little airline’s state controlled and managed competitor, is questionable. Maybe Bastian’s absence was more deliberate than a scheduling issue.
Also absent from the meeting, despite one of the main topics being an EU airline (Air Italy): the European Commission. DG MOVE Director General Henrik Hololei has made it amply clear that Air Italy is an EU airline and not, as the Big US 3 claim, a proxy airline for Qatar Airways. According to Bastian, Munoz and Parker, Qatar Airways is using its subsidies from the government of Qatar to finance the airline and fund services to the US and therefor it infringes the January 2018 commitment made by the Qatari government not to launch fifth freedom routes.
Incorrect, Hololei pointed out in recent correspondence with his US counterpart. Air Italy is 49% owned by Qatar Airways, but the majority of the shareholding lays with EU interests. Thus the airline is allowed to operate between the EU and the US under the Open Skies. Moreover, Air Italy’s flights to the US do not even carry the QR code. The shareholder set-up is no different than, for instance Virgin Altantic. Delta owns 49% of this airline and it owns 8.8% of Air France-KLM, which is set to take 23% in Virgin Atlantic. If the UK does not leave the EU soon, DG MOVE will need to look into Delta’s direct and indirect ownership of the London-based carrier and verify whether maybe Virgin Atlantic is a proxy airline for Delta.
Expect Hololei to throw a couple of public punches when he delivers his—by now almost yearly – speech at the International Aviation Club in Washington, DC on Tuesday.