The US government has formally stepped in and arguably set a dangerous precedent concerning the new business models being adopted by some of the Gulf airlines in rejecting a request by Air Serbia (formerlyJAT) and Etihad to codeshare on service to the US.
The troika of airline lobbying group Airlines For America (A4A), Delta Air Lines and the Air Line Pilots Association formally opposed the request on what is now familiar grounds – arguing the Belgrade-Abu Dhabi–US routings are unviable for the consumer, Air Serbia’s new ownership (Etihad formally took a 49% stake in Jan-2014) is suspect, and the absence of a bilateral agreement with Serbia.
Air Serbia petitioned the the US Department of Transportation (DoT) in Sep-2013 for the right to serve the US through current or future codesharing partners, explaining initially it would place its code on Etihad’s flights from Abu Dhabi to JFK, Chicago and Washington Dulles from connecting service between Belgrade and Abu Dhabi.
Unsurprisingly, the reactionary combination of A4A, Delta and ALPA strongly opposed Air Serbia’s request, arguing the proposed routing from Belgrade to Abu Dhabi onward to JFK could add 8,046km of additional circuitry, which the parties counter is not a rational service option that produces any consumer benefit. This was an intriguing argument, aimed at taking such an obvious judgment out of the hands of consumers; the fact that it was such an obscure issue only made the sledgehammer attack more beguiling.
Delta argued that “it is highly unlikely that a rational consumer would seek out itineraries via Abu Dhabi unless fares were artificially low, i.e. unless JAT and Etihad plan to engage in capacity dumping at below market fares”. That is a not unfamiliar argument offered by Delta, which postulates that the Gulf carriers, because they are government owned (a feature they share with many of Delta’s SkyTeam partners), are inevitably heavily subsidised by their respective owners.
Then, with a logical leap of faith, this accordingly allows Etihad, Emirates and Qatar to exhibit the sort of uncommercial behaviour Delta ascribes to them. (In reality the Gulf airlines are among the most cost-efficient in the world and, in Emirates’ case, the airline has paid its owners a dividend – “profit” – of nearly USD3billion over the past three financial years. Hardly the stuff of government-subsidised discounting.)
But meanwhile this relatively minor application, having created such a massive reaction, has produced an outcome that harkens back to the baddest old days of regulation. In those less enlightened times, government took the position that it knew best what was good for consumers. In 2014, most people outside trade associations and pilot unions, would support the concept that consumers be allowed to decide the most appropriate routing they wish to fly. Logic would dictate that more route options and price points are better for consumers than fewer.
For more on this story, read the full CAPA analysis here.
This story originally appeared on CAPA – Centre for Aviation, a Skift content partner.
Additional links from CAPA:
- easyJet reports slower revenue growth in 1QFY2014 and predicts wider 1H loss
- United Airlines ends 2013 on a positive note; now the challenge is to sustain the momentum
- American Airlines intensifies competition with Delta Air Lines in small markets from LaGuardia