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The expanding dispute between the biggest U.S. airlines and the three dominant Persian Gulf carriers looms over the yearly gathering of the global industry’s trade group.
While the issue is absent from the agenda for this week’s annual general meeting of the International Air Transport Association in Miami, Director General Tony Tyler faces tensions inflamed by U.S. airlines’ complaints that Emirates, Etihad Airways PJSC and Qatar Airways Ltd. get government subsidies.
“It’s a huge elephant and it’s going to be in every room,” Willie Walsh, chief executive officer of British Airways parent IAG SA, said before the event. “We’re all going to want to talk about it. Trying to run the AGM and pretend it doesn’t exist is impossible.”
The industry’s tiptoe approach to the spat was on display Sunday as executives began assembling ahead of the IATA event. While Etihad CEO James Hogan is commenting to reporters about the position of the Abu Dhabi-based carrier, he said he is “setting it aside” as far as IATA’s official business.
“We didn’t start this,” Hogan said in an interview. “We covered all the issues in our response and, frankly, it’s time to get on with business. We’re committed to this market. We’re going to continue to fly to this market.”
American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. say Emirates, Qatar and Etihad get unfair subsidies. The U.S. carriers want the Obama administration to reopen aviation-treaty talks with the United Arab Emirates and Qatar. The Gulf airlines deny receiving any improper aid.
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Deutsche Lufthansa AG CEO Carsten Spohr said Sunday that the Gulf dispute “wasn’t a big issue” at an IATA governing board meeting earlier in the day.
The role of the Gulf trio matters most for competitors that see Emirates, Qatar Airways and Etihad grabbing traffic via connections in Dubai, Qatar and Abu Dhabi, Spohr said at a news conference in Miami. European airlines including Lufthansa have already lost traffic on Southeast Asia nonstop routes, he said.
“This has now become a global debate with the active voices of the Americans on this,” Spohr said. “It’s those airlines that used to offer those nonstop services — or still do on a smaller scale — that are affected and taking a position.”
IAG, which is 10 percent owned by Qatar and is an alliance partner with American, said in a U.S. government filing that the U.S. carriers’ subsidy claims “do not withstand scrutiny.”
Ryanair Holdings Plc, Europe’s biggest discounter, has come out in favor of the Gulf trio, while JetBlue Airways Corp. has said American, Delta and United have stifled competition through international alliances that are immunized against antitrust prosecution. American has such an arrangement with IAG’s British Airways.
“I’m absolutely on the side of the consumer and that means you support the Gulf carriers,” Ryanair CEO Michael O’Leary said in a May 26 Bloomberg TV interview.
John Strickland, director at London-based JLS Consulting, said the industry would be well served by a full-throated discussion of the issues posed by the Gulf carriers’ emergence as industry heavyweights.
Emirates has surged to the world’s largest airline by international capacity from No. 30 since 1998, according to figures compiled by Delta, American and United. Qatar went to 10th from 90th, while Etihad is 13th. It didn’t exist in 1998.
“It needs to be an open debate, not just whispers in corridors, because the airline business is changing,” Strickland said in a telephone interview. “You still have the rock-solid markets of old, but you have new ones developing. Some carriers are seizing new opportunities and challenging the status quo. The question is, do you complain or do you follow their lead?”
No one predicts a quick resolution of the dispute. Among the people attending the meeting will be U.S. Transportation Secretary Anthony Foxx, added to the list of speakers late last week. The Transportation Department is among the federal agencies reviewing the U.S. airlines’ Gulf complaints.
“It would be healthy for the industry to discuss it,” IAG’s Walsh said. “I don’t think that’s going to happen because I think people will want to avoid it and be diplomatic.”
This article was written by Kari Lundgren, Mary Schlangenstein and Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network.