Journalists grilled American Airlines CEO Doug Parker on Sunday about world affairs. It was unusual, considering he usually answers questions about capacity, or the passenger experience. But airlines are global businesses that rely on free trade agreements and deals negotiated by diplomats. Recent protectionist moves by some governments may not bode well for airlines.
American Airlines is “pleased” with the results of recent U.S. government negotiations with the United Arab Emirates and Qatar over Open Skies agreements, but has no plans to restore commericial partnerships it canceled with two of the Gulf’s most powerful carriers during the height of the drama, CEO Doug Parker said Sunday at a briefing in Sydney.
“We are grateful for what the U.S. government was able to accomplish,” Parker said during an occasionally testy briefing on foreign affairs at the IATA Annual General Meeting, a conference of airline executives. “We haven’t had enough time to make sure that those resolutions actually have the affect we hope for.”
Even as relations between U.S and Gulf carriers became acrimonious in recent years — the U.S. airlines have said their competitors receive unfair subsidies from their governments — American retained codeshare agreements with Etihad Airways and Qatar Airways. But last summer, with discussions between the countries not progressing, American said it would drop them, a decision Etihad called “anti-competitive and anti-consumer.”
In codeshare agreements, each airline can sell tickets that include flights on the other. That was important for Etihad’s Abu Dhabi to Dallas/Fort Worth route, because Etihad relied on American to transport its passengers to other destinations in North America. Etihad canceled the route in March, when the codeshare officially ended, though the company’s CEO said in a statement that the airline might keep it if American changed course.
Relations between U.S. and Gulf carriers could improve soon, as U.S. dipolmats recently reached agreements with the United Arab Emirates and Qatar under which the big three Gulf airlines — a group that also includes Emirates — will have to be transparent about their finances.
And while the agreements don’t expressly ban them, Parker said American understands the gulf carriers will not add new fifth-freedom flying, or routes that begin in the Gulf, but stop in Europe to pick up passengers. Under this arrangement, Emirates essentially flies nonstop to the New York area from Milan and Athens, effectively competing with U.S. airlines. U.S. airlines have feared Gulf carriers might add more similar routes.
“We were pleased with what we saw from the agreements which include not commitments but statements by those carriers that they do not intend to fly fifth freedom routes and that gives us confidence,” Parker said.
Issues With China
Also at the briefing, Parker addressed a letter American received from the Chinese government, asking it to remove references to Taiwan on its website. Some airlines elsewhere, including Australia’s Qantas, have obliged, but so far American has not.
Parker called it an issue for diplomats to settle.
“It’s an issue between countries,” he said. “We received the noticed but the United States has replied. We are following the direction of the U.S. government.”
In a related matter, American recently said it will suspend its Chicago-Beijing route later this year, but Parker said the carrier remains committed to Mainland China.
“It’s nothing political,” he said. “It’s just a difficult market. There’s a lot of capacity as it relates to demand but we are committed to China. We know over time it is going to develop and it’s a market that it incredibly important. The Chicago market was particularly troublesome for us just because there’s so much capacity there. The rest of the markets we are committed to and we expect to be flying decades from now.”
Still, Parker said American is carefully watching brewing U.S. trade disputes with China and other nations.
“We always get concerned when you start to see tensions around free trade and global trade,” he said. “As of yet, it is nothing that has affected our revenues, but certainly it’s the kind of thing that you watch. Hopefully countries are able to work together and keep global trade moving.”
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Photo credit: American Airlines is not yet ready to cooperate with Gulf carriers its CEO said Sunday. Pictured is an American jet in a hangar. Bloomberg