U.S. Airlines vs. Arab Carriers: How Does the Battle Affect Fliers?

If you have to fly from New York to New Delhi on April 1, you can book through one of the three big U.S. airlines for at least $1,100 round trip. Or you can take one of Emirates’ luxurious Airbus A380s for less than $900.

That choice is at the heart of the complaint raised by Delta, American, and United Continental with U.S. regulators. They say handouts from Persian Gulf governments let the region’s major carriers offer artificially low prices and flood the market with wide-body aircraft that have far more seats than could be filled from their home markets alone. 

Emirates President Tim Clark called the assertions “bluster and flimflam,” Etihad Airways said it’s reviewing the evidence, and Qatar Airways had no comment. Clark travels to Washington this month to present his rebuttal. All three Gulf airlines have long denied getting subsidies from their governments. 

As the U.S. reviews the complaints, here are some questions and answers for fliers.

Aren’t cheaper fares and more service good for consumers?

The three Gulf carriers offer an average of 25 daily round trips to the U.S., to cities that include New York, Washington, Los Angeles, and Miami. Collectively, the U.S. airlines offer just two daily flights to Dubai.

So thanks to the Arab airlines, there’s more choice in reaching the major cities in the Persian Gulf. This week, Emirates sweetened the deal with an offer of a $1,299 round trip to Dubai from any of nine U.S. cities for two people on tickets purchased by March 12.

Is there a downside for passengers?

The U.S. airlines say their Middle Eastern rivals are just taking market share from other carriers, rather than responding to new demand. As Emirates, Etihad, and Qatar undercut Delta, American, and United on some international routes, the U.S. carriers will be forced to reduce service, they warn.

They contend that cheaper tickets to international destinations could wind up hurting passengers. If U.S. airlines can’t compete with Gulf carriers on certain international routes, they’ll be left with fewer passengers on connecting domestic flights. That could make flights to small and midsize cities unprofitable, they say.

Have the Gulf airlines really changed travel behavior in the U.S.?

The Gulf carriers since 2008 have more than tripled the share, to 40 percent, that they and their European partners have of U.S.-to-India bookings. The U.S. carriers’ share has dropped in that time, bouncing in a range of 36 percent to 39 percent for several years before falling to 34 percent, the airlines’ report says.

Emirates ranked No 30 globally in international capacity in 1998 and today ranks No. 1, according to the U.S. carriers’ report. Qatar has shot up the rankings to No. 10 from 90th in that time, while Etihad, which didn’t exist in 1998, today ranks No. 13.

Another concern for U.S. airlines is Gulf carriers flying between the U.S. and Europe without stopping in the Middle East. Emirates already flies one such route between Milan and New York.

What do the U.S. airlines want?

The three major U.S. airlines met with the Obama administration in January to present their findings on what they say is $42 billion in subsidies to the Gulf airlines and to request that the government open talks with Qatar and the United Arab Emirates over air treaties.

The State and Transportation departments have approved more than 100 such “Open Skies” agreements with countries over the past two decades, allowing flights between countries essentially free of government intervention.

The U.S. airlines also want the administration to ban the Gulf carriers from adding any new routes while it considers the issue.

The Big Three showed their investigative report to the European Union to help such partners as Air France-KLM and Deutsche Lufthansa. Those European airlines have their own complaints of unfair competition by the Gulf carriers.

But really, if the U.S. airlines don’t fly much to the U.A.E. and Qatar, who cares?

Travel to the Persian Gulf itself isn’t the issue, according to the U.S. airlines, which say most passengers to the region don’t actually begin or end their trips there. The Gulf carriers’ goal is to link the U.S. and Europe with Asia and Africa, using their home cities of Dubai, Abu Dhabi, and Doha as points where passengers connect to their destinations.

As Emirates flies more people from Mumbai or Singapore to Dubai and on to New York, it cuts the U.S. and European carriers and their hubs out of the picture.

In the long run, the Big Three argue, that will come back to hurt U.S. fliers.

(Michael Sasso - Bloomberg Business News)