IAG, Cargo Airlines Association speak out on open skies

IAG - inside (2)The Cargo Airlines Association, representing the all-cargo carrier industry, issued a statement Thursday urging the U.S. government to maintain its open skies agreements it negotiated with 115 countries worldwide, which promote world trade. The association maintains that cargo carriers employ more than 760,000 people, and that those jobs would be in jeopardy if any action is taken to “limit competitive opportunities and restrict the ability of carriers to operate, not only between countries that are parties to open skies agreements, but also beyond those countries to other areas of the globe.”

This commentary came at a time when several dignitaries from the Persian Gulf states were in Washington, D.C., meeting with President Obama to discuss a nuclear arms deal with Iran. The three U.S. legacy carriers, Delta, United and American, have accused the airlines from the Gulf – Emirates, Qatar Airways and Etihad Airways – of receiving more than US$40 billion in government subsidies, which they say creates an unfair advantage. The three U.S. carriers have asked the American government to limit the number of flights that the Gulf carriers make to the U.S.

At the same time as the Cargo Airlines Association made its voice heard, International Airlines Group, parent company of British Airways, Iberia and Vueling, sent a five-page statement to the U.S. Department of Transportation, Department of Commerce and the Department of State Stakeholder Engagement on Gulf Carrier Subsidy Claims. IAG said it is pro-consumer and pro-competition, and that British Airways has faced competition from Emirates for more than 25 years.

“Open skies agreements have vastly expanded international passenger and cargo flights to and from the United States, promoting increased travel and trade, enhancing productivity, and spurring high-quality job opportunities and economic growth,” IAG stated. “Open skies agreements do this by eliminating government interference in the commercial decisions of air carriers about routes, capacity and pricing, freeing carriers to provide more affordable, convenient and efficient air service for customers.”

IAG points out that trade between the U.S. and the UAE has grown to where the UAE is now America’s largest export market in the Middle East. U.S. exports and foreign direct investment in the UAE rose from US$3.6 billion in 2004 to $24.6 billion in 2013, a six-fold increase. Additionally, IAG said, “since Boeing aircraft represent the largest single category of U.S. export earnings and support many hundreds of thousands of jobs directly and indirectly in the U.S., it would be perverse not to take into account the value of Gulf carriers to the U.S. economy and U.S. citizens.”

Other points made by IAG include the fact that fuel subsidies to any Gulf carriers are non-existent, and it is not credible to assume so just because they have large oil and gas reserves; alleged subsidies in the form of investments in airlines are no different from the many investments made by states in airlines around the world; state investment in airport infrastructure is not, and never has been, regarded as a “subsidy” anywhere in the world; and in Dubai, well over 100 international airlines compete successfully against Emirates and fly into Dubai.

The Cargo Airline Association said that beyond the government subsidy issue, “beyond rights” are under attack. “It is not an overstatement that, absent open skies agreements, existing worldwide air cargo networks could not exist as we know them today,” said Stephen Alterman, president of the association.

IAG maintains there are few major carriers in the world that have not previously benefited from state support of its business in one form or another. “These include Chapter 11 reorganization procedures, which among other things, has allowed airline pension liabilities to be take off carrier’s books.”

In conclusion IAG said it believes the industry functions best when competition is allowed to flourish. “To shield U.S. airlines from their competitors would be to grant them the biggest subsidy of all,” the carrier said.

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