special report

Av i at i o n

opinion

AVI ATION

A case of self interest

Re-negotiating Open Skies bilateral treaties and recognising
the Gulf carriers right to expand may put an end to ongoing
mudslinging between the US and GCC aviation industries

Qatar Airways fleet of 165 is set to grow further, with orders in place for around 213 widebody aircraft

the century will keep growing with

another 213 orders in place. Seven new
routes have been launched this year,
pushing the number of destinations in
the network above 150.
Qatar Airways is also one of just
seven airlines globally - and the only
one in the Middle East - that can boast
of a 5-Star rating from consultancy
Skytrax. Al Bakers obsessive attention
to product excellence undoubtedly
secured this accolade.
Yet the companys exacting standards
have a darker side. A public relations
emergency was triggered in 2013,
when leaked copies of the airlines
employment contracts exposed the
heavy-handed terms under which
cabin crew were hired. As well as
barring flight attendants from getting
married for five years, the contracts
identified pregnancy as a valid reason
for being made redundant.
Reports were already circulating
about the burdensome restrictions at
company-provided housing, prompting Al Baker to issue a public denial
36

Qatar Airways is one

of just seven airlines
globally - and the only
one in the Middle
East - that can boast
of a 5-Star rating from
consultancy Skytrax.
Al Bakers obsessive
attention to product
excellence undoubtedly
secured this accolade
that he employs spies to watch over
his workforce.
With unions banned in Qatar, the
International
Transport
Workers
Federation (ITF) took up the cause
and mounted a concerted campaign
to overhaul working practices at the

flag carrier. After two years of negative

press, Al Baker relented.
As the airline matures, the workforce
matures, Rossen Dimitrov, senior vice
president of customer experience, told
Bloomberg in August. You cant turn
to someone who is 35 years old and
say, No, you cant have a family.
Updated contracts now allow staff to
get married whenever they wish, as
well as guaranteeing that pregnant
flight attendants are offered temporary
ground jobs.
Other controversial practices remain
- female staff still cannot be dropped
off at work by unrelated males, for
example - though most of these rules
stem from cultural norms in Qatar.
Dimitrov said the airline will continue
to review its policies.
Having
become
a
household
name, Qatar Airways is struggling to
reconcile Dohas conservative values
with the cosmopolitan liberalism of a
truly global marketplace. Success on
that front could be Al Bakers greatest
achievement to date. <
October 2015 | the gulf

he chief executives of
American Airlines and
Delta Air Lines met
with US Secretary of State
John Kerry in September,
stepping up efforts to
convince Washington that
the fast-expanding Gulf
carriers pose an existential threat to the US airline
industry.
Banding together with
United Airlines and several
trade unions under the
so-called Partnership for
Open and Fair Skies, they
accuse Emirates, Etihad and
Qatar Airways of receiving
$42 billion in state subsidies
over the past decade.
The alleged handouts documented in a 55-page
dossier released by the US
lobbyists in March - may
contravene the terms of the
Open Skies agreements that
America has signed with the
UAE and Qatar. Those bilateral treaties allow the Gulf
carriers to launch unlimited
flights to the US mainland,
but only if they operate on a
commercial basis free from
government support.
Accusing Dubai, Abu
Dhabi and Doha of pouring
money into their flag-carriers
in pursuit of wider economic
development programmes,
the Partnership says the Gulf
carriers are not playing fair
and the Open Skies deals
should be re-negotiated.
We believe these Gulf
airlines are playing from the
higher side of an uneven
playing field, posing a
serious threat to American

the gulf | October 2015

by Martin Rivers
thegulf@tradearabia.net

jobs and the long-term

viability of our nations
carriers, said Keith Wilson,
president of the Allied
Pilots Association, one of
the labour unions in the
Partnership.
Dismissing the charges
against them, Emirates,
Etihad and Qatar Airways
have accused their US counterparts of seeking protectionism. The Gulf carriers
insist that their rapid expansion is fuelled by nothing
more than efficient business
models, pragmatic government policies, and a natural
geographical advantage for
intercontinental transfer
flows.
The US departments of
commerce, state and transportation responded to the
deepening war of words
by opening a public docket
to solicit comments from
all interested parties. It is
now sifting through 3,000
submissions.
First in line among the
respondents were the
Gulf carriers themselves.
Emirates submitted a
mammoth 388-page pointby-point rebuttal, claiming
to expose the Partnerships
dossier as nothing more
than a mess of legal distortions and factual errors.
Qatar Airways filed its own
84-page document, while
Etihad submitted 60 pages
in its defence.
Etihad Airways is owned

by the Abu Dhabi government. That has never been

in dispute, wrote James
Hogan, Etihads chief
executive. The Abu Dhabi
government has taken
equity in Etihad Airways
and made shareholder loans
- something that is fully
consistent with our [Open
Skies] air services agreement
and international law.
Hogan separately commissioned research purporting
to show that Etihad will
contribute $2.9 billion to the
US economy this year, while
supporting 23,400 American
jobs.
Several smaller US airlines
have also voiced support
for the Gulf carriers. They
include FedEx, which has
taken advantage of the
US-UAE Open Skies treaty to
open a freight hub in Dubai;
and JetBlue Airways, which
has signed codeshare agreements with Emirates and
Etihad to feed its domestic
US flights. International
Airlines Group, the parent
company of British Airways,
also backs the Gulf carriers.
Amid endless mudslinging
between the two sides - the
US lobbyists quickly issued
counter-rebuttals to the Gulf
filings - it is easy to lose
sight of two key facts.
First, the term subsidy is
open to interpretation. The
World Trade Organisations
(WTO) definition, used by
the Partnership, does indeed
seem to apply to the Gulf
carriers - but it is not legally
binding in aviation treaties.

Other, broader definitions

could be used to malign
American carriers, for example by citing the favourable
terms of US Chapter 11
Bankruptcy Protection.
Second, on the other side
of the argument, Open Skies
treaties are not an entitlement. They are a commercial privilege bestowed on
airlines by two governments
that have identified mutual
benefits in the arrangement.
If one side no longer considers the treaty advantageous,
it is of course within its
sovereign right to revoke it.
Focusing on these two
principles lends clarity to
the dispute and exposes the
self-interested arguments
emanating from both camps.
Etihad and Qatar Airways
have, indisputably, received
what are generally understood to be subsidies.
Their US counterparts, while
not subsidised today, have
meanwhile benefited from
decades of historic advantages in the global aviation
market.
With neither side truly
concerned about objective
fairness, Washington
should seek a compromise
that leaves both parties
dissatisfied.
That means acquiescing to
the Partnerships request for
re-negotiated bilateral treaties, while at the same time
enshrining the right of the
Gulf carriers to expand at a
commercially-rational pace
within a fully liberalised,
open marketplace. <
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