US becomes Gulf airlines’ third largest market as subsidy row continues

The US is now the third largest market for the three major Gulf airlines, according to a new report that may help explain why American carriers are pressing their government to curb their competitors’ reach.

In terms of total passenger numbers, India remains the biggest market for Etihad, Emirates and Qatar Airways. The UK is second, the US is third and Australia is fourth.

However, the Centre for Aviation report states that the gap between second and third place is closing, and figures show that the American market is becoming a key strategy for growth for the Gulf carriers.

In the second half of last year for example, the US market was 76 percent the size of the UK market for the three Gulf carriers, but in the same period this year it is forecast to grow to 83 percent.

The report also stated that an extra 2,350 seats were available on flights to the US from Qatar and the UAE in the second half of this year, a 28 percent jump compared to the same period in 2014.

Subsidy controversy

These buoyant figures come as major US air carriers continue their efforts to restrict access given to Qatar Airways, Emirates and Etihad at American airports.

Three major airlines in the US – Delta, American and United – have demanded that their government renegotiate its Open Skies agreement with Qatar and the Emirates.

The deal allows airlines, rather than government regulators, to determine the frequency and capacity of flights.

The airlines and a coalition of other interested parties,  Partnership for Open & Fair Skies, claim that Gulf carriers have benefited from $42 billion in subsidies from their respective governments, constituting unfair competition.

United, Delta and American Airlines made statements to the New York Times in February detailing their point of view.

“We welcome robust competition provided the playing field is level” they said. “A reopening of those open-skies agreements is the first step and the right step to ensure competition is preserved and enhanced.”

The US government has now opened an investigation into the claims, and last week Qatar Airways became the last of the three Gulf carriers to submit an official response to the allegations.

In its submission, Qatar Airways attributed its rapid growth not to government assistance, but to advances in aircraft technology, with efficient long haul aircraft allowing passengers traveling from the US to the Middle East and India to fly to their destination with far fewer stops than previously possible.

In response to the charge that the airline is damaging the American economy, Qatar Airways argued that it was making a significant contribution by carrying visitors who spend money on hotel accommodation, car rentals and other items, which it valued at some $900 million.

In a statement,  CEO Akbar Al Baker added:

“It is puzzling to see the biggest US carriers describe Qatar Airways as a “threat,” given our small size and lack of direct competition with them… We are concerned to see the Big 3 seek to change the rules of the game as soon as they see US consumers respond well to the services offered by a competitor.”

Thoughts?