–Richard Anderson, Delta CEO, in a criticism of how the Gulf’s three major airlines, including Qatar Airways, do business. Anderson was quoted in a Wall Street Journal article this week about American companies balking at the success of the state-backed GCC carriers, which also include Emirates and Etihad.
The main reason for the companies’ success, Anderson charged, is that “profitability doesn’t matter.”
According to the WSJ, the Gulf trio have expanded into Europe and the Americas because their small home markets could not sustain their growth. It continues:
“The Gulf three now send nearly 120 large, new and lavishly appointed planes weekly to a growing number of American cities. They offer U.S. passengers flights to far-flung cities around the globe via connections in what have become geographically advantaged hubs in the Middle East, bypassing older, traditional air routes served by U.S. carriers and their foreign partners.
… The Gulf carriers, critics say, have used the resources of their state backers to exploit the huge U.S. market, while American carriers have gotten access only to their tiny Mideast city-states.
‘The Gulf states clearly out-traded our negotiators,” said Jeff Smisek, chief executive of United.’ “
Not all American carriers feel so threatened. American Airlines has had a long-standing agreement with Etihad that allows them to sell each other’s flights. AA also entered into a code-sharing deal with Qatar Airways this week, when the national carrier joined the oneworld global alliance. And JetBlue has a deal with Emirates, WSJ reports.
Meanwhile, the GCC carriers are dismissing the growing criticism. The CEO of Qatar Airways, which plans to launch its sixth US destination, to Miami, next year, told the newspaper:
“We have never been a threat to anybody,” said Qatar Airways Chief Executive Akbar Al Baker. “We have only been a threat when we are challenging them in the kind of product we offer.”
That Al Baker last week was awarded ‘business leader of the year’ by the local chapter of the American Chamber of Commerce is one indication that things aren’t going to look up for US carriers any time soon.
Despite a proliferating number of legal challenges, it looks unlikely that the US airlines will succeed in keeping Gulf carriers out of their markets, the newspaper concludes:
“Many industry officials say U.S. opposition has little chance of thwarting the Gulf carriers in a deregulating aviation world. Washington is unlikely to antagonize its Mideast allies, and Boeing, the U.S.’s biggest exporter, gets a 10th of its widebody order book from the Gulf trio.
James Hogan, Etihad’s CEO, said his company has been unfairly criticized as being subsidized. ‘The only advantage I have is I’m not a legacy airline,” he said. “I started with a clean sheet of paper…And I’m within three hours of huge emerging markets.’ “
The article, however, makes no mention of US carriers competing on price, as GCC airlines charge a significant markup for their flights.
Thoughts?
Deal with it.
I must say that is an extremely naive statement to make. How are they expected to ‘deal with it’ exactly? When one airline has virtually unlimited funds from their government and the government skewing the rules, (Remember when QA stopped emirates selling cheaper tickets in Qatar?), it is impossible to compete fairly.
What should they do, get their governments to block these airlines flying into their countries? I beg you would be the first one to scream racism if that happened.
Please think before you post next time
In business, you learm to deal with whatever circumstances you get…
They should start thinking “outside the box” …
Well, since it is governments we are dealing with, perhaps a few F-18s ‘accidentally’ dropping their ordnance on QA planes would even things up. Whaddya say?
Please don’t get me started on F-18s dropping bombs on yet another Muslim country as way to resolve problems and disagreements with those said countries.
But it is just business…
Fair enough, as long as you don’t get me started on ‘Muslim’ ‘clerics’ supported by regional governments encouraging death and destruction of innocents as way to resolve their problems and disagreements with other countries.
Why bring religion into the conversation? Muslims kill more Muslims than any Western Nation ever thought of. Israel included.
They sure do. Just like Christians have killed more Christians than Muslims ever did.
Or Muslims flying F-18s dropping bombs on other Muslims. How many has Qatar ordered btw?
Please explain how an independent company can compete against one that has unlimited subsidies from a government?
why is it unfair?? the government is backing up their country just like every other government back ups theirs… why is it when we help our projects it seems as unfair? its our money we decide what to do with it… instead of the US spending so much money on the army and war why don’t they cut back in using it for their government they sure as hell need it after the government shutdown and what not.
well said! Imagine if the issue was about health care….:-)
ya tomorrow they’ll bring up an issue to stop free health care in the country.. because its unfair that the rest of the world should pay the bill >.<
Unless it injures others, then it is fair game. Health care stays within Qatar’s borders, as soon as your airplanes start competing with those from my country, well, then comment is free. N’est pas?
who said that? even in travel Qatar takes care of us sorry to burst your hate bubble but the government even pays our healthcare outside the country. so it dosent stay in Qatar’s borders as you think but comes with us wherever we are.
You missed my point. Health care is a public good as most countries (not the Americans necessarily, but most countries) recognize. Qatar’s providing health care within Qatar does not impact other countries. Qatar Airways attempt to enter other markets does, so it is very much appropriate for other countries to comment and regulate as they see fit.
It is generous of Qatar to pay for treatment abroad that Qatar is unable to provide domestically, but this is not unusual, most countries that have national health care systems do this. It is equally generous of other countries to allow Qataris to purchase health care. I’m not sure how this example is related to the conversation though.
“Qatari” is not getting it are they? Like taking in circles
The format of these conversations is confusing and replies don’t necessarily follow the comments/questions, so it can be difficult for all of us to keep up with the flow.
Two things.
1. Yes GCC governements should use their funds to get these companies off the ground but support should be finite, with a definite end date. Starting a new airline is an expensive business.
2. Totallly agree on the US. They could cut their defence spending by 50% and solve their debt problem overnight and still have the biggest military in the world. At the moment total insanity.
why should there be a limit in time?? as long as they are doing it to benefit the country then no one should say anything really.
Benefit your country all you want, when you injure mine, expect comments.
how are we injuring yours?? are we killing your people??
not the same thing see??
I’m curious as to when we made the leap from economic competition to killing. The link is unclear to me.
Every other country does not have a heavy subsidized state airline.
To your point on the military: very true the military is state subsidized. They could just use that “company” to drum of business in other countries–i.e. conquer and then make a bundle rebuilding it. But then people would complain about that . . .
and every other country does not have subsidized military to the extent where they just invade territories and leave them burning… i.e Iraq, Palestine, etc… so instead of using military money and harming people why dont they cut back in benifiting themselves and stop the mass murders…
and then you call it unfair for us… you have the money you’re just spending it in wrong places.
Well, we find ourselves in agreement here…
please explain how are we spending it in wrong areas?
Umm, I said no such thing. You said “….you have the money, you’re just spending in in the wrong places”. I agreed with your assessment of the misplaced priority of military spending.
As does Qatar. Instead of the World Cup rebuild Palestine. Instead of all the vanity projects do something useful for someone, anyone, in the world that makes less than a $1,000,000/yr. This is where money and religion become a slippery slope. All religions consider greed a sin of some degree. In the GCC, with the exception of Bahrain/Oman, that greed comes in spades.
the conquerers rebuilding it?? ya I can see how they rebuilt Palestine, and how they rebuilt Iraq…
Not so, the Arabs rebuilt the levant after they conquered it from the jewish tribes a thousand years ago.
How many small businesses in the U.S. and elsewhere had to close becasue a Wal-Mart opened near by? And to what extent are the subsides you mention are in fact unlimited?
Years ago, before Qatar Airways started to the U.S., I used to fly Gulf Air to London, and then take American Airlines to the U.S. Then I discovered British Airways, and never looked back. It was the most expensive choice, but I got my money’s worth in terms of the service and hospitality of the staff.
Except that Walmart isn’t a government agency.
Here i just wish they’d start thinking.
O great thinker; the pronoun “I” should be capital!
“What should they do, get their governments to block these airlines flying into their countries” Didn’t Prime Minister Harper of Canada do just that when he denied Emirates more destinations in Canada? All so that Air Canada would be protected!
he did good, to protect his country airline, same way QA and Qatar protects its own
I loathe Harper with a passion, but keep the Gulf airlines out. If they want access to our market, then it is our rules. End of story. I’m sure QA understand that thinking.
Yes and how the Emiratis whined when he did that. Even close their military base in the UAE and then put in place huge fees for visas for Canadians wanting to visit or do business in the UAE.
Air Canada is crap and has been for a long time but if they let in Emirates or QA and others then Air Canada would either go bankrupt or need government subsidies to keep going. If the Canadian government went down the subsidy route they would in effect be competing against the UAE governement and others to level the playing field. More people’s money wasted on both sides of the world.
Yes, spoiled children was certainly the phrase used to describe the Emiratis at that time.
I go for the cheapest ticket, I do not care what carrier that is. Whether Etihad, Emirates and QA can survive (independently) in the long run, let’s see. Cheap fuel and low salaries will help.
To James Hogan, what stable emerging countries (other than India) are within 3 hours flight from Abu Dhabi?
I’m the same. I needed a tkt to Dubai to reach my Dubai-Atlanta flight. QA was nearly twice as much as Emirates. I did NOT fly QA. I think QA is over rated. I’ve flown with them many times and really don’t see the point. Unless you sit in 1st class it’s pretty much like any other carrier. If I was the CEO of a bottomless funded company I to could be CEO of the Year. And I would pay a decent wage and God forbid if an attendant got pregnant I think I might let them keep their job.
amen!!!
A lot of us thinking the same. QA is average unless you fly 1st. And its food an attempt to our health
And customer service? Friends of mine flew to States with their children 1/3/5 yrs old. They had them sitting in all separate seats. Even the baby. Even after calling 2 weeks in advance to confirm they had infant. The father eventually got the infant in his lap (not until they were on the plane mind you. Gate told them to check with attendants once onboard.) but the others not. I was on the same flight. WTH?
I know, it happened to me too! I know very well our poor is their customer service. It has turned like this in recent years. Back in 2004 at least if you had complain something would have been done.
Well, hard not to see a bit of sour grapes in there, given how crappy US airlines are, but he does have a point about government backed ‘companies’.
Gotta agree here, US airlines are pretty crap. Even normal run businesses like Singapore Airlines and Cathy Pacific far outshine them
Oh, don’t they just though? I do love East Asian airlines, well, not domestic mainland Chinese, but many of the others are just so great.
SA is 50% govt owned
Of routes they are not real businesses, they are important to gulf countries growth but they are also vanity projects for those countries. Unlimited state subsidies are illegal in the developed world as they distort competition but in the GCC it is considered good business sense.
“Unlimited state subsidies are illegal in the developed world”. Seriously!!! What do you call all those bailouts and all this money printing, all those banks would have FAILED in 2008 had the west had a real market economy. The west has been exporting it’s inflation for decades forcing the whole world to bail out their corrupt financial systems. The equation here is very simple: Strategic location+ easy access to credit= Thriving business. The west is the last to preach about market values since their markets are so screwed up
The ME does their part when they slow or stop production of gas and oil. In the 70s the oil embargo crippled the west. no stones from glass houses.
And customer service? Friends of mine flew to States with their children 1/3/5 yrs old. They had them sitting in all separate seats. Even the baby. Even after calling 2 weeks in advance to confirm they had infant. The father eventually got the infant in his lap (not until they were on the plane mind you. Gate told them to check with attendants once onboard.) but the others not. I was on the same flight. WTH?
And where in the ME are there ‘markets’ that are successful without government support?
there aren’t. but at least we know we’re screwed up
Bah, business everywhere is ‘screwed up’, I don’t see how it can be avoided – nature of the beast and all.
Yes, it was the ” Unlimited state subsidies” by GCC countries which caused the 2008-2009 global financial crisis. And then, the GCC governments stepped in and bailed out all the businesses deemed “too big to fail” using the money of the people!
People’s money, seriously?
Actually Qatar and Abu Dhabi did bail out one British banks with their people’s money and they made a nice tidy profit out of the deal ws well….
2008 was a disaster for the west, no doubt about that but I don’t think you can compare the two, but also don’t forget that the Qatar government also bailed out it’s banks during that period. (although of course you did not read about it in the local press)
Yep. Qatar bailed out a number of its own financial institutions back then–institutions that had made the same mistakes as other world banks. That’s why I find it laughable when Qataris criticize the West for the global crisis. Their banks were doing the exact same thing, but they just didn’t get the press coverage.
It is because their banks were tiny and if they went bust, it wouldn’t even cause a ripple on the worlds markets.
Royal Bank of Scotland before 2008 was the biggest bank in the world and had ‘assests’ on its books greater than the GPD of the UK. If that went bust then the whole world would have known about it. I do not excuse the poor oversight and incompetence of the western regulators though. Let’s hope the lesson has been learnt.
Yes, out of the goodness of their hearts, or was it because it was a great business decision and chance to make a tidy profit? I get so confused between philanthropy and profit taking….
How about this? Same distorted competition? http://www.dw.de/us-warns-german-economic-policies-damaging-to-eurozone/a-17195771
This article is not at all related to the conversation.
It is another example of US and similar countries, complaining that “the rest of the world is doing great and we are not. So lets warn, accuse and threaten them.”
We have a different interpretation of the article it seems.
You should do more than read the headline to form your opinions.
Read Page # 26 http://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2013-10-30_FULL%20FX%20REPORT_FINAL.pdf
I did and it reiterates that the policies that were in place were putting the Eurozone into financial fragility.
Not relevant to this conversation, though it is certainly guaranteed to put a person to sleep, as dry as sand.
The problem is that even if you boycott airlines like QA, Etihad and Emirates, they will still be funded by the government. So they’ll never feel the pinch. Business in the East is not the same as that in the West.
for me, i still maintain that the 3 mentioned airlines or carriers (Qatar Airways, Etihad, and Emirates) still have the best record in terms of customer relations, safety, and their fares are reasonable.
Vanity Projects & Illegal subsidies … I agree with MIMH…
what about the profits made out of forced labour ….
Or the profits made from “reconstruction” in Iraq and Afghanistan by companies like Haliburton!
Yes, because Qatar never tries to profit from war-torn countries by being amongst the first to offer cheap loans and infrastructure projects–Libya, Tunisia, Egypt and, Syria (if the current investments tip the balance in the Qatar-backed groups). LOL. Besides, have you ever looked at the various companies that state-backed funds are invested in? Let’s just say they’re making a packet off of war and reconstruction. Remind, which country has the most invested in Asiacell, the “Iraqi” telecom company and controlled it entirely before in went public?
People in glass houses shouldn’t throw stones.
so whine cus you cant compete… thats good business
“Al Baker last week was awarded ‘business leader of the year’ by the local chapter of the American Chamber of Commerce” I guess he was right when he said business leaders in the West wish they could have the same sponsorship system as the one in the Gulf. Scary, very scary!
Bah, when someday the history is written of that little creep people will regret those awards I’m betting.
I seriously don’t think anyone is going to write a serious history of guy that runs a medium-sized state-owned airline.
Unless they have already started… 😉
Yes, I found that to be scary statement, too, but only too true. Slavery is always popular amongst the masters; it’s the slaves that don’t like it.
I don’t think it is the place of the US carriers to complain, but they have the right to do so. It wasn’t that long ago that Air Canada was state funded.It was a great airline at that time but lost money and became quite unionized. Debt is an issue with many airlines, including Air Canada.Eliminate that and things work better.But I bet companies like Boeing may be thankful for GGC airlines to keep that economy running.
Profitability does matter of course! QR is about to open direct flight to the Arctic Circle in Northern Finland. Santa’s village is the latest destination and part of sponsorship deal with Mr Claus. Footballers of both FCB and PSG will participate as Elves and will help Santa in delivering presents from he’s industrial toy production facility in Lapland. Good news for the reindeers!
Be careful Deer Bestow and her lot will be on here spouting this reply amounts to blasphemy.
Given the freedom and bottomless bank accounts it is not too difficult to envision how the three top airlines in the Gulf have evolved. Al Baker is not a business leader, any one with half a brain could build an airline with a bottomless bank account, no work rules and a tyrants approach to human resources. If he had to work with a bottom line QR would not have the attrition rate it experiences and Qatar would have a new airport.
Closing this thread now – great discussion, but getting off track!