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OpenSkies Agreement & Debate: Emirates chief says US row won’t ‘end in tears’

The OpenSkies debate has been going on for about a year now. US based airlines such as American, United, Delta, and Southwest have accused Middle Eastern airlines Emirates, Etihad, and Qatar Airlines of receiving unfair government subsidies that have allowed these airlines to grow at a rate that is too fast for the private sector. According the BBC, the Gulf carriers, often referred to as the ME3, “of having receiving up to $40bn (£25bn) in subsidies from their government over the past 10 years”.

These three airlines have been able to grow at miraculous speeds, and now have destinations in every inhabitable continent. With strategic locations in the Middle East, the ME3 are able to connect passengers in an efficient manner on intercontinental itineraries. The ME3 have also expanded to markets, and have remained profitable, despite only operating long haul, larger aircraft. CEO of Emirates, Tim Clark, says that Emirates took gambles in many of the markets, and is now feeling the benefits. He said that US based airlines are accusing the ME3 wrongly because they are simply not able to fathom the level of growth.

US based airlines are feeling threatened because they are feeling it financially. People who want service, reliability, and want to get to their countries choose the ME3 airlines, simply because the US based carriers do not have the ME3’s expansive route networks. The competition is too much for US based airlines, and many argue that US based airlines are using this debate to weaken the ME3 by taking away potential customers. Additionally, US based carriers have pressured their European partners into taking sides in the debate, creating an interesting taking of sides in airline relationships.

The open skies agreement is a weak agreement where most of the conditions are vague. American based airlines basically expect airlines to play by their rules, and unfortunately, as we discussed in class, not every country has the same systems in terms of business solutions and government.

The interesting thing is that US based airlines initially did not even  take much note much about the ME3’s expansion into the USA market when they each launched their initial services to New York. To them, Emirates and friends were just another airline launching their services. The US based airlines only got fed up because these airlines started to serve traditionally non-getaway cities, and thus did not need as many feeder flights anymore. Now Emirates serves 10 cities in the US, Etihad 6, and Qatar 7 + 3 planned for 2016. These airlines are also expanding capacities, because now Emirates operates 4x daily to New York JFK, Etihad 2x daily to New York JFK, and Qatar will begin operating 2x daily to New York JFK soon. The Middle East 3 give consumers sensible connections to anywhere in the world, and bring people closer to their intended destinations than US based airlines.

(Source: http://www.bbc.com/news/business-33089927)

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