Big 3 Airlines Say Foreign Competitors Are ‘Dumping’ Seats In U.S.

May 15, 2015

Many U.S. passengers who have been wedged into coach-class seats on long flights might welcome more flying options — even if that competition were to come from overseas.

But the chief executives for Delta, United and American airlines say it’s not fair if such competition involves big government subsidies given to state-backed carriers.

Persian Gulf carriers, namely Qatar Airways, Emirates Airlines and Etihad Airways, are “dumping airline seats” into the U.S. market and covering market losses with government subsidies, United Airlines CEO Jeff Smisek said Friday at the National Press Club.

The Gulf carriers say the accusations are untrue, and they are not violating any rules.

Smisek, joined by Delta Air Lines CEO Richard Anderson and American Airlines CEO Doug Parker, said subsidized seats on trans-Atlantic flights may help the foreign carriers, but are “quite detrimental to U.S. jobs.”

The pilots, flight attendants and other U.S. airline workers in the audience cheered such remarks. Their unions have joined with management to pressure the White House to investigate practices they say violate “Open Skies” agreements that govern international airline competition.

Earlier this month, the Obama administration said it is launching a review of the matter. U.S. airline executives say the Gulf carriers have “flooded” the U.S. market with about 11,000 new daily seats, traveling from this country to Dubai, Doha and Abu Dhabi.

Last week, Qatar Airways said it would launch three new U.S. destinations — Boston, Atlanta and Los Angeles — next year.

Delta’s Anderson said the Gulf carriers’ surge into U.S. markets is disproportionate to demand, and clearly the result of subsidization.

“The evidence is overwhelming,” he said.

But groups representing passengers strongly disagree. They say U.S. carriers have benefited from mergers that did not get tough anti-trust scrutiny; bankruptcy filings that shifted pension obligations to the Pension Benefits Guaranty Corp.; and other forms of relief.

“These airlines want to close down the U.S. market to foreign carriers with no regard for consumers or airports in the U.S. that have lost air service and robust competition due to consolidation,” said a statement from the Business Travel Coalition.

On Thursday, Etihad, an UAE-based airline, released its own report, saying Delta, American and United have received more than $70 billion in subsidies since 2000, mostly in the form of pension guarantees and creditor protections in bankruptcy.

U.S. carriers say Chapter 11 bankruptcy protections are not a “subsidy” as established by international laws.

If the Obama administration doesn’t do more to check the growth of the Gulf carriers in this market, then airlines will seek action from Congress. Anderson said Delta has been a leader in raising objections and will continue to do so.

“We’ve been at it over two years and we’re not going to stop,” he said.

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