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Wed 25 Feb 2015 07:20 PM

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Emirates chief hints at legal action over US subsidy spat

Tim Clark hits back at US airlines in bitter subsidy row; urges gov't to block calls to renegotiate Open Skies agreements

Emirates chief hints at legal action over US subsidy spat
Tim Clark, president of the worlds largest international carrier Emirates.

The head of Dubai's Emirates has hit back at US airlines in an increasingly bitter subsidy spat and urged Washington to block their calls to renegotiate Open Skies agreements.

In an interview with Reuters, Tim Clark, president of the world's largest international carrier, also urged the US government to think about the impact on its aerospace industry, which has been boosted in recent years by orders from the Gulf.

He was responding to allegations of trade-distorting Gulf subsidies made by the three largest US airlines, Delta Air Lines, American Airlines and United Airlines.

In a 55-page dossier presented to the US government, they have called for the renegotiation or suspension of Open Skies liberalisation deals with the United Arab Emirates and Qatar.

Clark said the airline could provide a "cast iron defence" against subsidy claims and hinted at possible legal action over the criticisms, voiced especially by Delta.

"Delta is maligning us, leading people down a path which is based on unsubstantiated false allegations and that is very serious. It could be commercially damaging to us and if it is we will consider ... all our options," Clark said.

He called for publication and a right of response to the 55-page report.

Open Skies deals broadly give airlines from each side the right to fly wherever and whenever they want.

US airlines say the system puts them at a disadvantage because their market is far bigger.

Furthermore, they say Gulf states broke the trade deals by pouring $40 billion of alleged subsidies into their carriers, something Gulf nations and airlines have repeatedly denied.

And they complain that three Gulf carriers - Emirates and Etihad of the UAE and Qatar Airways - switched strategy after the deals were negotiated to become global hubs threatening the rest of the industry, rather than ordinary national carriers.

Clark denied that Emirates, founded in 1985, had changed its spots and said its growth and strategy were discussed openly during the trade talks that led to the 1999 Open Skies deal.

He said it was the United States that had pioneered such agreements and Emirates had invested heavily in aircraft, notably from US manufacturer Boeing, as a result.

"So on what basis would they call for negotiations, because they laid the ground rules in the first place?"

Emirates has ordered a total of 289 Boeing wide-body jets, including 199 that have yet to be delivered. It is also the largest single customer of European planemaker Airbus.

"We have invested heavily in the US aerospace industry and a lot of what we have done with regard to market access has allowed us to go and place these orders, for which we have contracts in place," Clark said.

"I don't want to be seen as threatening or intimidatory but I am hoping that the US government thinks about all of this."

He also rejected claims that Gulf carriers had been able to take market share from US airlines, saying it was they that had missed the boat on globalisation.

"When the world started to knit together and energise, and all these people started travelling, where were the American carriers then?," he said.

"They go in and out of India and say the fares are too low. OK, that's your problem: maybe your costs are too high, Richard," he said, in a swipe at Delta CEO Richard Anderson.

The US airlines say the Gulf carriers use aggressive pricing to poach customers, but Emirates and its Gulf rivals maintain passengers are attracted by modern planes and better service.

"Emirates does its own thing. It supplies a quality product which knocks spots off any American product," Clark said. "Why should we match their prices when we don't need to?"

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Dharma 4 years ago

"Emirates does its own thing. It supplies a quality product which knocks spots off any American product," Clark said. "Why should we match their prices when we don't need to?"

A $40 Billion subsidy buys great service. If American, Delta, and United had a proportional subsidy from our government based on our market size what would that be? $350 Billion. American, Delta and United could buy some pretty fancy service with that kind of cash.

John Harte 4 years ago

Sounds like EK is panicking.......lack of transparency in Gulf governments is the problem, what we have here is a cultural clash in how business is conducted.

Interesting that the UAE refuses to liberalize its telecommunications market to outside competitors despite buying into other countries' markets......when the shoe is on the other foot the Gulf states are even more protectionist.

leo50 4 years ago

Missing the point completely. Why does market size matter in a global industry? U.S. customer service standards have slipped alarmingly over the past 30 years, not just now, and the difference between flying with U.S. carriers and Gulf carriers is marked.

Yoda's Grandfather 4 years ago

#1 The USA doesn't have $35)M, let alone $350B to give to their airlines.
#2 The OSD was negotiated by the same Govet so Boeing could sell more metal - and they did. Why did the US Airlines not raise these issues then ? Are these great aviation leaders not able to see beyond today ?
#3 This is protectionism by the US Airlines, same as the Europeans. What happened to the US being the flagbearer of Capitalism ?
#4 The world is changing faster & faster and the old regime is being exposed and left behind. Yes, the world needs a healthy USA economy with it's gluttonous spending capacity. However not at the expense of the rest of the world. The new world order as predicted is looking very different.

Han Solo's 2nd Cousin 4 years ago

I agree...someone is panicking but it definitely isn't EK, EY or QR. The likes of BA who built monopolistic networks but dished rubbish service and charged what they felt are now seeing their empires crumble. Disruption creates opportunity - in any industry. The ones that are panicking are the ones who realise that they were too short sighted and arrogant to accept the future and now cry behind their impotent governments who sold them out to prop up their haemorrhaging economies by embracing the petro-dollars. Land Rover, Jaguar, The City of London...the list goes on.
Both Tories & Labour have systematically privatised the Countries crown jewels in bring in new money. What is their left to be "protectionist" about ?
There is no "cultural clash in how business is conducted" - it is plain and simple Evolution and sadly the big fat airlines of the past are now not the 'fittest'.

Shf 4 years ago

Agree Dharma... And you can apply the same formulate to everything else that is happening in that region. It's common sense that protected monopoly creates extreme wealth... But of course only for a few...!

Red Snappa 4 years ago

To be honest, the US is likely to take the protectionist option with open skies, whatever bluster comes out of EK.

Yes US airlines have deteriorated but this maybe the catalyst to buck their ideas up. The US also knows full well that it protects this part of the world, certainly the GCC, against a number of threats and does not take kindly to it's business assets being degraded in its own back yard, never mind the employment

Re subsidies, aviation fuel is historically supplied at much cheaper rates in Dubai, is that not a form of subsidy? EK is part of Emirates Group which is Dubai government owned through Investment Corporation of Dubai. Government entities certainly get dispensations on items like import duty.

Also employers obligations are different to the US, the majority of employees at the airline like the emirate's population are foreigners, only nationals receive contributions to state pension schemes, all others accrue gratuity, a form of end of contract severance pay.

John Harte 4 years ago

The issue being raised is not so much about levels of inflight service....of course EK is way better than the US carriers (although EK economy class in their B777 must be the most cramped in the industry!), but open skies agreement allows EK to fly into any US airport as long as slots allow; but it is with the understanding that EK operates with complete transparency as a private airline, and it is this the US carriers are disputing (and European carriers), claiming that the Gulf carriers are being suspicious in what they are failing to mention on their balance sheets.....and having worked in the Gulf I am sympathetic to the US carriers, because business in the Middle East is predominantly opaque.

Eyes Wide Open 4 years ago

If the US government would hand out 40 billion to the Airlines. The service levels would actually drop further (cost savings) while the the shareholders would receive record dividends.
Customer does not matter anymore. THAT is the root problem.

How many billions did GM receive?
How much better are their cars and their Service since then?