Emirates' Clark hits back at US airlines' claims

Tim Clark says calls for a review of US air treaties with Gulf states based on “unfounded” claims it received $40bn in annual subsidies “makes absolutely no sense” and made a mockery of the country’s liberalist stance
Emirates' Clark hits back at US airlines' claims
By Courtney Trenwith
Wed 11 Feb 2015 10:51 AM

Emirates Airline boss Tim Clark has hit back at allegations from America’s top three airlines that Gulf carriers have received billions in unfair subsidies by claiming their demands for protection would amount to “the biggest subsidy of all”.

Clark questioned how American Airlines, United Airlines and Delta Air Lines calculated that Emirates, Etihad and Qatar Airways had received $40 billion worth of government subsidies and benefits, and ridiculed the complaining CEOs after they publicly called for the US to copy Dubai’s pro-aviation growth policies.

He said the airlines’ call for political protection from Gulf airlines expanding in the US “makes absolutely no sense” and made a mockery of the country’s liberalist stance. Meanwhile, they benefited from US bankruptcy laws that allowed them to forgo debt and cut operating costs to continue flying, he said.

“As far as the airline industry is concerned, aero-political protection for airlines is arguably the biggest subsidy of all,” Clark said in a statement sent to Arabian Business.

“Therefore, it would be ironic, and a shame, if the US, who have been the forerunners of liberalisation and deregulation, would now contemplate a U-turn on its successful international aviation policies for the benefit of a narrow few, based on sweeping and unfounded subsidy allegations.”

American, United and Delta said they had conducted a year-long investigation into the Gulf carriers and presented a 55-page report to US authorities to support their request for a review of US air treaties with the Gulf states.

Clark said he was “surprised” by the report and urged the complaining airlines to read Emirates’ annual financial reports, which had been audited by PricewaterhouseCoopers in accordance with International Financial Reporting Standards for 20 years.

It is public knowledge that Emirates received start-up capital of $10 million in 1985 and a one-time infrastructure investment of $88 million for two Boeing 727 aircraft and a training building.

The investment has been more than repaid by at least $2.8 billion worth of dividend payments to the Dubai government, Clark said.

“We have repeatedly debunked various accusations by competitors about subsidies and ‘unfair’ operating conditions,” Clark said.

“Emirates has engaged transparently with regulators, journalists, analysts, academics and financiers, and no one has found factual grounds to any of the allegations – whether on subsidised fuel, hidden financial support, airport charges, staff conditions or environmental regulation.

“Emirates operates its flights on a fully commercial basis, and rational market assessments. Although the Open Skies air services agreement was signed in 1999, we only started services to the US in 2004 when we had the right long-haul aircraft to provide the service and connectivity that our customers wanted.”

Emirates flies direct between Dubai and nine US cities. Those services also allow passengers one-stop connectivity to 60 other cities in the Middle East, Africa and Asia Pacific - destinations Clark said were not currently served by American carriers, except perhaps via their alliance partners “where routings are often relatively convoluted or inconvenient”.

“Head-to-head, there are virtually no competitive overlaps between Emirates’ network and those of the three complaining US carriers,” he said, adding that Emirates’ operations in the US market generated more than $2.8 billion of estimated economic value annually for the airports it flew to.

It also delivered “high-yield” tourists and business travellers from important developing markets in the Middle East, Africa and Asia and helped facilitate US foreign trade by opening up new markets for US exporters, while its long-standing relationships and aircraft investments with Boeing, GE and other US aviation manufacturing partners generated hundreds of thousands of US jobs.

“It is clear that the global economy in the 21st century, in its many facets, is underpinned by the theories of macro-economic liberalism, so championed by the United States in the post Second World War era, and that in the absence of free trade agreements, emerging markets would have stalled in their development and many other western countries would have remained in economic backwaters,” Clark said.

“For the United States government to be persuaded by a non-representative vocal minority that it should change course, particularly with regard to its Open Skies policy, makes absolutely no sense. And this at a time when the overarching requirements of the Middle Eastern geopolitical calculus requires relationships to be cemented, not fractured.”

Emirates, Etihad and Qatar Airways have rapidly expanded by taking advantage of their geographical locations that easily link the East and West.

But the three Gulf carriers are expanding to capture far more passenger traffic than their home populations need, Delta spokesman Trebor Banstetter said. Their growth already had hurt European carriers.

Air France CEO Alexandre de Juniac is among European carriers that also have called for greater protection from Gulf carriers.

In contrast, Clark said, Dubai was encouraging and benefiting from competition.

“We have no problem with competition. In fact we relish it. At our home base in Dubai, Emirates competes with over 120 other international airlines, without protection or financial hand-outs,” Clark said.

“Dubai is the antithesis of a protected, fortress hub.”

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