Global insight

Etihad appeals Air Berlin code-share court ruling

Unfair competition: Isn’t that just normal business?

IN the competitive maelstrom of the business world, is there a difference between a subsidy, a government bailout, a period of legally-enshrined bankruptcy protection, and a straightforward entrepreneurial investment? asks Nigel Tomkins.

I’m not convinced that airlines in the USA and Europe know the answer or, if they do, are prepared to admit it.

The unseemly war of words over allegations of widespread anti-competitive practices – currently being played out between the poor, downtrodden legacy airline industries of the USA and Europe, and those of the upstart wealthy Persian Gulf states – shows no sign of peace.

Ill-considered statements made in recent days, both from within the European Union and the big three US carriers of Delta, United and American, claim that Persian Gulf rivals Emirates, Etihad and Qatar are uncompromisingly breaking the rules – by throwing a ‘war-chest’ of oil and gas revenues at erstwhile loss-making airline routes in a strategic ploy to run less privileged operators out of business.

According to politicians, regulators, managers, pilots, analysts, commentators and many news publications on both sides of the North Atlantic, the Middle East carriers – whose financial affairs are always filed in the secrets drawer – are acting unfairly, deliberately operating services at a loss, thereby skewing the market forces of supply and demand.

Apart from some ‘independent’ analysis, sponsored by Delta, United and American into the profitability of Middle East-carrier flights to and from the USA, there appears to be no actual evidential proof of these unfair competition claims.

Strangely, there is also no mention – anywhere – of the number of rescue acts that US Chapter 11 bankruptcy protection laws have afforded US airlines over the past 20 years; or of the cosy bilateral airline agreements forged in the 1980s and ‘90s which prevented outsiders from entering lucrative routes within Europe and beyond; or the global expansion over the decades of the big US and European players as they swallowed rival carriers or merged forces to survive or dominate in the market. Anyone recall the government bailouts of Air France, Alitalia, Lufthansa, British Airways or their predecessors; the reinvention of the stricken Swissair; the pumping of funds into the likes of Iberia; the acquisition of Flying Tigers by FedEx? The list goes on.

And what about the US$billions forked out by the Middle East carriers in the last few years for massive new fleets of European Airbus jets and Boeing aircraft to service their global expansion plans? Are Europe and the USA unhappy about that war-chest too?

One thing is sure: in the last 20 years, the Middle East carriers have helped remove some of the complacency which has been eating away at the rest of the air transport world. They’ve done this by setting hitherto unreached standards of impeccable service and reliability – and not just for the carriage of passengers, or the development of state-of-the-art airports.

All of the Middle East carriers have also invested hugely in their air cargo businesses, with far-reaching plans to continue doing so. Excluding the integrators, how many US carriers operate international freighter services? Answers, please, on the back of a postage stamp.

Instead, US carriers have been flagrantly downgrading their cargo interests for many years. Some airline customers may also insist they’ve been doing the same with the quality of their passenger services, as some US domestic flights can be unsmilingly unappealing tests of endurance.

How many people reading this blog would choose, say, a long-haul seat on an American Airlines flight over one on Qatar Airways or Etihad?

Those in the know will give a quick answer.

Have your say