United Airlines announced Wednesday that its employees along with several members of Congress will stage a protest on Sunday at Newark Liberty International Airport.
The protest, which United and its unions expect to draw between 150 and 200 people, is in reaction to the inaugural flight of Emirates’ new daily service between Newark and Athens, Greece.
The furor surrounding Emirates’ new flight is just the latest episode in the contentious dispute between the Middle East’s trio of mega carriers — Emirates, Etihad, and Qatar Airways — and their US rivals — American, Delta, and United Airlines.
Last year, Qatar Airways’ inaugural flight to Atlanta proved to be equally dramatic — leading to a head-to-head showdown with Delta. The soap-opera-worthy incident left more than 500 Qatar Airways passengers without a gate to deplane, an Atlanta landmark without Delta’s sponsorship dollars, and allegations of poor etiquette bandied about by both parties.
Over the past decade, the Middle Eastern trio — known as the ME3 — have expanded at an incredible pace while garnering critical acclaim.
Emirates, for example, now operate the largest fleet of Boeing 777s and Airbus A380 superjumbos in the world by a significant margin. At the same time, Emirates was named the Best Airline in the World by consumer aviation website Skytrax in 2016.
However, the US trio or US3 allege that their Middle Eastern rivals have been fuelled by more than $US50 billion in subsidies from the governments of Qatar and the United Arab Emirates that unfairly tilt the playing field against US airlines. The US3 even contend that most of the ME3’s expansion into the US would be untenable without those subsidies.
All three members of the ME3 have repeatedly denied these allegations.
“At the end of the day. We have a shareholder who placed equity in the airline who gave us loans to be repaid. That’s what people do when they invest in the business,” Etihad CEO James Hogan told Business Insider in a 2015 interview. “We’ve done nothing improper. We’ve created a great airline, with great service, created value, and the accounts are audited by one of the top accounting firms in the world.”
In fact, Emirates has reported 28 straight years of profitability while returning more than $US3 billion in dividends to the airline’s investors. In 2015, Emirates released a report that accused the US airlines of receiving more than $US100 billion in support from the US government since 2002 in the form of government assumption of pension responsibilities, bankruptcy protection, anti-trust immunity, direct grants, loan guarantees, and tax exemptions.
As for Emirates’ move into United’s New York-area fortress hub, United CEO Oscar Munoz told Business Insider in a recent interview that his airline believes Emirates will lose an estimated $US25 million a year on the Newark to Athens route based on its experience operating seasonal service to the Greek capital. United declined to elaborate further on how it generated the estimated figure.
“At the end of the day, the economics of it is that, if it indeed continues, it’s going to affect the jobs in this country because I’m not going to fly from Newark to Athens, Greece, every day,” Munoz said. “I fly there seasonally now, because that’s where the demand is. If they are going to fly every day, they are going to lose $US25 million on that route every year. If they are going to continue to do that, then I have no business in making that route.”
An Emirates spokesperson denied these accusations while telling Business Insider that the airline’s decision to launch the flight fulfils consumer demand for a service other airlines weren’t offering.
“The New York-Athens route was underserved by other carriers — no airline has operated a year-round nonstop service between the U.S. and Greece for more than five years,” the Emirates spokesperson told Business Insider via email. “We are launching our New York to Athens service following multiple requests from Athens International Airport and the Greek aviation authorities, and after careful study. We believe it will be commercially successful and mutually beneficial to the U.S., Greece and the UAE.”
The crux of the US3’s concern is the belief that the ME3 can enter a market, flood it with a large number of seats at unsustainable low prices made possible by subsidies. This, the US3 contends, would eventually force them to curtail service or even completely exit certain markets — leading to the loss of US jobs.
“For me, it’s the jobs aspect. That’s why the unions are so engaged with us and so aligned, because they understand that when demand dies down, we are not going to fly there,” Munoz told us. “Which means I am not going to buy an aircraft for the route and obviously I’m not going to hire people to crew it.”
As a result, the American airline companies believe the ME3 are in violation of the Openskies agreements that govern air travel between the US and the UAE and Qatar.
Even though Munoz understands that the ME3 are global marketing machines for their respective countries, he still believes the Openskies agreements should be updated in a way that would strike a balance between the need for open competition and the protection of American jobs.
“It would be nice to be able to write something that benefits everyone without being so protectionist, which is sometimes how we come off. Sometimes the industry comes across as a little bit too much of that and it makes people not want to help you,” Munoz added. “Where’s the delicate balance? Is the situation unfair? Yes. Do I support what these airlines are doing? Absolutely not.”
Emirates’ 2015 report hits back at the US3 for failing to properly show that they have been hurt by the presence of the ME3 while reporting record profits and returning billions of dollars to investors. The report also accuses the US3 of failing to note that the ME3’s growth has been due to its presence in the Indian Subcontinent — a market that the US3 has long abandoned.
It should be noted that the US3 and ME3 compete head-to-head on very few routes. This is because, apart from a few exceptions, all of the ME3’s flights are routed through their mega-hubs in Abu Dhabi, Dubai, and Doha. After all, these airlines exist, in part, to drive trade and commerce to their respective homelands.
The exceptions include Emirates service between Milan and New York — where it competes against American, Delta, and Delta’s joint venture partner; Etihad-owned Alitalia — along with the new Newark-Athens route.
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