Three months away, but Miami prepares to welcome senior airline executives from the Gulf for a heated debate with US rivals.
By Updesh Kapur/Doha
June may seem a long way off, but time as we know travels fast. In the airline business it is at lightning speed.
The annual gathering of senior executives from over 240 of the world’s airlines takes place in the sweltering of Miami in three months’ time.
The International Air Transport Association (IATA) general assembly and World Air Transport Summit get together will discuss industry issues, latest trends and of course stories of the day that impact this vibrant sector.
Each year, a different airline host in a different city on a different continent will stage the three-day conference that also attracts hundreds of international business and aviation media.
After successfully organising IATA’s 70th AGM in Doha last year, hailed by delegates as the best ever under the auspices of the host Qatar Airways, this year’s event heads west to the US. It will be a hard act to follow after the 2014 edition saw an event executed with sheer perfection, helped by world-class evening entertainment of the highest calibre never before seen at previous AGMs.
They say it’s a hard act to follow. Last June, Qatar Airways Group CEO Akbar al-Baker took the reins as president of the AGM. It was also when safety, security and improved surveillance technology dominated the conference news agenda in the aftermath of the disappearance of Malaysia Airlines MH370 on a flight from Kuala Lumpur to Beijing.
This year, it’s the turn of, but not yet confirmed, Doug Parker, group chairman and CEO of American Airlines to be president of the 71st AGM taking place between June 7 and 9.
American Airlines will be hosting the event in one of its home markets of Miami jointly with US-based cargo operators FedEx and UPS. And as if the event doesn’t already have powerful backing, it will be held in conjunction with Airlines for America (A4A), the trade association representing the interests of the US airline industry.
At the close of the AGM in Doha last June, A4A president and CEO Nicholas Calio said: “Scheduled commercial aviation was born 100 years ago not far from Miami, and today aviation supports some 5.7mn jobs in the US and drives US$1tn in economic activity. Aviation connects the world, and we look forward to welcoming global airline leaders to the US, the birthplace of flight.”
A cordial welcome indeed from the US airline fraternity, but what a difference a year makes.
An industry that warms to hospitality yet engaged in commercial dogfights for supremacy, it has entered a new chapter – one that has become a big spat between the Gulf and US carriers.
And it will inevitably come to a showdown in Miami when the airline bosses of Emirates, Etihad and Qatar Airways come head to head with their US hosts at the IATA AGM – American Airlines, Delta and United, the three most powerful carriers in the US.
The two sides have been engaged in an ongoing war of words in recent weeks over US claims that the rapidly-growing Gulf-based carriers distort competition by receiving unfair government subsidies amounting to billions of dollars to support their expansion. They argue that the US government should backtrack on an open skies accord with the Gulf nations. Under this agreement, US and Gulf carriers can freely operate flights to and from their respective home markets without restriction.
The subsidy issue is one that continues to be dragged into the media spotlight, but is being ramped up by the US carriers, more recently after they presented a 55-page White Paper to Washington with reported evidence to support their claims. The report has so far not been made public to allow the Gulf players provide a point by point constructive response.
But, the Big 3 Gulf airlines have voiced their dismay at the US backlash arguing that US-based carriers themselves benefited from “backdoor” government help in the aftermath of the 9/11 terror attacks through Chapter 11 bankruptcy protection, going onto say that the American operators are losing market share because of their ‘inferior’ service and fear competition.
The comments sparked further rhetoric when Delta CEO Richard Anderson said that it was “a great irony” for Middle Eastern airlines to bring up the post-9/11 government assistance, saying the 9/11 terrorists were from the Arabian Peninsula. He has since back-tracked from those comments, apologising for any offence caused.
To add to the debate, US airline union leaders joined their employers warning that thousands of US workers will lose their jobs if domestic airlines are pushed out of key markets because of competition from the Gulf carriers.
The heated exchanges are already creating an environment of discomfort between both sides. Yet this is not healthy. With over 250 flights a week to a dozen or so gateways across the US, the three Gulf carriers are filling aircraft to and from the US at competitive prices indicating they have a workable business model. Passengers want to fly and are prepared to pay a price for the service and comfort they are offered.
By contrast, the US carriers operate only a handful of flights to the Gulf out of their choice, though open to fly more without restriction.
The fact that US carriers have strong commercial agreements for a share of passenger traffic flown to key American gateways by the Gulf airlines for onward US domestic connections speaks volumes. US carriers are benefiting from feed traffic which otherwise they wouldn’t if the Gulf boys were not flying there. Also, in reverse there is plenty of revenue to be had by the Americans feeding their business to the Gulf and beyond.
In the world of aviation, all airlines have some form of commercial agreement with one another allowing passengers travelling on one airline to connect with another to their final destination. When Qatar Airways and American Airlines signed a codeshare pact in 2013, American stated: “Our extensive codeshare relationship with Qatar Airways will provide our customers with easy, premium access when travelling to and from the Middle East and beyond. This new codeshare relationship with Qatar is another example of how American is focused on building its global network through closer co-ordination with its alliance partners around the world.” The codeshare has gone from strength to strength due largely to the two airlines forming a closer partnership through the oneworld alliance, of which both are members.
It is clear such a pact is aimed at providing customers with greater convenience and more choice. So it begs the question why do US carriers such as American want to threaten the future of these partnerships which will inevitably feel strained, if not already.
Why threaten business freedom and put an end to open competition and scale down open skies. At stake, for example is the US trade surplus amounting to $19bn, according to the US-UAE Business Council which goes onto say the US-UAE relationship has supported tens of thousands of jobs in the US.
It’s a matter of growing up in the real world of open competition and embrace it rather than attack it. This is the fact of life in the corporate world. Between now and IATA’s June summit, there will for sure be more fireworks.
But tempers will certainly flare in the fiery heat of Miami and the media will look forward to those invaluable sound bites to make the trip to Florida memorable and worthwhile.
On the surface, the hosts in Miami may well give a warm welcome to delegates from around the world, but the Gulf players need to prepare for a cold reception.
♦ UpdeshKapur (below) is a PR & communications professional, columnist, aviation, hospitality and travel analyst. He can be followed on twitter @updeshkapur
