Aviation article(s)
June 18, 2015
storm clouds gather
Air cargo and global supply chains stand to be the big losers in the row over alleged subsidies for three Middle East carriers.

Air cargo and global supply chains stand to be the victims of the bitter row over alleged subsidies for three carriers from the Middle East and proposed restrictions in traffic rights.

The Airline Cargo Association, which represents US all-cargo airlines, has blasted calls for curbs in traffic rights to the three Middle Eastern carriers, warning that cargo would bear the brunt from a trade dispute.

Three US legacy airlines – United, American and Delta – have accused Emirates, Etihad and Qatar Airways of receiving altogether US$40 billion in illegal subsidies. Supported by several US airline labour unions, they have called on the US government to revisit open skies agreements with the authorities of Qatar and the United Arab Emirates with a view to limiting access to the US market for their airlines.

The three Middle Eastern carriers have refuted charges of illegal subsidies and, for their part, argue that the US legacy carriers have enjoyed an unfair advantage from Chapter 11 bankruptcy protection amounting to subsidies.

Other US airlines are opposed to the proposals from the big three legacy carriers. The Airline Cargo Association recently weighed in with comments filed in a public docket on the issue that was opened by the Departments of Transportation, Commerce and State seeking comments from interested parties.

In its submission, the ACA urged the authorities not to take any unilateral action that is now within the scope of the current bilateral agreements, arguing that cargo interests could be disproportionately affected.

“The cargo industry is in the unique position to be disproportionately negatively impacted if any protectionist actions are taken by the United States government and retaliatory action ensues. Global supply chains and the global economy as a whole would be negatively affected,” it commented.

Earlier on, FedEx had taken a strong public stance against the proposals to curb existing open skies agreements, emphasizing their importance for trade and for the US economy.

“Our industry is an essential component of a rebounding American economy. The connectivity we provide for US businesses, both small and large, is critical for their global expansion,” stressed David Bronzek, president and CEO of FedEx Express in an open letter to the Secretaries of State, Transportation and Commerce. He added that FedEx could not operate internationally and provide efficient, cost-effective services without open skies.

 “Retrenchment in any way from Open Skies by the US would jeopardize the economic growth benefits that air cargo provides,” he wrote.

Bronzek argued that the three US legacy airlines do not fly extensively between foreign points and therefore believe they have little to risk by limiting foreign carrier access to US markets. “What they want is for the US government to protect them from competition from able, attractive new entrants,” he wrote, concluding that “the US should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead of the economic benefits that Open Skies provides to the people of the United States.”

Others that have argued strongly against open skies curbs include Boeing, JetBlue and IAG. The US Airforwarders Association supports closer scrutiny of the alleged subsidies but is opposed to tampering with open skies.

“The Airforwarders Association is a strong proponent of open skies agreements and level playing fields. Stepping away from open skies agreements should be avoided at all costs,” said executive director Brandon Fried.

A second theatre of war in the dispute has opened in Europe, where Lufthansa and Air France-KLM have echoed the allegations over illegal subsidies to the Gulf carriers, when the Dutch junior transport minister announced a controversial decision to freeze the traffic rights of Emirates, Etihad and Qatar Airways at Amsterdam because of perceived unfair competition.

This step, which drew both plaudits and harsh criticism, has prompted EVO, a Dutch shipper group, to call for a separation of traffic rights for cargo and passenger operations. EVO spokesman Joost van Doesburg suggested that the market should be liberalized for freighter flights. Air France-KLM operate cargo aircraft, but they have been reducing this side of the business amidst broad expectations that they would eventually withdraw from running freighters altogether.

There have been calls for a separation of traffic rights for passenger and freighter flights before, mostly from forwarder or shipper organizations, but they have found no resonance among airlines and governments.


By Ian Putzger

Air Freight Correspondent | Toronto

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