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Friday, October 22, 2021

Qatar Airways submits formal defense over subsidy row to US government

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Photo for illustrative purposes only.
Photo for illustrative purposes only.

In an official 84-page response to unfair competition claims made by US airlines against Gulf carriers, Qatar Airways has called on the American government to reject any changes to its current business agreement.

The complaints made by the American carriers are “overblown” and merely “a transparent and concerted attempt by the Big Three to block the introduction of air service options that offer an alternative to their own,” Qatar’s national carrier asserted.

In a statement, CEO Akbar Al Baker said:

“It is puzzling to see the biggest US carriers describe Qatar Airways as a “threat,” given our small size and lack of direct competition with them. Their long-standing focus on other markets, and large (and growing) profits completely undercut this claim.

…We are concerned to see the Big 3 seek to change the rules of the game as soon as they see US consumers respond well to the services offered by a competitor.”

Qatar Airways, which is state-owned, and its Gulf competitors Emirates and Etihad have been embroiled in an increasingly combative dispute with three major airlines in the US – Delta, American and United.

Photo for illustrative purposes only.
Photo for illustrative purposes only.

The carriers, as well as a coalition of other American groups, have demanded that the US government renegotiate its Open Skies agreement with Qatar and the Emirates, which allows airlines, rather than government regulators, to determine the frequency and capacity of flights.

The group, called Partnership for Open & Fair Skies, claims that Gulf carriers have benefited from $42 billion in subsidies from their respective governments.

The three GCC airlines have all denied accusations of unfair competition.

This week, Qatar Airways became the last Gulf carrier to submit its formal defense to the US government, which has opened an investigation into the matter.

Defense

In its white paper, Qatar Airways attributed its rapid growth not to government assistance, but instead to “important advances in aircraft technology and significant demographic changes.”

In a press statement, the airline said:

“With ultra-long range B777 and B787 aircraft, passengers bound for the Middle East and India can now over-fly congested European hubs, and enjoy convenient one-stop services to their destinations, instead of making longer two-and three stop journeys. These technological changes have shortened travel times, and have brought families and businesses closer together.”

The white paper also addressed specific claims that the national carrier has received $16.5 billion worth of forgiven loans, free land, grants and other forms of support from the Qatar government over the past 11 years.

It called those findings “replete with factual and methodological errors, if not outright deceptions.”

In addition to manipulating financial data, the report contained several factual inaccuracies, including basic information about when Qatar Airways actually launched, the airline said.

“Errors such as these are fundamental and underscore the lengths to which the Big Three (US carriers) strained to reach their conclusions,” the white paper said.

American market

Qatar Airways also countered claims that it harms American employment, saying it plans to employ 250 people in the US by the end of its current financial year.

It added that almost half of passengers on Qatar Airways flights to the US are visitors who spend money on hotel accommodation, car rentals and other items, contributing some $900 million to the economy and sustaining 27,000 jobs.

Qatar Airways defense
Qatar Airways defense

The national carrier is also among the largest customers of US plane manufacturer Boeing, which has benefited from the airlines’ rapid expansion.

Read the full white paper here. Thoughts?

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DavidRSS8
DavidRSS8
6 years ago

Other issues aside, I take issue with the ‘driving the U.S. economy’ stats. They are only valid insofar as these jobs, tourists, and flights would not have otherwise existed without Qatar Airways–i.e. is Qatar Airways really contributing or simply taking someone else’s marketshare?

Of course, fairness has very little to do with global business practices. And, within a few years, Qatar Airways will be in steady decline, because the government will not be able to subsidize it to the level it has grown accustomed. The GCC has a large enough market to support one major global carrier, not three, and Emirates has a huge head start.

ShabinaKhatri
ShabinaKhatri
6 years ago
Reply to  DavidRSS8

From the report, it sounded like QR acknowledged it and other Gulf carriers have gained market share, but argued that US airlines shouldn’t complain because the overall pie is growing…

DavidRSS8
DavidRSS8
6 years ago
Reply to  ShabinaKhatri

Which takes away from the argument that QA is benefiting the US economy–these visitors, jobs, and revenue would all occur regardless. If it wasn’t QA then it would be another carrier. QA needs a better team writing its reports and doing its impact analysis, because you know the Americans and Emirates will.

Maddix
Maddix
6 years ago

US has some insanely crappy airlines. It’s not Qatar’s fault that people hate US airlines. US should join the competition instead of unjustly limiting Qatar Airways.

DavidRSS8
DavidRSS8
6 years ago
Reply to  Maddix

No, but (according to the complaint) the reason QA is better is because it cheats by subsidizing its airline. If the complaints are proven, then there are two options–punishing cheating or get rid of the rulebook and allow everyone to cheat.

Maddix
Maddix
6 years ago
Reply to  DavidRSS8

And how is that cheating?

DavidRSS8
DavidRSS8
6 years ago
Reply to  Maddix

I didn’t write the complaint, but my guess is that the argument is that government subsidies make the operating costs lower, enabling the subsidized airline to hire more staff and better planes.

onthefence
onthefence
6 years ago
Reply to  DavidRSS8

So the US carriers dont receive any government aid or bailouts?
http://fee.org/freeman/detail/the-futility-of-the-government-airline-bailout

DavidRSS8
DavidRSS8
6 years ago
Reply to  onthefence

According to the complaint and the free skies accord, regular subsidies are not the same.

I’m not saying the accord is right or fair. I’m predicting what will ultimately happen.

Cerebus
Cerebus
6 years ago
Reply to  Maddix

Delta Airlines has very clean planes, great customer service, in the air and more importantly on the ground, better privilege programs, and services 1000x the passengers that Qatar Airways does. Trying to compare the airlines based on the first and business class cabins is utterly pointless. The US carriers primarily serve routes in the US. Meaning 4 hours or less for most flights. You simply dont sell enough seats on a flight like that to make the over the top flying apartments worth the loss of revenue from more coach seats, as that is what people buy there. The US carriers primarily serve business customers versus vacationers. Businesses in the US, not propped up by artificial investment and that are publicly traded or ran by small business owners focus on the bottom line more that the comfort of their business traveler’s seats. Business class travel is seen as an extravagant perk. There are many companies whose CEO’s travel on discount airlines or in coach, so again, just a different market, with different customer expectations. Frankly, I would take Delta’s customer service operations and ground game over Qatar Airways any day of the week. They service more that 170 million passengers a year, and are a Top 50 Fortune Most Admired company. You don’t get there acting the way that Qatar Airways does, bullying their employees, and muscling out the competition. Qatar Airways may win awards for having a nice cabin, but that is much easier to do when you simply buy your way into the award by putting extravagant, pointless, crap in the cabin. Apples and oranges.

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