Unfair Competition Taking Passengers from U.S. Airlines and Threatening Jobs

The Partnership for Open & Fair Skies today released a new economic study showing that the state-owned, government-subsidized Gulf carriers are diverting passengers from U.S. airlines while not stimulating new passenger demand, contrary to their claims. This subsidized competition is seriously harming U.S. airlines and costing American jobs.

The Gulf airlines – Qatar Airways, Etihad Airways and Emirates Airline – often justify their rapid, subsidy-fueled expansion into the U.S. market by claiming they are creating new passenger demand to major international markets, such as India. The new report proves that claim to be false.

“The Gulf carriers assert that their service stimulates new traffic in key U.S. markets, bringing substantial numbers of new passengers to the United States. We find little – if any – evidence that this claim is true” said Dr. Darin Lee, one of the authors of the report and an Executive Vice President at Compass Lexecon, who has published numerous studies on the economics of the airline industry in leading academic journals. “An analysis of the data shows that the Gulf carriers do not meaningfully stimulate new traffic. Instead, they are using their subsidized capacity to grow their networks at the expense of U.S. and other carriers.”

The 27-page study by recognized airline economists from the leading economic consulting firm Compass Lexecon found:

• The presence of a single Gulf carrier on a city-pair between the United States and an international destination with as little as a 3 percent share reduces the number of passengers carried by U.S. airlines by approximately 8 percent, on average; where all three Gulf carriers serve the city-pair, the number of U.S. airlines’ passengers is approximately 24 percent lower. On city-pairs where each of the Gulf carriers has at least a 10 percent share, U.S. airlines’ passengers have been reduced by 50 percent, on average.

• The Gulf carriers flooded the market with approximately 11,000 new daily seats between the United States and their hubs in Dubai, Doha and Abu Dhabi between 2008 and 2014, but “origin and destination” traffic between the United States and those destinations remained essentially flat.

• A statistical analysis of passenger traffic from 2008 to 2014 showed that Gulf carrier presence on city-pairs between the United States and international destinations failed to meaningfully stimulate additional traffic.

The report also warns that if the subsidized Gulf carrier expansion continues unabated, U.S. carriers will be foreclosed from serving more international routes, which will harm passenger service to many small- and medium-sized communities in the United States.

As the Obama Administration considers the Partnership’s request to initiate consultations with the governments of Qatar and the UAE to address their state-owned airlines’ massive subsidies, the Gulf carriers are flooding the United States with even more subsidized capacity. On May 4, Qatar Airways announced new direct flights from Doha to Los Angeles, Boston and Atlanta, as well as a second daily flight to New York and potentially new flights to Pittsburgh and Washington. And since February, Emirates has announced new service from Dubai to Orlando, second daily flights from Dubai to Boston and Seattle, and the up-gauge of its New York to Milan flight to a massive A380.

“The Gulf carriers’ accelerated expansion into the U.S. market makes it even more urgent for the U.S. government to enforce the Open Skies agreements, and seek a freeze on new flights until consultations can take place,” said Jill Zuckman, chief spokesman for the Partnership for Open & Fair Skies. “That’s because the billions of dollars of subsidies to the Gulf carriers cause immediate harm to the U.S. airlines and threaten important international routes and the livelihoods of our pilots, flight attendants and other employees.”

The full is available here.