Cargo carriers finding skies more competitive
FedEx seeks aid in battle with new Gulf companies
WASHINGTON — For months the battle lines have seemed clear, and dozens of lawmakers, mayors, unions and business types have joined in support as the three big U.S. airlines seek to stave off a bold challenge from competitors operating out of tiny Middle Eastern countries.
It was the U.S. versus two Persian Gulf nations, with the Obama administration being pulled like taffy between them.
The dynamic changed dramatically last week when another big player entered the fray. FedEx, a U.S. company the flies 660 cargo planes worldwide, warned the White House that any action that could be taken as “the cold wind of U.S. protectionism.”
FedEx, which is expanding a major hub operation in Dubai, home base to one of the Gulf airlines, told federal regulators that “we would potentially be subject to the greatest harm” if the U.S. moves against their Gulf competitors.
“We just don’t see how we could be kept out of the potential cross-fire, even if it was not the intent of the Big 3 (U.S. airlines) to involve us,” FedEx managing director Nancy S. Sparks wrote in a formal filling to the U.S. Department of Transportation.
Two other big U.S. players with skin in the game have been more circumspect in responding to the desire of Delta, United and American Airlines to have the government intercede in their battle for international dominance with Etihad, Emirates and Qatar airlines.
The UPS Inc. says it is working to protect its own interests “but also maintain our long standing position on fair and transparent competition.” Boeing, which has sold billions of dollars in planes to the Gulf carriers and has billions more on order, says, “We’ll let the (U.S.) carriers speak for themselves. We’re in no position to make judgments about these competitive issues.”
The issue at hand is fairness. The U.S. airlines, now merged into three big carriers who fly globally, are saddled with a stale domestic market and need international growth to expand. They’ve built that worldwide reach by expanding their own operations and through code sharing deals with airlines from other countries.
That growth faces a major threat from the three Gulf carriers, whose rapid growth into international behemoths suggests they intend to control a huge slice of the global aviation pie.
The U.S. airlines say their competition is unfair because all three Gulf airlines are government owned and, the U.S. carriers contend, have received $42 billion in subsidies from their governments. Against such subsidies, the U.S. carriers say they cannot compete.
The Gulf airlines have not opened their books to scrutiny, but they say that their governments are investors who expect a return on their money.
The U.S. airlines want the White House to invoke the Open Skies agreements under which international flights operate, seeking a formal consultation. They hope the Gulf carriers will freeze their flights to the U.S. while talks are underway, although Qatar Airways recently announced plans to expand their flights to the U.S.
“The Gulf carriers’ abuse of our Open Skies agreements is a matter that involves passenger airlines, not cargo carriers,” said Jill Zuckman, spokesperson for the coalition of U.S. carriers. “Furthermore, it is hypocritical for FedEx to demand that the U.S. government include provisions in trade agreements to protect it from subsidized foreign competition but take the opposite position when it affects others.”
Zuckman’s reference was to a 2012 case when FedEx argued that the U.S. government should establish a “level playing field” for cargo and prohibit state-owned foreign enterprises from “cross-subsidizing” FedEx’s competitors.