Release #: Vol. 84, No. 10
December 01, 2015

Pilot Commentary: How the Middle East 3 Affects Low-Cost, Midsize Carriers

By F/O Philip Prada (Spirit)

Over the last decade, three Middle East state-owned carriers (Emirates, Qatar, and Etihad = ME3) have received more than $42 billion in subsidies and other unfair benefits from their governments. On the surface, it’s easy to see why my fellow pilots who fly for low-cost carriers don’t believe this issue affects them. The initial thought is that this only impacts international flying at the Big 3 U.S. airlines—American, Delta, and United. But the tie is quite closely linked to low-cost carriers and regionals. As a Spirit pilot, let me tell you why I’m highly concerned about the ME3’s influence on the low-cost carrier market.

While U.S. airlines compete fairly in our free market, the ME3 carriers are cheating the system and playing by their own rules. They want to dominate the international air services market to and from the U.S.—the largest, most lucrative air service market in the world—and are cheating to win. The schemes that the United Arab Emirates (UAE) and Qatar governments use to infuse money into their airlines include direct capital injections and interest-free loans that have no repayment schedule so that they never have to show a loss. More than $3 billion was also spent on construction of Terminal 3 at Dubai International Airport, Emirates’ new, exclusive-use A380 hub.

In addition to the subsidies, the ME3 also probably saved about $3.1 billion in the last 10 years by having nonunionized labor, because unions are illegal in the UAE and Qatar. The New York Times reported that labor conditions in the UAE are on par with “indentured servitude.” According to Qatar CEO Akbar Al Bakar, “If you didn’t have unions, you wouldn’t have this jobless problem in the western world.”

But what frightens me most is Etihad’s “equity alliance” program. Using government subsidies, Etihad purchases investments in many failing airlines. These airlines, including Air Berlin, Alitalia, and Virgin Australia, weren’t able to turn a profit for a reason. Instead of failing or changing, as operators in the free market must, these airlines are finding new life as feed for Etihad.

With the advantages noted above—all due to government intervention on behalf of their airlines—what will the ME3 do to our industry? If allowed to continue their subsidized advance into our market, what will stop them from not only competing with the U.S. Big 3, but with low-cost and midsized carriers as well? Let’s be honest, if these carriers put a B-777 on such routes as FLL–LIM, MIA–PTY, or PBI–AUA at a competitive price, which airline would passengers choose? It’s not just the Big 3 airlines that have to worry. We’re all affected. And unless something is done, we’ll allow the ME3 to become an unstoppable force.

We’ve already seen the results in other parts of the world. Australian carrier Qantas has cut back its own international flying after Emirates’ entry into the market, forcing Qantas to ally with Emirates. European carriers are now cutting flying and laying off pilots because of vastly increased ME3 services.

The ME3 argument is competition. If they offer a better service for less, isn’t it just simple competition—“just running an airline” as Qatar’s CEO states? My own airline often makes similar arguments. However, Spirit didn’t receive $42 billion in free money from our government. We’re building our airline under the same rules everyone else is playing by—make a profit or die.

The U.S. Open Skies agreements have been extremely beneficial to the United States. Open Skies is meant to promote liberalization and remove government interference from the international air service market and to ensure a fair and equal opportunity to compete. But these same Open Skies agreements that allow the ME3 to fly here actually forbid these kinds of market-distorting government subsidies. We have the right to tell these nations to play by the rules and operate their airlines in a free market.

To do this, however, we all must be involved. Our administration needs to be convinced that this is a priority for all pilots and the entire U.S. airline industry. Every pilot should do their part by contributing to ALPA-PAC, taking part in ALPA’s Calls to Action, and participating in ALPA’s district advocacy program. Only through all of us voicing the truth will we win on this and every other pilot-partisan issue.

This article is from the December issue of Air Line Pilot magazine, the Official Journal of the Air Line Pilots Association, International—a monthly publication for all ALPA members.

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