European airlines to join Gulf airline subsidies row at IATA meeting

The forthcoming International Air Transport Association (IATA) meeting is likely to get off to a heated start this Sunday as the row over accusations of Gulf airlines benefitting from unfair subsidies rolls on. However it is not now just the three main US carriers who started the row (Delta, United and American Airlines) who are involved in accusing the Gulf airlines of being in receipt of US$40bn in unfair state subsidies; their ranks have been swelled by the support of two major European airlines, notably Lufthansa and Air France-KLM. In addition, the Dutch government made it clear in May that it would stop granting new slots at Amsterdam’s Schiphol airport to Gulf airlines on a temporary basis, guaranteeing a more dominant approach to possible “unfair competition” from the Middle East.
However this incident has divided opinion and those protesting have additional opposition in the names of Boeing, Jet Blue and IAG who own British Airways and who are continuing to support the Open Skies agreement the US has with the Gulf, an agreement Delta, United and American Airlines wish to see terminated. In assessing the current situation, John Strickland, an independent aviation consultant, made his feelings on the matter very clear: “This is a debate that goes beyond subsidies. It’s to do with how airlines are run and how markets around the world are changing.”
Currently IATA represents the interests of approximately 260 worldwide airlines which account for 83% of global traffic. As a result it is not anticipated they will step into the breach to subdue any fight between a number of its highest-profile members, but some consider it a possibility that certain airlines will use the formal section of Sunday’s meeting agenda to garner support for the case against the Gulf carriers. “It’s not for IATA to act as a ringmaster, but it could help to take some of the heat out of the discussion and bring a more factual look at the debate,” Strickland made clear.
Tony Tyler, IATA’s Director General, said he felt it was up to individual governments to decide on the situation and that he felt this was more an argument about what constituted fair competition. “The last time this happened it was with the Europeans and the Middle East and since then you’ve seen the integration through alliances or commercial agreements or in the case of Etihad, investments,” Tyler said to Reuters. The problem is that Air traffic rights or airline services do not fall under WTO rules, which basically means there is no precedent set for dealing with these subsidy claims or means to present challenges for the US government as it assesses the situation.
On a more constructive note, the Chief Executives of both Turkish Airlines and Lufthansa have intimated that WTO-style tools could be used in the dispute, though they have made it clear that airlines should simply concentrate on improving what they have to offer to be more competitive. Jonathan Wober, an analyst at CAPA Centre for Aviation, said that “It strikes me that the kind of mindset that focuses on complaining about competition is probably the wrong mindset. Airlines should focus on putting their own house in order.”