FedEx told federal regulators that "we would potentially be subject to the greatest harm" if the US moves against their Gulf competitors. Photo / Getty
FedEx told federal regulators that "we would potentially be subject to the greatest harm" if the US moves against their Gulf competitors. Photo / Getty
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 US airlines seek to stave off a bold challenge from competitors operating out of tiny Middle Eastern countries.
It was the US 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. Federal Express, a US company the flies 660 cargo planes worldwide, warned the White House that any action that could be taken as " the cold wind of US 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 US 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 [US airlines] to involve us," FedEx managing director Nancy S. Sparks wrote in a formal filling to the US Department of Transportation.
Two other big US 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 United Parcel Service (UPS) 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 [US] carriers speak for themselves. We're in no position to make judgments about these competitive issues."
The issue at hand is fairness. The US 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 US airlines say their competition is unfair because all three Gulf airlines are government owned and, the US carriers contend, have received $42 billion in subsidies from their governments. Against such subsidies, the US 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.
It is hypocritical for FedEx to demand that the US government include provisions in trade agreements to protect it from subsidised foreign competition, but take the opposite position when it affects others.
The US 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 US while talks are underway, although Qatar Airways recently announced plans to expand their flights to the US.
"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 US carriers. "Furthermore, it is hypocritical for FedEx to demand that the US government include provisions in trade agreements to protect it from subsidised foreign competition, but take the opposite position when it affects others."
Zuckman's reference was to a 2012 case when FedEx argued that the US government should establish a "level playing field" for cargo and prohibit state-owned foreign enterprises from "cross-subsidising" FedEx's competitors.
The Obama administration has not called for consultations with Qatar or the United Arab Emirates, both key allies in the Middle East, and an administration official weighing whether to intercede said last month that any unilateral action by the US would be "a major breech of the Open Skies agreements."
FedEx, in it's 11-page filing, argues strenuously against any US action.
The cargo company says the US airlines exploited the Open Skies agreements to build their international network with code sharing, eliminating competitors by banding with foreign airlines. But now, FedEx contends, they are "making it appear that US international aviation policy must be formulated first and foremost to secure US airlines's profits."
"In this case, we believe the consumers should be allowed to be the winners," Sparks wrote, an allusion to the belief that competition from Gulf carriers may bring about lower ticket prices in the near term.
Open Skies agreements with more than 100 nations allow equal access to each others airports without interference from the respective national governments. FedEx argues that access to the three mega airports that have been built in Qatar, Dubai and Abu Dhabi doesn't matter much to the US airlines. But it is important to FedEx, which sends 44 flights through Dubai each week.
"Only two of the Big 3 [US airlines] even operate to the Gulf, and those two (Delta and United) each only operate a single bilateral flight each day," Sparks wrote, adding, "It is important to note that the Gulf carriers compete vigorously with FedEx in the air cargo arena."
