European airlines opposing the expansion of Gulf rivals into their home markets may be overstating the amount of financial assistance Middle Eastern carriers receive. At the same time, they may be understating their importance in preserving European manufacturing jobs, say industry officials and analysts. While European airlines have long lobbied their governments to oppose granting additional landing slots to carriers including Emirates Airline, Etihad Airways and Qatar Airways, they have opened a new front focusing on the role of export credit assurance.
Pierre-Henri Gourgeon, the chief executive of Air France, this week upped the ante in the long-running dispute saying Europe's role as an aviation centre was "a role we need to value and defend". He asked authorities to help develop a strategy "that gives us a chance to resist". The Middle East's airlines, he said, were "very dangerous for Europe". However, Saj Ahmad, an analyst and industry commentator based in London, said European governments were keenly aware of the tens of billions of dollars these airlines were pouring into the coffers of Airbus, which has manufacturing bases in the UK, Germany, France and Spain.
"Europe cannot afford to prevent GCC airline growth within Europe because the risk of Airbus losing big orders is very real," said Mr Ahmad. The importance of Emirates Airline was made clear when it announced at the Berlin Air Show in June it had signed a US$11.5 billion (Dh42.24bn) deal to buy 32 new Airbus A380s, in a high-profile ceremony attended by the German chancellor Angela Merkel. This week, European airlines are set to take up the issue of export credit agencies in member nations of the Organisation for Economic Co-operation and Development and how they have benefited Gulf carriers. These agencies help foreign airlines finance purchases of Boeing and Airbus aircraft but do not help their home airlines such as British Airways, Lufthansa and Air France, or the big American carriers. Interest rates arranged by the export credit agencies have been as much as 4.5 percentage points lower than those arranged by American and European airlines.
As Gulf airlines have grown their fleets, funding from the Ex-Im Bank is up 200 per cent since 2006, officials have said. However, Bob Morin, the vice president of transportation at Ex-Im Bank, said last month that Middle East airlines arranged financing from many sources and did not overly rely on export credit-backed deals. Ex-Im Bank has not arranged any deals for Qatar Airways and concluded its first deal with Etihad last year for a Boeing aircraft. In 2008, it helped arrange six aircraft leasing deals with Emirates.
Emirates's financing activities include "commercial banks, then unsecured debt, then Sharia-compliant loans, then export credit financing, then leases," Mr Morin said. "To suggest [Etihad] has become a strong force in the airline industry because of export credits, well, we did one deal." As Middle East airlines have increased their market share into European destinations for long-haul travel to Asia, Africa and their own region, European carriers have offered a number of criticisms in recent years to try to limit their expansion.
Air France has complained that landing fees at airports in France are seven times more expensive than in Dubai. ECAD, a German think tank affiliated with Lufthansa, said in a 2007 study that landing fees for Lufthansa in Germany were nine times more expensive than in Dubai. Paul Griffiths, the chief executive of Dubai Airports, said Dubai was one of the fastest-growing airports in the world because "airlines recognise value for money".
"Dubai offers a compelling combination of open skies, a great business and leisure destination and top-notch infrastructure at competitive rates," he said. ECAD also said that while Emirates paid its cabin crew about the same as Lufthansa crew, income taxes and other fees forced Lufthansa to spend 28 per cent more per attendant. "It is probably something like 20 per cent cheaper to operate a full-service carrier in the Gulf region," said Doug McVitie, an aviation analyst based in France. But "these are only estimates", he added, "and I'm sure it wouldn't take long to find someone who totally disagrees".