x Abu Dhabi, UAESaturday 25 November 2017

A case of US hypocrisy in ‘open skies’ dispute

America's aviation development puts the alleged $42bn spent by Gulf governments in the shade, writes Frank Kane.

Delta Air Lines is among the US carriers making allegations of Gulf airlines receiving subsidies. Lucas Jackson / Reuters
Delta Air Lines is among the US carriers making allegations of Gulf airlines receiving subsidies. Lucas Jackson / Reuters

The spat between Arabian Gulf airlines and some sections of the US aviation industry over open skies is escalating steadily.

Tim Clark, the president of Emirates, upped the tempo significantly in Copenhagen last week, with a declaration that the Americans’ claims were “spurious, fallacious and malicious”.

The word “malicious” is important here because it leaves the way open for Emirates to mount a legal action against the Americans if it can be proven the Dubai airline lost business as a result of the claims.

Meanwhile, in the US, the federal government got some skin in the game by calling an “open forum” for three departments – state, transport and commerce – to hear evidence from interested parties about the allegations. The forum has been called as part of Barack Obama’s “open government” initiative, and is a talking (and listening) shop, rather than a grand jury with the power to recommend prosecution. But it is a sign that the administration is taking the allegations seriously.

I do hope that the forum considers the views of John W Fischer and Robert S Kirk. I’ve no idea whether either of these two gentlemen is still around, but fortunately their evidence is available in written form.

In the late 1990s, they were economists at the US congressional research service, part of the analytical capability of Capitol Hill, and they produced a report entitled “Aviation: direct federal spending 1918-1998”.

The report gathered dust in the congress library for a few years until recently, when it was unearthed by some sleuthing aviation analysts in Washington. And, in the light of the “open skies” accusations, it makes for interesting reading.

The essence of the allegations made by three US carriers – American, Delta and United – is that the governments of Qatar and the UAE have bought their growing market share in world aviation by unfair subsidies to their international airlines, to the tune of US$42 billion over a decade.

This, the US airlines allege, is contrary to the American principles of free markets and private enterprise, the implication being that American airlines would never engage in such an un-American activity as accepting a government handout.

James Hogan, the chief executive of Etihad Airways, made the point in a recent speech in London that all western airlines had benefited from the state-funded infrastructure they inherited from their governments over the years, and that Gulf governments were only doing the same in a telescoped time frame.

But the congressional report takes it to a whole new level, demonstrating that not only did US airlines willingly accept billions of dollars in aid over decades, but they and the US government regarded it as logical and desirable to fund the growth of the US aviation industry as a matter of national strategy.

Mr Fischer and Mr Kirk sum it up nicely: “The federal government has played a large role in the development of aviation. In the 10 years prior to 1918, this role was exclusively military in origin. Beginning in 1918, with the first air mail flights, commercial aviation became a growing focus of federal attention and assistance. In the intervening 80 years, the federal government has spent $155bn in support of aviation activities.”

That puts the alleged $42bn spent buy Gulf governments in the shade.

The congressional report details, with painstaking accuracy, the extent of US federal government assistance to the American airline industry. Airport construction, aviation control systems, purchase of aircraft and even postal services were all the subjects of enormous government expenditure over the decades when America was in the process of developing the most advanced aviation industry in the world.

It’s ironic now to see how the main opponents of the government-funded aviation sprees were the US railroads, who stood to lose most from the bloated expansion of the airline industry, funded to a large degree by direct grants from US Treasury general funds.

So for most of the last century, the US government unashamedly championed the cause of its aviation industry. When Gulf governments do the same, the beneficiaries of US largesse – in the shape of American, Delta and United – call foul.

Hypocrisy is one of the milder words you might use against them.

fkane@thenational.ae

Follow The National’s Business section on Twitter