x Abu Dhabi, UAEMonday 24 July 2017

Emirates president refocuses on war of words with US airlines

Tim Clark speaks forcefully on the Open Skies row and what he thinks of other aviation executives.

Tim Clark, president of Emirates Airline, during the interview at his office in Dubai. Pawan Singh / The National
Tim Clark, president of Emirates Airline, during the interview at his office in Dubai. Pawan Singh / The National

Tim Clark, the president of Emirates Airline, is refocusing on the war of words between some in the US aviation industry, including American, United and Delta airlines, and Arabian Gulf carriers over open Skies agreements.

It has been an increasingly bitter dispute, with the Americans claiming that Emirates, Etihad Airways and Qatar Airways have received $44 billion in subsidies from their governments, and seeking US government action against them.

In a lengthy and candid interview with The National, Mr Clark spoke forcefully about the Open Skies row, where it leaves Emirates’ growth plans, and what he thinks of other aviation executives.

Emirates vows to press on with new US routes - read more from Tim Clark here

On the US campaign against Gulf airlines

“Late last year we heard rumbles they were preparing a dossier of allegations and then it appeared in late January.

“For two years they hired an army of private investigators – they’re so proud of their gumshoes – to dig the dirt on us at vast expense to their shareholders and spread it around.

“When the first ‘white paper’ came out we were amazed. There was no attribution or sourcing in it at all. We contacted [the] US department of commerce and asked them to force the airlines to disclose all the evidence and appendices, which they eventually did.

“I don’t think they’ve broken any laws in compiling it, but all three have got antitrust immunity in the US and you might question how they can act in collusion on a matter like this. It’s at least contrary to the spirit of antitrust legislation, and we might take that up with the US authorities.

“You could drive a bulldozer through it in terms of how they’ve collected and interpreted data, but I think the most serious flaw is that it ignores how the aviation industry model has changed.”

On open skies agreements

“In 1999 only two regional carriers were interested in open skies – Gulf Air and Emirates. Gulf Air was, of course, owned by governments then so it was obviously subsidised, but that didn’t seem a problem back then.

“The language of the original open skies agreement was pretty light. It was decided on full freedom traffic rights internationally, with no restriction in principle on aircraft, airports or times. It was all part of the Clintonesque liberalism and opening up, throwing off protectionism. There are 114 open skies agreements in the world now, and of course lots of the carriers involved in these deals had been state-owned or had state aid from previous regimes.”

On fuel subsidies

“I cannot speak for the other two airlines, but at Emirates in 1985, $10 million went from the government to Maurice [Flanagan, who died on Thursday], bless him, and that was the extent of the investment in the airline.

“They claim ICD [Investment Corp of Dubai] bailed us out of the oil hedge in 2008-09, but they have fundamentally misunderstood the nature of the transaction. We didn’t receive the letter of credit, we gave it to ICD. At no point did the government of Dubai put one dollar into Emirates to mitigate oil market exposure. We footed the bill for any losses ourselves.

“PwC has been our auditor for years and they made a statement before the figures last week, reiterating the fact that at no point did the Dubai government inject anything into Emirates. All related party transactions were at an arm’s length commercial basis.

“We’ve got 16 government auditors in HQ building 24 hours a day questioning all we do, and there is an internal audit twice a year.”

On subsidies to US airlines

“We’ve received material evidence that the US airline industry was in receipt of billions of dollars of subsidy over many years, $155bn in the last century, according to an official report by US authorities. This was in addition to the Chapter 11 assistance. They said it was all OK because Chapter 11 made it legal, but that’s a ridiculous argument. It’s as if the government of AD published a retrospective law saying all state aid was legal, and that would have made it all OK.

“Since then, there have been several examples of US airlines in Chapter 11 bankruptcy, which obviously has an effect on their business and the rights of creditors, employees and pension obligations. Some of them were able to come out of Chapter 11 and to carry forward losses against tax, which makes their complaints about the no-tax regime in the UAE illuminating. What’s the pot doing calling the kettle black? How about the people in glass houses throwing stones?”

On the future of open skies

“For a viable open skies policy you need long-range aeroplanes – the A380 is the perfect plane for this – and a region that in policy terms looks to serve demand, not just adhere to an outdated air-services agreement. The deal with the US was the jewel in the crown of our open skies policy, and is still a very important part of the strategy.”

On European airlines

“The Europeans, apart from Air France/KLM and Lufthansa, are less keen on protectionism. The Portuguese ambassador sat here a while ago and asked me to think about Portugal when we were planning routes. Soon we’ll have a second Lisbon route.

“I was in Copenhagen recently and they’ve spent €20m [Dh82.7m] on the airport to allow it to take A380s. As far as we’re concerned, we’re welcome in Europe. We were asked by the Italian government to take over the Malpensa [Milan] operation, that was how Milan to New York began. Milan was so badly served by the US carriers it made sense to put in a proper product at the right price. There are so many reasons Americans would want to travel to Milan – social, historical, business reasons, – yet the US carriers were almost ignoring Malpensa. Since we did it, the market has expanded overall for us, and for them.

“This is what happens when we enter a ‘fifth freedom’ market [where the carrier has the right to originate flights outside its home market]. Dubai is a hub of multiple city pair permutations.

“The attacks by the troika [of US airlines] have made us rethink the model. When we did Milan, 20 other cities asked us to do the same. This is what the US airlines want to stop.”

On Delta Air Lines and its CEO Richard Anderson

“They want to take us down, to see us off the planet, certainly out of the US. We could only fly with Mr Anderson’s permission – “we will tell you where to fly”.

“Mr Anderson has suddenly become the secretary of state for aviation politics. Why is he being allowed to determine the geopolitical reality of the global aviation industry? He lost Malpensa and that really got to him.

“In his last letter he virtually demanded to see the financial books of the government of Dubai. I thought: how dare you? Would I be allowed to see the related party records of US airlines with the Pentagon? Never.

“Why doesn’t he approach us in the areas Delta doesn’t serve? In the Middle East and North Africa, for example? How else can American tourists get to the Seychelles or Mauritius? How else can businessmen get from America to any place in Africa, where there is hardly any US airline presence.”

On US domestic airlines

“What they should focus on is the appalling state of the US domestic market. It’s happened because the big three were allowed to absorb the rest of the industry. They were focused on restructuring their own domestic industry to such an extent that they ignored the rest of the world, all the growth of Asia and the East, for a long time they were just blind to that.

“And they were blind to standards in their own market as well. Have you been on a US domestic flight? It’s like travelling with a low-cost bus company. The terminals are full of frightened people sitting on the floors because they’ve no facilities, being shouted at by airline agents and cabin crew who are stressed themselves because of the working conditions.

“No wonder that the three airlines accusing us figure regularly in the list of the most-hated companies in America.”

On global aviation growth

“There is still plenty to go round in world aviation markets for the other two Arabian Gulf carriers and for other non-Gulf airlines. The pie is doubling in size, with third and fourth level hubs now coming into their own. There are still 100 cities that are not served by Emirates.

“I see the Indian Ocean as one of the big centres of growth in world aviation today. The great sweep of growing economies taking in East Africa, the Middle East, India and South East Asia. Dubai is geocentrically placed for this growing market.

“The market is changing all the time. We lost big chunks of the Middle East – Syria, Libya – because of their problems. We lost big chunks of Africa for a while because of Ebola. There are always events you couldn’t possible foresee, like the ash cloud in 2010. But the trend is for growth in global aviation.”

On other aviation executives

“Willie Walsh [CEO of International Airline Group] is one the new brand of airline manager, a 21st-century aviation thinker and a risk-taker.

“Just look at the British Airways deal with Iberia, which is so profitable and effective – a new force in European aviation. He has told the Americans he is committed to multilateral open skies agreements and he appreciates the value of aviation to national economies.

“Compare IAG with Air France/KLM or Lufthansa. France is too bureaucratic, Lufthansa has lots of different kinds of plane and very high costs. If Willie Walsh can make it work with IAG, why can’t Lufthansa?

“We’re joined at the hip in terms of our philosophy, with people like Walsh, Michael O’Leary [of Ryanair], Carolyn McCall [chief executive] of easyJet. These are people who believe in change and progress in aviation. There is a reshaping of aviation coming, driven by people like this, and by us.”

fkane@thenational.ae

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