Feb 26, 2015 07:10 AM EST

Boeing, FedEx battle back vs U.S. airlines on Gulf competition

A push by three U.S. airlines to curb competition from Gulf state carriers has triggered a sharp response from other powerful U.S. aviation companies including BoeingCo (BA.N) and FedEx Corp (FDX.N), potentially complicating the airlines' campaign for Obama administration support.

Delta Air Lines Inc (DAL.N), United and American Airlines have asked the White House to look into the financial statements of competitors from Qatar and the United Arab Emirates, which they accuse of receiving more than $40 billion in government subsidies since 2004.

But calls for the United States to tamper with Open Skies agreements with the Gulf nations have angered other U.S. companies that benefit from the pacts. The agreements eliminate barriers that would block some FedEx operations and slow the expansion of carriers like Emirates that have showered Boeing with orders.


A counteroffensive from Boeing, Fedex and others could make it easier for the White House to resist renegotiating the agreements.

"I think the entry into the fray of Boeing and the others as countervailing pressures to the airlines will make it easier politically for the administration to do what I believe the Department of Transportation wants to do, namely, to continue to pursue its successful Open Skies strategy," said New York University law professor Michael E. Levine.  

Boeing, which like European rival Airbus (AIR.PA) has filled its order book with commitments from Gulf carriers, opposes drastic changes to the Qatar and U.A.E. agreements.

"Boeing supports a commercial-aviation industry based on open and fair competition, and Open Skies has long been a key factor in this, benefiting both U.S. and international airlines," Boeing spokesman Jim Proulx said in a statement.

Other companies were more blunt in taking on the top U.S. airlines, long big Boeingcustomers.

"The U.S. should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead of the economic benefits that Open Skies provides," David Bronczeck, chief executive of FedEx's Express air cargo unit said in a Feb. 18 letter to the heads of the U.S. Departments of State, Transportation and Commerce.

JetBlue Airways Corp (JBLU.O), which has a codeshare agreement with Emirates, also wrote a letter to the same departments opposing tampering with Open Skies.

Delta, United Continental Holdings Inc (UAL.N) and American Airlines Group Inc (AAL.O) say in the report - which has been reviewed by Reuters but not yet been made public - that they support Open Skies agreements but not their abuse through subsidies.

Yet the top U.S. carriers have long been ambivalent toward liberalizing air travel.

"The major U.S. carriers have opposed Open Skies and deregulation all along the way, even from the word go, and yet have been major beneficiaries due to domestic consolidation and also globally in terms of market access," said Peter Harbison, chairman of Sydney-based CAPA-Centre for Aviation, an independent aviation consultancy.


Emirates, Qatar Airways and Etihad Airways deny the U.S. airlines' accusations about unfair subsidies. So far, the Obama administration says it is reviewing the U.S. airlines' claims but has made no decisions.

In an interview with Reuters Wednesday, Emirates [EMIRA.UL] President Tim Clark hinted at possible legal action over potential commercial harm done by the U.S. airlines' campaign. The clash between Delta and the Gulf airlines has taken a caustic turn, including remarks by Delta's chief executive that were perceived as linking the Gulf carriers with the Sept. 11 attacks on the United States in 2001.

Clark also called his U.S. rivals' service "shoddy" and said they would do better to focus on improving their own product.

U.S. consumer groups such as the Business Travel Coalition agree that Delta and its U.S. cohorts have only themselves to blame for the market share loss, a contention disputed by Delta.

Still, the U.S. airlines may have one trump card to play in the form of Americans for Fair Skies, an organization opposed to Gulf subsidies that is the project of former Air Line Pilots Association President and former Delta captain, Lee Moak.

"Protectionism is making a revival as some of the powerful national airlines exert strong pressure on their governments," Harbison said. "Have Open Skies reached their limits?"

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