Emirates debunks US subsidy allegations

Dubai — In a long-awaited formal response to allegations of subsidy and unfair competition leveled by the big three US legacy carriers, Emirates airline on Tuesday rejected the trio’s claims, saying their charges are patently false, riddled with inaccuracies, conjecture, and legal misinterpretations.

“US legacy carriers got the facts wrong, got the law wrong, and set their sights on an outcome that will be wrong for American consumers, communities and the national economy,” the Dubai-based carrier said its fact-based response to allegations leveled by Delta, United and American Airlines.

The full 388-page document was released to the media and public, following meetings on Monday where an Emirates delegation briefed officials from the US Departments of State, Transportation, and Commerce on the airline’s response.

Emirates’ move comes after the US trio issued a 55-page report accusing the three Gulf airlines of collectively receiving $42.3 billion in subsidies. The airlines called on the US government to curb their rivals’ growth through changes to bilateral so-called Open Skies agreements that liberalised air travel.

According to the report released on Tuesday, the US legacy carriers launched an aggressive lobbying campaign in January, in a protectionist bid to restrict consumer choice, and restrict the growth of international flights to the USA operated by Emirates and other Gulf airlines.

Sir Tim Clark, President of Emirates airline, argued that methods employed by the US legacy carriers to discredit Emirates have been “surprising and frankly, repugnant.”

“We do not underestimate their lobbying prowess, but facts are facts. Unlike the Big 3’s white paper, which is riddled with inaccuracies, conjecture, and legal misinterpretations, Emirates’ response is comprehensive and based on hard facts. We clearly show why the Big 3 have no grounds to ask the US government to unilaterally freeze Emirates’ operations to the USA or pursue other action under the Open Skies agreement. It is because we are absolutely not subsidised, and our operations do not harm these legacy carriers, but instead benefit consumers, communities and America’s national economy.”

In its response, Emirates systematically disproves each of the Big 3’s allegations that it has received over $6 billion in subsidies, including fuel hedging subsidies; purchasing goods and services from related third parties at below-market terms; disproportionately benefiting from airport infrastructure and user fee at Dubai International airport; and having an artificial cost advantage through the structure of the UAE’s labour law.

“The subsidy allegations put forward by the Big 3 are patently false. We have been profitable for 27 years straight, and unlike our accusers, we have never depended on government bail-outs or protection from competition. In fact, we were told right from the start by the government of Dubai that Emirates has to deliver profits and stand on its own feet.

“We had to then, and we still have to now. Dubai has no oil reserves to speak of, and therefore it embarked on a well-documented strategy to diversify its economy with air transport as a key enabler. That directive is what led us to pioneer a successful business model as an efficient long-haul connector that offers customers a best-in-class experience,” said Sir Tim.

“Our global expansion is funded from our own cash flow, and debt raised in the open market through banks and financial institutions. Our success is due to superior commercial performance. To date we have paid our shareholder, the Dubai government, more than $3 billion in dividends. We are financially transparent, and have published fully audited accounts for over 20 years,” said Sir Tim.

Sir Tim said: “It is ironic that the Big 3 are trying to argue their case based on WTO rules, when the USA, at the behest of these same legacy carriers, has always opposed efforts to bring air transport into GATS. Part of that reason would be because the US carriers themselves would be a prime target for restrictions, and would for the first time have to compete with foreign carriers in their protected US domestic market. Even if WTO rules applied — which they don’t — the legacy carriers would have to show that Emirates was subsidised and that competitive injury resulted, and they have failed to do this.”

He pointed out that  by asking the US government to take unilateral action, the Big 3 are asking the US to breach its own negotiated international obligations. “This would put in jeopardy America’s Open Skies relationships with 113 other countries, and all the significant public and competition benefits that the Open Skies program has generated.”

 “The Big 3’s white paper is littered with self-serving rhetoric about ‘fair trade’, ‘level playing field’, and ‘saving jobs’, but their mess of legal distortions and factual errors falls apart at the slightest scrutiny. The allegations about Emirates receiving subsidies or competing unfairly are false. The Big 3 are far from being ‘harmed’ financially by Emirates’ operations, and they are not even operating in the same markets that we are,” said Sir Tim.

— issacjohn@khaleejtimes.com