How American, United and Delta misinform about the Gulf airlines?

For several months now, American airlines, even though they are competitors in their own market, have been speaking with one voice to denounce the unfair competition of the three Gulf majors, namely Emirates, Qatar Airways and Etihad.
Nevertheless, unlike the European companies which have few weapons against these new competitors who are not only fighting on costs, the American companies have many weapons to use… State of play and deciphering of the arguments of both sides.

A fairly recent breakthrough in the American market

The 3 majors of the Gulf, recently named ME3, have arrived in the United States rather recently, focusing initially on Europe, and the lack of structural competitiveness of companies from the old continent.

If this arrival is recent, it is rather massive, hence the rather violent media reaction of the American companions.
marketshare
This chart shows several things: on the one hand, the clear rise of the three Gulf carriers in the last ten years, and on the other, the overwhelming dominance of Emirates among the ME3 group.

A very rapid rise in power, which knocked out the American competition

In the United States, priority was initially given to the main gateways to the United States: New York, Los Angeles, San Francisco, with Emirates in the lead. Frequencies have gradually increased from these cities to establish the brand and create travel habits.
Emirates’ presence in these three US cities has grown steadily since the beginning of 2004.
The other Gulf majors, more timid, have waited for their competitor to set up in these same cities, Qatar Airways first and then Etihad, more slowly and with mixed results at the start due to the lack of frequency of flights.
The conquest of other American cities is more recent: the ME3 only ventures there with smaller modules and reduced frequencies. Atlanta, Boston, Chicago, Houston, Miami, Orlando, Philadelphia, Seattle and Washington are all examples.

Finding ways to be profitable despite long and expensive flights

The flights between the United States and the Emirates are long: nearly 6000 miles from Dubai to New York, 7250 miles from Dubai to Los Angeles. And the longer a flight is, the more expensive it is: doubled crew, fuel, services on board. However, the ME3s have to keep their prices in check in order to be more competitive than the European or American majors and therefore reduce their margins to stay in the market.
Also, the growth in traffic has been accentuated since 2013 not only by the opening of new destinations, but also by the increase in the frequency and size of modules on the various routes, as shown in the following graph:
gulf_us
And as these same airlines continue to open new destinations, the trend is not about to reverse.

Emirates’ dominance under attack from rising Gulf carriers: Qatar Airways and Etihad

The initial chart, while showing a very favorable situation for Emirates, also shows the rump of the other two Gulf majors, Qatar Airways and Etihad.

If Emirates’ fleet seems adapted to blockbuster destinations such as JFK, LAX or SFO, those of the two competitors seem to be well suited to secondary American destinations. Moreover, Qatar Airways shows that it is present alone in certain cities, such as Atlanta or Philadelphia.

More importantly, both companies have their own unique strengths:

    • Qatar Airways is a member of the Oneworld alliance. This is an undeniable advantage for reaching American Airlines customers, who are also members of this alliance and whose frequent flyer program members can benefit from their advantages by using Qatar. And it is a success.

https://www.youtube.com/watch?v=zBtGSa_xOS8

    • Etihad is focusing on exceptional products in front class, such as the Business Studio, the First Apartment or the now famous Residence. But Etihad could, in the coming months, benefit from a similar advantage to Qatar Airways: joining a major alliance, in this case SkyTeam.

Unfair competition, a vast hoax by the American majors

The undeniable progress of the three Gulf majors is now scaring American airlines. This is evidenced by the recent press releases issued by these airlines, which find an easy scapegoat in these airlines with methods that escape them.
The arguments put forward are quite trivial: the lower cost of labor and the ad hoc regulation which is more flexible and the excessive state support.
In all honesty, these arguments leave me stunned. I would have said exactly the same thing if I had asked myself why American companies are more competitive than European ones, in short, the pot calling the kettle black!

The cost of labor, an invalid argument due to the nature of the American work market

o-EMIRATES-facebook
The labor cost argument does not seem to me to be relevant. Indeed, even if social charges are very low in the United Arab Emirates, American wage costs remain very low, especially since the bankruptcy of the major American companies, which have renegotiated downwards the wages of all the crew. At the airport, too, take a good look at the myriad of employees working around the planes and compare it to the team in charge of the same activities in Europe. In the U.S., they are up to twice as numerous, due to the aging equipment in American airports, which pushes the employment of abundant and unskilled labor.
If the labor cost argument is valid in absolute terms, it could largely be countered by modernizing work infrastructures and procedures.

Subsidies, a plague for American airlines

The most fallacious argument is still that of subsidies and more generally of state support. Since the beginning of the 20th century, American airlines have received hundreds of billions of dollars in subsidies from the U.S. federal government.
Let’s face it: all states massively subsidize the companies of their country, which proudly wear their respective colors around the world.
But the United States has another strength: industrial and commercial patriotism. Indeed, most of the American companies I have worked for require their employees to travel on US airlines: this is written into the travel policy and failure to comply with it can result in sanctions up to and including dismissal.
Also, until the beginning of the 21st century, American airlines were reluctant to buy from Airbus, led by American Airlines. Since then, things have changed, and the competition has arrived.
Finally, and this is what makes it possible to make, without any doubt, the most profits, American companies have used Chapter Eleven at their convenience, which makes it possible to declare bankruptcy, thus erasing one’s debts, the validity of work contracts, and to start again from scratch. This is the console reset, or the ” Bullshit Joker “. A bit easy, and the trick was notably seen with American Airlines recently: It declared itself bankrupt on November 29, 2011, announced its merger with US Airways in 2012 and made the highest profits in its history in 2014. Pathetic.

Conclusion

In conclusion, if the Gulf companies have undeniable advantages over their American competitors, these advantages are not unfair: the Gulf companies just know how to use them better.
And if some airlines are attacked in an unfair way, it is the European companies, which cannot fight as much, the EU authorities ensuring the strict respect of competition between players.
The big question to be asked is always: So, fact or fake?

Olivier Delestre-Levai
Olivier Delestre-Levai
Olivier has been into airline blogging since 2010. First a major contributor to the FlyerTalk forum, he created the FlyerPlan website in July 2012, and writes articles with a major echo among airline specialists. He now co-runs the TravelGuys blog with Bertrand, focusing on travel experience and loyalty programs.
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