Emirates airline urges U.S. to ignore subsidy claims

By Reuters

Feb 25, 2015 07:43 PM EST

The head of Dubai's Emirates has hit back at U.S. airlines in an increasingly bitter subsidy spat and urged Washington to block their calls to renegotiate Open Skies agreements.

In an interview with Reuters, Tim Clark, president of the world's largest international carrier, also urged the U.S. government to think about the impact on its aerospace industry, which has been boosted in recent years by orders from the Gulf.

He was responding to allegations of trade-distorting Gulf subsidies made by the three largest U.S. airlines, Delta Air Lines (DAL.N), American Airlines and United Airlines (UAL.N).

In a 55-page dossier presented to the U.S. government, they have called for the renegotiation or suspension of Open Skies liberalization deals with the United Arab Emirates and Qatar.

Open Skies deals broadly give airlines from each side the right to fly wherever and whenever they want.

U.S. airlines say the system puts them at a disadvantage because their market is far bigger.

Furthermore, they say Gulf states broke the trade deals by pouring $40 billion of alleged subsidies into their carriers, something Gulf nations and airlines have repeatedly denied.

And they complain that three Gulf carriers -- Emirates and Etihad of the UAE and Qatar Airways - switched strategy after the deals were negotiated to become global hubs threatening the rest of the industry, rather than ordinary national carriers.

Clark denied that Emirates, founded in 1985, had changed its spots and said its growth and strategy were discussed openly during the trade talks that led to the 1999 Open Skies deal.

He said it was the United States that had pioneered such agreements and Emirates had invested heavily in aircraft, notably from U.S. manufacturer Boeing (BA.N), as a result.

"So on what basis would they call for negotiations, because they laid the ground rules in the first place?"

Emirates has ordered a total of 289 Boeing wide-body jets, including 199 that have yet to be delivered. It is also the largest single customer of European planemaker Airbus (AIR.PA).

"We have invested heavily in the U.S. aerospace industry and a lot of what we have done with regard to market access has allowed us to go and place these orders, for which we have contracts in place," Clark said.

"I don't want to be seen as threatening or intimidatory but I am hoping that the U.S. government thinks about all of this."

Clark said the airline could provide a "cast iron defense" against subsidy claims and hinted at possible legal action over the criticisms, voiced especially by Delta.

"Delta is maligning us, leading people down a path which is based on unsubstantiated false allegations and that is very serious. It could be commercially damaging to us and if it is we will consider ... all our options," Clark said.

He called for publication and a right of response to the 55-page report.

He also rejected claims that Gulf carriers had been able to take market share from U.S. airlines, saying it was they that had missed the boat on globalization.

"When the world started to knit together and energize, and all these people started traveling, where were the American carriers then?," he said.

"They go in and out of India and say the fares are too low. OK, that's your problem: maybe your costs are too high, Richard," he said, in a swipe at Delta CEO Richard Anderson.

The U.S. airlines say the Gulf carriers use aggressive pricing to poach customers, but Emirates and its Gulf rivals maintain passengers are attracted by modern planes and better service.

"Emirates does its own thing. It supplies a quality product which knocks spots off any American product," Clark said. "Why should we match their prices when we don't need to?"

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