Source: USA Today Editorial Opinion March 22. 2015
Oil-rich emirs subsidizing global air traffic hurts competition.
Those who don't travel much abroad might not know about Emirates Airline and Etihad Airways, two carriers owned by the government of the United Arab Emirates, or Qatar Airways, the carrier of the Qatari government.
But they are making quite an impression on those who do. The three Persian Gulf airlines are buying jets and adding routes at an awe-inspiring pace. Emirates alone is responsible for nearly half of the world's orders of Airbus A380 super jumbos. Though its home nation, the UAE, has just 9 million people, it is now the largest airline in the world in international traffic and capacity. Its home airport in Dubai is busier than Chicago O'Hare.
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Also awe-inspiring are the low rates and lavish service. Have a layover in Dubai, Abu Dhabi or Doha? No problem. In business class or above you get a hotel room and a car and driver. In first, you get a small room around your reclinable seat. On Etihad, you can opt on some flights for a "residence" with a sitting area, a room with a double bed and en suite shower and lavatory.
Needless to say, this is winning over a lot of Americans and Europeans on their way to the Middle East, Asia, Australia and Africa.
However, it all comes at a price. Such service wouldn't be possible without the massive subsidies the governments pour into their state-owned carriers. And those subsidies — which often go by euphemisms such as "equity investments" — undermine free markets around the world.
The big three U.S. carriers — United Airlines, American Airlines and Delta Air Lines — are rightly asking the Department of Transportation to initiate talks with the UAE and Qatar over their estimated $40 billion in subsidies over a decade.
Though no one is saying it, the talks would take place under an implicit threat that the DOT would revoke the "open skies" agreements it has with the two, something it may do for any reason with a year's notice.
The purpose of such deals, according to DOT, is to promote "unrestricted, fair competition to determine the variety, quality and price of air service." Clearly, that is not happening in this case.
While oil-rich emirs subsidizing global air traffic might seem harmless, or even advantageous, their actions have serious consequences. America's big three need international passengers to feed their domestic routes. Losses to Emirates, Etihad and Qatar translate to fewer flights and routes at home. This problem will grow as the Gulf carriers add flights on major routes linking American and European cities.
The dispute also poses an early test of how the United States will respond to the broad issue of state-sponsored capitalism. If it doesn't push back against such a flagrant example initiated by two tiny nations, it will send a clear message to China and others that state businesses will be allowed to gobble up market share.
Waging a war against low fares and luxury service might seem counterintuitive. But the vast fleets of new jets still on order, and the massive airport expansions under way in the Persian Gulf, make it clear that UAE and Qatar are out to dominate air transportation and put themselves at the center of the world.
Think about that for a while, and maybe the swank accommodations won't look so good.
USA TODAY's editorial opinions are decided by its Editorial Board, separate from the news staff. Most editorials are coupled with an opposing view — a unique USA TODAY feature.