Gulf proxies wage war in battle for Open Skies

Gulf proxies wage war in battle for Open Skies

IAG and airberlin are successfully promoting the agenda of their Gulf-based investors

IAG and airberlin are successfully promoting the agenda of their Gulf-based investors

We’ve been waiting some time now for US and European airlines to rein in their bitter attacks on their archrivals – the ‘big three’ Gulf carriers – but this week we witnessed a breakthrough of sorts. 

IAG and airberlin are fighting the battle for Open Skies on behalf of their Gulf shareholders.
IAG and airberlin are fighting the battle for Open Skies on behalf of their Gulf shareholders.

International Consolidated Airlines Group (IAG) confirmed its membership withdrawal from peak European airline body, the Association of European Airlines (AEA), in protest of the entity’s hardline stance against the Open Skies tactics of Emirates, Qatar Airways and Etihad Airways.

In a statement, IAG, the parent company of British Airways (BA) and Spanish airline Iberia, said that “on some important policy issues” it was “not aligned with the other AEA legacy airlines”.

“In particular, we believe global liberalisation of our industry is fundamental to our future growth and we are not willing to compromise on this fundamental matter,” the statement added.

This sudden pro-Open Skies stance will have brought a wry smile to the faces of many in the airline industry – and put a definite scowl on others – given IAG is now virtually ‘in bed’ with Qatar Airways.

The Doha-based carrier, headed up by their fiercely ambitious group CEO, Akbar Al Baker, acquired a 10% stake in IAG in January for a reported £1.15 billion.

It was a clever move by Al Baker to not only tap into IAG’s route network and customer base, but perhaps more importantly, to win allies in the anti-Gulf camp.

It’s a resentful group of legacy carriers whose market share is gradually being eaten away by the Gulf players who are using their clout (and their cashed-up coffers) to take advantage of vulnerable and financially fragile airlines, Emirates through its strategic alliance with Qantas and Qatar Airways and Etihad Airways primarily through their equity stake strategies.

Adding further fuel to the fire in the Gulf airlines’ proxy war with their European rivals, German carrier airberlin – which counts Abu Dhabi’s Etihad Airways as a significant shareholder – also withdrew from the AEA this week, citing the AEA’s commitment to a “protectionist aviation policy in Europe”.

“We see no future in [this] policy. On the contrary, the liberalisation of bilateral agreements will promote further consolidation and new, innovative business models, thereby benefitting all passengers. With its current focus and representation of interests, the AEA is not fulfilling these ideas, but allowing itself to be driven by airlines which desperately try to erect a new wall around Europe,” said airberlin CEO Stefan Pichler.

The AEA and the majority of US carriers have lobbied their respective governments in a bid to curb Open Skies agreements, which they say unfairly advantage the Gulf airlines.

IAG and airberlin’s sudden change of heart is transparent in sentiment, but it’s a simple case of knowing on which side your bread is buttered.

No doubt the fight will continue regardless of the two organisations bowing out, but perhaps the effort spent begrudging the Gulf carriers could be put to better use? Working out how to out-do the competition with improved products and services could be a good starting point.

It is common knowledge the Gulf nations have been blessed with an advantageous geographical location and oil revenues that have funded the growth of their airports and airlines. Much to contrary belief these carriers are not “subsidised” as such, although they are supported with government loans that they are under no real obligation to pay back quickly.

Good for them I say. The UAE and Qatar have taken their resources and put them to good use under the leadership of their respective governments.

Whether it’s ‘fair’ or not, they have brought prosperity to the global economy by connecting all four corners of the globe through their respective hubs, stealing a march on the likes of London, Singapore and Hong Kong and positively impacting travel and tourism businesses the world over.

Qantas and IAG have taken a ‘if you can’t beat ‘em, join ‘em’ approach, and I for one don’t blame them.

Governments everywhere need to take a hard look at the Gulf’s models for aviation industry growth and learn from their experience.

In the UAE and Qatar, the sector is the lifeblood of their respective economies and pumping funds into its development is deemed essential.

Open Skies policies up the ante, encouraging competition and giving customers more choice. It’s a game of ‘survival of the fittest’ and if the Gulf airlines come out on top, then so be it.

Gary Marshall
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Gary Marshall
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