Delta Backing Off Campaign Against Gulf Carriers to Focus Mostly on Qatar

Delta, American and United for three years have argued that the US government needed to take a protectionist stance against Emirates, Etihad, and Qatar. They’ve argued it’s unfair, they shouldn’t have to ‘compete against governments’ which is a rather strange position. Because if they can’t even compete against government airlines what good are they?

They doctored a white paper arguing the 3 Mideast airlines have gotten $50 billion in subsidies, while conveniently ignoring their own massive subsidies like moving nearly $20 billion in pension liabilities off their books onto the federal Pension Benefit Guaranty Corporation, subsidies for Delta’s oil refinery and on myriad routes, fuel tax subsidies and more. The very first major aircraft order by American Airlines was backed by the federal Reconstruction Finance Corporation.

Supposedly the Gulf carriers offer such a good product at such a great price that it’s uneconomic. However Emirates has a business class on the bulk of their fleet that lags Delta, American, and even United (since their seats are angled on the Boeing 777).


Emirates Boeing 777

Etihad and Emirates cut back unprofitable flying to the U.S. Etihad has unwound money losing investments in foreign carriers, including Alitalia which Delta shares revenue with across the Atlantic. In other words they respond to economic challenges, exactly the opposite of what the largest US airlines have claimed.

The Gulf carriers buy Boeing planes while Delta doesn’t yet Delta claims US jobs are being threatened — when US airline employment is at a peak and US airlines are earning a plurality of the world’s airline industry profits.

Attempts by United, American, and Delta to get the government to abrogate Open Skies obligations with the UAE and Qatar failed completely in the Obama administration. Delta have flattered President Trump and lowered themselves to racism trying to resurrect their case. And started hiring Republican lobbyists after discovering that their ex-Obama administration advocates weren’t helping their cause.

Now Delta CEO Ed Bastian offers a glimpse into their strategy going forward: stop complaining about Emirates, Etihad, and Qatar and instead just focus on Qatar, recognizing that their argument is simply unpersuasive when grouping the carriers together. Plus, spite.

Even though Bastian said he doesn’t believe they are profit-minded enterprises, the Delta CEO is quick to note that the Emirates, Etihad, and Qatar Airways are anything but a monolith.

“I’m not sure they’re all the same,” Bastian told Business Insider in a recent interview. “I think there are three different business models between the three. We have to be careful we don’t to group them together.”

After three years of grouping them together, Bastian is now trying to separate them. He acknowledges that his arguments don’t really quite work with Emirates and Etihad.

“Etihad is in a very difficult spot,” Bastian said. “Their investments in Air Berlin, Alitalia, and a few others have turned out to be dismal failures.” ..”I think they are regrouping and reassessing,” Bastian added.

…”Emirates just purchased and acquired their 100th Airbus A380 and they are building an airport in Dubai that’s four-time or five times the size of Chicago O’Hare,” Bastian said incredulously.

“At some point, the economics just don’t make sense and they’ll need to evaluate for themselves how much growth they can add through Dubai to build the world’s super-connector airport.”

(Emphasis mine.)

And he seems to be focused just on Qatar:

“And Qatar Airways is just a government agency that bleeds money,” Bastian told us. “If you look at their financial results, they weren’t the worst performing airline in the world, Alitalia and Air Berlin were worse than them. Qatar was third.”

According to Bastian, the only reason Qatar Airways avoided finding themselves at atop the list of the worst financial performers was due to subsidies like cost-free ownership of duty-free licenses and the hotel franchises in Qatar.

“It’s a ruse,” he added.

He says he still thinks he’s going to win with the government, of course. But he acknowledges he may not, and Delta has to compete with a better product. Which by the way makes clear that Delta wouldn’t need a better product if they were protected from competition, just like domestic airlines don’t have to much compete on product after consolidation since they’re protection from new market entrants.

“We can’t put our competition solely in the hands of Washington, we have to compete in the marketplace,” the Delta CEO said. “That’s why we are continuing to invest in our international fleet with the new Airbus A350s while working hard with our partners to invest and to improve the quality of service together.”

I’m genuinely floored Bastian acknowledges that lack of protection by the government is the reason we’re seeing product improvements. That as much as anything makes the case against government intervention. Since market competition forces US airlines to become better to win the business of passengers.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. New lipstick old argument. I would well imagine if DL bought some US metal, has a decent product, and took that “entitlement” hat off maybe some of us in the flying public would have some sympathy.

    Isn’t all this getting stale?

  2. Qatar probably had a worse year than normal due to the political atmosphere in the region that blocks them from flying into and through certain countries. Once that is squared away I’m sure they will improve business.

  3. Gary, I think Ed Bastian’s comments can be re-written many different ways. He is not perfect but I much prefer him and what he has been able to accomplish for Delta than any of his peers and what they have done to/for their airlines.

  4. @ZO — You got it. As usual, Gary is talking his position (he wants more free luxury flights from subsidized airlines) and not reality. Read the story for yourself. Bastian is not backing off on Emirates. He’s just pointing out the obvious economic realities. The ME3 nonsense will eventually collapse on its own because it is economically stupid. You don’t need to be the airline industry’s leading expert to understand that it makes no sense for Dubai to have an airport 4 or 5x the size of ORD. But some players are obviously weaker than others. The irony may be, of course, that as the weaker players fold, the stronger player (Emirates) will survive. That’s what I would expect. Whether they can survive flying a huge fleet of A380s around the world is unknown at this point. It kind of depends on the Emir’s bankroll.

  5. @iahphx — haha nice. Only you would interpret pointing out that Emirates offers a subpar business class and ‘free luxury from subsidized airlines’. By the way I am not even a MEMBER of Emirates Skywards or Qatar Airways Privilege Club.

    Surely even you would acknowlege (1) this is a change in rhetoric, until now they’ve intentionally lumped the 3 airlines together and now say doing that would be a mistake, and (2) a change like that is intentional, strategic.

  6. @Gary, @iahphx is not the only one interpreting it that way, methinks you are “talking your book” as well. Whether or not you fly Emirates, you (and all customers) do benefit from the subsidization, because it forces all competitors to spend more to keep up, whether or not is economical in the long run, or sustainable. Much the same way as how you didn’t need to be a Chase customer to benefit from them pouring hundreds of millions into the launch of the sapphire reserve. It forced Amex to come up with more benefits (5x airfare etc) to keep customers from leaving to Chase.

    It’s ok to like getting more for your airfare, and it’s even ok to talk your book. But what I take issue with is the deliberate manner in which you continuously mis-characterize PBGC and other payments as subsidies to the US carriers when they have all gone bankrupt since then. The companies complaining are not the companies that received these benefits. And I think you know that, you are a smart guy.

  7. Part of me wonders if Qatar is being targeted because they are the only one that operates out of DL’s sacred ground… ATL.

  8. @Lancelot: You got it. QR operates out of ATL, the others don’t.

    QR have a better product than DL.
    QR have better planes than DL.
    QR have newer aircraft than DL
    QR have better premium cabins than DL. ( Q-Suites, Oh my god!! )
    QR have flight attendants who care. DL don’t.
    QR has a brilliant FF program. DL’s is rubbish.
    QR has a better CEO by a country mile.

    So stop the fuck your whingeing and telling lies Bastion, you fool, and get the fuck on with your own business. It’s a mess. Stop worrying what every one else is doing and look at your own backyard. You have more than enough problems of your own sunshine. If you can’t stand the heat petal, take the old boilers with you and get the hell out of the kitchen.

    In the meantime, give yourself an almighty upper-cut.

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