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US airlines press regulators to act as Gulf carriers expand

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Persian Gulf carriers have expanded in the US by 25 per cent this year, signalling that federal regulators must act quickly on assertions by American, United and Delta that their rivals' growth is enabled by unfair government aid, according to the three US airlines.

[WASHINGTON] Persian Gulf carriers have expanded in the US by 25 per cent this year, signalling that federal regulators must act quickly on assertions by American, United and Delta that their rivals' growth is enabled by unfair government aid, according to the three US airlines.

Chief executive officers of the three US carriers said they expect the US will open talks with Qatar and the United Arab Emirates over the alleged subsidies, which would violate existing Open Skies agreements. Government aid to the gulf airlines is being used to increase US flights and offer discounted connections through Middle Eastern hubs to win international traffic, the US airlines have said.

"I'm highly confident they'll take action because the evidence is so compelling and it cannot be ignored," American Chief Executive Officer Doug Parker said at a National Press Club forum in Washington Friday. "We are concerned there isn't enough urgency in the process."

Regulators haven't responded to an April request from the US carriers to block Emirates Airline, Qatar Airways Ltd and Etihad Airways PJSC from adding more US flights until the issue is resolved.

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The three airlines will take their cause to Congress if the Obama administration doesn't limit growth by the gulf carriers, said Delta Chief Executive Officer Richard Anderson.

"We've been at it over two years and we're not going to stop," he said at the forum.

Executives from Delta Air Lines Inc, American Airlines Group Inc and United Continental Holdings answered questions about their position after releasing a study they said showed that the Persian Gulf carriers are diverting passengers from the US airlines instead of attracting new travellers.

The three gulf carriers repeatedly have denied that they've been sustained by US$42 billion in government subsidies.

"The gulf carriers have failed to meaningfully stimulate new traffic to and from the United States," according to a study by economic consultant Compass Lexecon released Friday by the Partnership for Open and Fair Skies.

"As a result, the traffic gains enjoyed by the Gulf carriers due to their subsidized expansion to the United States and elsewhere have come at the expense of US and other carriers."

About 11,000 new daily seats were added between the US and Dubai, Doha and Abu Dhabi from 2008 to 2014, with more than 95 per cent from the gulf airlines. At the same time, there was essentially no change in the traffic originating or concluding at either end of those routes, the study said.

The head of Qatar, Akbar Al Baker lashed back at criticism earlier this week after meeting with US transportation regulators, calling US airlines "greedy." The increase in flights by Qatar and other gulf carriers had been in the pipeline for a long time and were not a result of the US carriers' charges, he said.

"They are being forced to compete," Etihad general counsel James Callaghan said in an interview. "When you compete, your prices go down and, therefore, you attract more passengers."

Etihad said the US carriers received about US$64.9 billion in bankruptcy and pension-related aid from the US government, benefits which are generally only available to US carriers and which helped to create a "highly distorted market."

Etihad commissioned research that shows "no evidence whatsoever" of any harm to US counterparts.

It is "patently absurd" to suggest that bankruptcy involves government aid, United Chief Executive Officer Jeff Smisek said. "The people who paid for those were our fine employees, our creditors and our shareholders." The US government is accepting comments on the complaints into May. After that, it will decide whether to initiate Open Skies discussions.

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