United Airlines announced Wednesday that its employees, along with several members of Congress, would stage a protest on Sunday at Newark Liberty International Airport.
The protest, which United and its unions expect to draw between 150 and 200 people, is in reaction to the inaugural flight of Emirates’ new daily service between Newark, New Jersey, and Athens, Greece.
The fury surrounding Emirates’ new flight is just the latest episode in the contention between the Middle East’s trio of mega-carriers (Emirates, Etihad, and Qatar Airways) and their US rivals (American, Delta, and United Airlines).
Last year, Qatar Airways’ inaugural flight to Atlanta proved to be equally dramatic, leading to a showdown with Delta. The soap-opera-worthy incident left more than 500 Qatar Airways passengers without a gate to deplane, an Atlanta landmark without Delta’s sponsorship dollars, and allegations of poor etiquette bandied about by both parties.
Over the past decade, the Middle Eastern trio, known as the ME3, have expanded at an incredible pace while garnering critical acclaim.
Emirates, for example, now operates the world’s largest fleet of Boeing 777s and Airbus A380 superjumbos by a significant margin. It was also named the best airline in the world by the consumer-aviation website Skytrax in 2016.
- Flickr/Oliver Holzbauer
However, the US trio, or US3, accuse their Middle Eastern rivals of being fueled by more than $50 billion in subsidies from the governments of Qatar and the United Arab Emirates that unfairly tilt the playing field against US airlines. The US3 even contend that most of the ME3’s expansion into the US would be untenable without those subsidies.
The ME3 have repeatedly denied these allegations.
“At the end of the day, we have a shareholder who placed equity in the airline who gave us loans to be repaid. That’s what people do when they invest in the business,” Etihad CEO James Hogan told Business Insider in a 2015 interview. “We’ve done nothing improper. We’ve created a great airline with great service, created value – and the accounts are audited by one of the top accounting firms in the world.”
Emirates has reported 28 straight years of profitability while returning more than $3 billion in dividends to the airline’s investors. In 2015, Emirates released a report that accused the US airlines of receiving more than $100 billion in support from the US government since 2002 in the form of government assumption of pension responsibilities, bankruptcy protection, antitrust immunity, direct grants, loan guarantees, and tax exemptions.
- REUTERS/Thomas Peter
As for Emirates’ move into United’s New York-area hub, United CEO Oscar Munoz told Business Insider in a recent interview that United believes Emirates would lose an estimated $25 million a year on the Newark-to-Athens route, based on United’s experience operating seasonal service to the Greek capital. United declined to elaborate on how it generated that figure.
“At the end of the day, the economics of it is that, if it indeed continues, it’s going to affect the jobs in this country because I’m not going to fly from Newark to Athens, Greece, every day,” Munoz said. “I fly there seasonally now, because that’s where the demand is. If they are going to fly every day, they are going to lose $25 million on that route every year. If they are going to continue to do that, then I have no business in making that route.”
An Emirates representative denied these accusations and told Business Insider that the airline’s launching of the flight fulfilled consumer demand for a service other airlines weren’t offering.
“The New York-Athens route was underserved by other carriers – no airline has operated a year-round, nonstop service between the US and Greece for more than five years,” the Emirates representative told Business Insider in an email. “We are launching our New York-to-Athens service following multiple requests from Athens International Airport and the Greek aviation authorities, and after careful study, we believe it will be commercially successful and mutually beneficial to the US, Greece, and the UAE.”
The crux of the US3’s concern is that the ME3 could enter a market and flood it with many seats at unsustainably low prices made possible by subsidies. This, the US3 contend, would eventually force them to curtail service or even exit certain markets, leading to the loss of US jobs.
“For me, it’s the jobs aspect. That’s why the unions are so engaged with us and so aligned, because they understand that when demand dies down, we are not going to fly there,” Munoz told Business Insider. “Which means I am not going to buy an aircraft for the route and obviously I’m not going to hire people to crew it.”
As a result, the US airlines say the ME3 are in violation of the Open Skies agreements that govern air travel between the US and the UAE and Qatar.
Munoz said that even though he understands the ME3 are global marketing machines for their respective countries, he believes the Open Skies agreements should be updated to strike a balance between the need for open competition and the protection of American jobs.
“It would be nice to be able to write something that benefits everyone without being so protectionist, which is sometimes how we come off. Sometimes the industry comes across as a little bit too much of that, and it makes people not want to help you,” Munoz said. “Where’s the delicate balance? Is the situation unfair? Yes. Do I support what these airlines are doing? Absolutely not.”
Emirates’ 2015 report hit back at the US3 for what it said was failing to properly show that the US3 had been hurt by the presence of the ME3 while reporting record profits and returning billions of dollars to investors. The report also accused the US3 of failing to note that the ME3’s growth was because of their presence in the Asian subcontinent – a market that the US3 have long abandoned.
- Thomson Reuters
The US3 and ME3 compete head-to-head on very few routes. This is because, apart from a few exceptions, all of the ME3’s flights are routed through their mega-hubs in Abu Dhabi, UAE; Dubai, UAE; and Doha, Qatar. After all, these airlines exist partly to drive trade and commerce to their homelands.
The exceptions include Emirates’ service between Milan, Italy, and New York – where it competes against American, Delta, and Delta’s joint-venture partner, Etihad-owned Alitalia – and the new Newark-Athens route.