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02 March 2024

Cheaper fares help Gulf carriers boost US-India route market share

Under the offer, you can now take a return flight to Delhi, a very popular destination for Indians in the UAE, for just Dh613 in its economy class and for Dh1,470 if you prefer the luxury of business class. (Shutterstock)

By Reuters

US airlines have lost at least five percentage points of their share of flight bookings from the United States to the Indian subcontinent and Southeast Asia since 2008 due to fierce competition from Gulf carriers, according to data seen by Reuters.

More recently, US carriers have seen an erosion in their share of bookings to Milan, according to a report the US airlines sent to the White House and the departments of State, Transportation and Commerce. The 55-page white paper is not yet public.

The report says the combined share of bookings between the US and the Indian subcontinent for Delta Air Lines, United Airlines and American Airlines dropped to 34 per cent in 2014 from 39 per cent in 2008. The drop includes bookings on the airlines’ codeshare partners, such as British Airways and Air France.

In the same time, Emirates Airline, Qatar Airways and Etihad Airways have surpassed them. The Gulf airlines' share of that market has jumped to 40 per cent from only 12 per cent seven years ago, according to the report.

The report sheds light on the intensifying battle between the US carriers and their rivals from Qatar and the UAE since “Open Skies” agreements authorised commercial flights between those countries and the United States more than a decade ago.

The data shows that the Gulf carriers have eroded US airlines’ market share even beyond the subcontinent, although bookings to the region resulted in the largest revenue hit so far, Delta Chief Legal Officer Ben Hirst said in a telephone interview.

US airlines and their partners’ share has declined from 43 to 36 per cent of the market between the eastern US and Southeast Asia, according to the report. The region includes Vietnam, Thailand, Indonesia, Malaysia and the Philippines.

Gulf carriers, meanwhile, expanded their share of bookings from just 1 per cent to 13 per cent.

Open Skies pacts

The US airlines are stepping up efforts to persuade the American government to alter or terminate the Open Skies pacts.

The white paper, citing confidential financial statements from the Gulf airlines, alleged that their rivals have received subsidies from their home governments contrary to US trade policy. The report alleges loans, tax exemptions and other support totalled more than $40 billion since 2004, which the Gulf carriers used to pay expenses that airlines typically must cover themselves, such as aircraft acquisitions.

"We fully expect the government to act on the evidence," Delta's Hirst said, adding, "From the US airlines' standpoint, we're competing with (foreign) governments, not private businesses."

An official from the US State Department said the agency was carefully reviewing the claims and coordinating with other agencies.

"The US government takes seriously the competition concerns raised by our airlines," the official said in an email on condition of anonymity. "However, we remain committed to the Open Skies policy, which has greatly benefited the travelling public, the US aviation industry, American cities, and the broader US economy."

Cheaper fares

The report says the Gulf carriers could drive ticket prices down to a point where US airlines could not afford to stay in certain markets, costing hundreds of jobs.

But advocates for travellers say that slashing prices and improving service is precisely what Open Skies agreements are intended to do.

"From the passengers' point of view, they want as many choices as possible," said Erik Hansen, a senior director at the US Travel Association, a non-profit industry group based in Washington.

Hansen said he had not seen the report and could not comment in detail on its findings, but added that Open Skies pacts have improved the US balance of trade. He said a change would "send a message that the US is willing to implement protectionist policies if just a few airlines protest."

Executives of the Gulf carriers dispute the US carriers' charges that they have received unfair subsidies and bailouts.

"We have no problem with competition. In fact, we relish it," Emirates Airline President Tim Clark said in a statement last week.

The Gulf airlines are pushing to expand their reach. US carriers have lost their share of bookings from New York to Milan since Emirates announced service there in 2013 as a stopover on the way to Dubai. Emirates' share has jumped to 19 per cent since then, while the share held by US airlines and their partners has fallen to 78 per cent from 85 per cent.