Emirates Airline rejects US accusations of state subsidies

Emirates_AlMaktoumAhmadbinSEmirate’s airline’s top two executives have hit back at claims by US carriers that they receive state subsidies. The Dubai airline’s chairman Sheikh Ahmed bin Saeed (right) and company president Tim Clark,  described the US allegations as far off-base.

Their rebuttals came after the chief executives of America’s three biggest airlines – Delta, United and American Airlines – called on the US government to review the country’s air treaties with Gulf carriers. The three CEOs claimed that the foreign airlines have an “unfair advantage” of receiving government support.

Sheikh Ahmed, however, asserted that what the US carriers need to do is simply “improve their service” to compete with the Gulf airlines. “Offer the best to the passengers and people will fly with you,” Sheikh Ahmed told Bloomberg News. Mr Clark also questioned the claim by the US airlines that Arabian Gulf carriers, including Emirates, had received $40 billion worth  of government subsidies. Clark remains unsure how the US carriers came up with the figure of $40 billion.“We did receive start-up capital of $10 million in 1985 and a one-time infrastructure investment of $88m for two Boeing 727 aircraft and a training building but we have never received financial subsidies or bailouts,” he said. ”

Emirates currently flies directly to nine cities in the US. Last year, it added services to Boston and Chicago. Since 2004, it has carried 10.7 million passengers to the US. The Gulf carriers’ intercontinental dispute with their American rivals is not the first of its kind. European airlines including Lufthansa and Air France-KLM have likewise criticised Gulf airlines by claiming they are unfairly backed by their governments.

An industry analyst supported Mr Clark’s view, saying that “better government policies” are what propels the success of the airline. “A while back UBS looked at the books of Emirates and  came to the conclusion that they were straightforward,” said Peter Morris, the chief economist at UK-based Ascend. “There wasn’t any subsidy of any sort.”

However, as Mr Morris noted: “There is a competitive advantage for Gulf carriers in not having to pay any  income tax on the money they earn. The stakes are high for Dubai. Aviation has played a significant role in the growth of its economy.

According to Oxford Economics, aviation contributed $26.7bn to the emirate’s economy in 2013, supporting 416,500 jobs. By 2030, aviation is expected to contribute $88.1bn and nearly 1.2 million jobs. This week Emirates Group said it would hire 11,000 new staff this year, spurring benefits to the city’s economy. And Dubai International Airport, with its strategic location, has overtaken London Heathrow as the world’s leader in international passenger numbers. Mr Clark highlighted the benefits of Emirates’ presence to the US economy. “Our US operations generate more than $2.8bn of estimated economic value annually for the airports,” he said, adding that the airline creates jobs for American-based industry manufacturers such as Boeing and GE.

“It would be ironic, and a shame, if the US, who have been the forerunners of liberalisation and deregulation, would now contemplate a U-turn on its successful international aviation policies for the benefit of a narrow few, ” said Mr Clark.

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