Factors including regard for the victim, the nature of the crime, the powerful accusers, and Trump-related anxieties all contribute to the extraordinary impact in Washington of the Khashoggi murder.
Recent aviation agreements between the United States and the United Arab Emirates and Qatar have ended a bitter dispute over alleged anti-competitive practices. In the aftermath of the agreements, Delta announced plans to relaunch its nonstop route to India, three years after it cancelled the flights, blaming competition from Gulf airlines. However, the agreements are unlikely to fundamentally change the landscape for aviation links with the Gulf states and other changes, such as newer planes able to fly longer routes more economically, are arguably more important drivers for the industry.
The rapid rise of the three Gulf “super-connector” airlines – Emirates, Etihad, and Qatar Airways – has been a source of concern for many global airlines for a decade. They have leveraged advantages ranging from flexible labor markets to the locations of their modern hub airports – at the intersection of Europe, Africa, and Asia – to capture a growing share of transcontinental traffic, including both passengers and cargo. Competitors have lost business and some, in particular the U.S. legacy carriers – American, Delta, and United – have fought back. They launched a campaign in 2015 accusing the Gulf states of providing excessive support to their airlines, allegedly violating commitments in their bilateral Open Skies agreements with the United States (U.S.-UAE agreement in 2002 and U.S.-Qatar agreement in 2001). They called for bilateral discussions on the agreements and for a suspension of new landing rights for the Gulf airlines (provocatively, Qatar Airways began flying to Delta’s hub of Atlanta in 2016).
The legacy carriers’ lobby group, the Partnership for Open & Fair Skies, claims that the UAE and Qatar have provided $52 billion in subsidies and unfair benefits to their airlines, mainly in the form of financing assistance (interest-free loans, loan guarantees, and equity infusions) as well as advantages such as the low cost of expatriate labor in these countries, reduced airport charges at their hubs, and government assumption of losses from fuel price hedging. These forms of alleged support are open to some interpretation: The data is fairly limited and the value calculations are heavily laden with assumptions. The claim is that the alleged subsidies have facilitated the growth of the Gulf airlines, harming the U.S. airlines and leading to job losses.
However, the Gulf states retort that it is very common for countries to support their national airlines in various ways. This includes the U.S. government, which bailed out airlines after 9/11 and provides regular support, at both federal and local levels, through investment in infrastructure, official travel procurement, and lenient regulation. Moreover, several smaller U.S. airlines – including JetBlue, Hawaiian, and FedEx – have expressed support for the Gulf airlines, arguing that the international connectivity the Gulf carriers bring is beneficial to the U.S. economy and not in violation of the Open Skies agreement. Some already have partnerships with Gulf airlines. In fact, they call for greater liberalization of the aviation sector, as the status quo tends to benefit the legacy carriers. They launched a rival campaign, U.S. Airlines for Open Skies, to lobby for this perspective. A significant point they make is that even if the Gulf states have provided subsidies, the Open Skies agreements only permit retaliation if this leads to artificially low prices, and there is no strong evidence that the Gulf airlines have systematically underpriced their flights. Although Boeing has not intervened directly in the dispute, the fact that the Gulf airlines are among its largest customers is certainly a factor in the debate.
The legacy carriers made little progress in lobbying the administration of former President Barack Obama. The Justice Department appeared to view the campaign as an antitrust push by the legacy airlines. The State Department held informal discussions with Qatar and the UAE in July 2016, but not the formal treaty talks that the campaign had pushed for, and took no retaliatory actions. The legacy carriers were hopeful for a second push following the 2016 presidential election, seeing links between their arguments and President Donald J. Trump’s protectionist rhetoric. These hopes were raised when Trump met with airline executives within a few weeks of his inauguration and seemed to express sympathy. In March 2017, Emirates launched a “Fifth Freedom” flight, linking Dubai and Newark via Athens. Airlines have a right to stop and pick up passengers in a third country between their home country and final destination, but such flights are controversial because they are seen as a way for airlines to muscle in on routes that don’t involve their home country. Congressional supporters of the legacy airlines tried to lobby Trump to block the route, however they were unsuccessful.
The Gulf dispute that divided the UAE and Qatar also spurred both countries to strengthen their bilateral relationships with the United States. This has included trying to resolve areas of tensions, such as the aviation issue. Qatar has particularly prioritized its relationship with the United States; a key moment was the U.S.-Qatar Strategic Dialogue in January. Alongside this event, Qatar and the U.S. State Department reached a set of understandings, including a commitment to publish audited financial reports and disclose any transactions with government-related entities. The CEO of Delta, the fiercest critic of Qatar Airways, welcomed the understandings as a “strong first step” toward transparency. A deal with the UAE took longer, in part because, unlike Qatar Airways, Emirates utilizes the controversial Fifth Freedom flights. However, a similar set of understandings on transparency was reached in May, with a commitment from Etihad to publish annual financial statements after its ongoing restructuring. Although Breitbart News claimed a victory for the America First agenda, the understandings do not seem to impose excessively onerous conditions on the Gulf airlines and are unlikely to substantially change the dynamics of competition between the United States and Gulf airlines, notwithstanding Delta’s relaunch of its India route. The Economist, among others, counted the agreements as a victory for the Gulf airlines. However, the concessions that were made provided a face-saving outcome for the legacy carriers and U.S. government.
The deals come at a time when the Gulf airlines look somewhat less formidable than they did a few years ago. Etihad’s strategy of expansion through direct investments in partner airlines has come adrift after the bankruptcies of Air Berlin and Alitalia, its two largest investments, forcing it to restructure. Emirates has remained profitable but has seen some recent retrenchment in routes, slower growth, and restructuring in staff and aircraft deliveries (although it did see profits double for 2017-18). Finally, Qatar Airways has been hard hit by the regional boycott, which meant that 18 routes to the UAE, Saudi Arabia, Bahrain, and Egypt were blocked and many other routes are now longer (and therefore more expensive) owing to restrictions on access to the airspace controlled by its boycotting neighbors. Its CEO, Akbar al-Baker, has warned that this will result in a “substantial loss” for the 2017-18 financial year. Nonetheless, Qatar Airways has remained aggressive in opening new routes and also making new partnerships and investments (most recently in JetSuite a startup airline for regional jets on the West Coast of the United States).
There have been related disputes between the Gulf states and other countries, one in 2010-12 over landing slots in Canada for the UAE airlines, which escalated into a political row including reprisals such as a brief period of high visa fees for Canadian visitors to the UAE. Some European Union flag carriers, such as Air France, have complained about competition from the Gulf carriers. The EU is in the process of revising legislation covering commercial aviation in the bloc to address concerns about unfair competition. However, the current proposals are relatively soft, excluding the options of revoking flying rights or limiting the scope of investigations into the commercial threats posed to EU carriers. The proposals still need endorsement by member states in June and then negotiations with the European Parliament over a compromise text. It seems unlikely that the final legislation will pose a serious threat to the Gulf airlines.
There is also growing cooperation with the Gulf airlines. Qatar Airways led the way in 2013 when it joined oneworld, one of the three big international airline alliances, subsequently deepening the relationships by buying stakes in four oneworld airlines – British Airways, Iberia, LATAM, and Cathay Pacific – and following these up with various degrees of operational cooperation. It even considered buying a stake in another oneworld member, American Airlines, in 2017; however, it dropped this plan after fierce opposition from American’s management, which used the proposed unsolicited investment as one justification for ending their code-share arrangement (it also ended its code-share with Etihad). However, this incident is an outlier, and another fierce critic of the Gulf airlines, Germany’s Lufthansa, forged code-share and other agreements with Etihad in 2016-17. Australia’s Qantas went further in 2013, forging a 10-year partnership with Emirates, which saw it shift its hub for flights connecting to Europe from Singapore to Dubai.
Looking ahead, the Gulf airlines face new competitive threats, notably the rising Chinese airlines (which are also a threat for the U.S. legacy carriers) as well as technological disruption. A new generation of fuel efficient ultralong distance jets, such as the Boeing 787 Dreamliner and Airbus A350, are facilitating direct connections between Europe and Australia or the United States and East Asia – indeed Singapore Airlines has just announced a 10,400-mile direct flight to New York, 15 percent longer than the previous scheduled flight record (held by Qatar Airways). This reduces the need for transcontinental hubs such as Dubai for some of the most profitable routes. However, the decades of operational life remaining for the existing global fleet and the cost of ultralong-haul flights means that the super-connector hubs will have a role to play for many years.
Despite U.S. sanctions, Iran, with the second-largest economy in the Middle East after Saudi Arabia, is likely to remain an integral economic actor for the Gulf Arab states.
Nationality and naturalization laws are often ambiguous in Kuwait, specifically for the children of Kuwaiti mothers and foreign or bidun (stateless) fathers.
Through its careful examination of the forces shaping the evolution of Gulf societies and the new generation of emerging leaders, AGSIW facilitates a richer understanding of the role the countries in this key geostrategic region can be expected to play in the 21st century.Learn More