User:AHeneen/sandbox/Gulf carriers

The Gulf carriers, sometimes known as the ME3 (short for "Middle East 3") or the Big Three, are three major airlines&mdash;Emirates, Etihad Airways, and Qatar Airways&mdash;based along the Persian Gulf. The rapid rise of these airlines in the early twenty-first century has led to a significant disruption in the air transport market. Several US and European airlines allege that the Gulf carriers have been subsidized by the governments, through discriminatory fees in favor of local airlines and favorable fuel contracts.

Gulf carriers
The phrase Gulf carriers refers to airlines (which are also known as carriers) based in one of Arab states bordering the Persian Gulf, which are typically referred to as the Gulf states. In practice, however, the term is almost exclusively used to collectively refer to three major airlines based in the region:

In 2014, Emirates was the world's leading airline in international passenger-kilometres flown and fourth among airlines in terms of international passengers carried.

Other large airlines in the region include flydubai (based in Dubai), Gulf Air (the flag carrier of Bahrain), Kuwait Airways (the national carrier of Kuwait), Oman Air (the national carrier of Oman), and Saudia (the flag carrier of Saudi Arabia).

Position in the air transport market
The airlines significantly benefit from the geographic location of their hubs, which are centrally located between Europe, Africa, Asia, and Australia. The Gulf carriers rely on sixth freedom passenger traffic—passengers flying from one country to another via a third country, in the Gulf carriers' case via the UAE and Qatar—to a much greater extent than most of the world's major airlines. Roughly three in five passengers on Emirates are only connecting through Dubai. The region is within an eight-hour flight of more than 4 billion people, including many of the world's fastest growing economies.

The Gulf carriers are a major contributor to the economies of the UAE and Qatar. In the emirate of Dubai, aviation accounts for nearly a third of the GDP and 30% of employment. A Washington Post writer dubbed the two countries emerging "aerostates", alluding to the term 'petrostate', as states "where world-class aviation is a critical economic engine deeply integrated with the state itself."

Australia
The kangaroo route between Australia and Europe is too great to support any economically-viable non-stop flights. Most travelers on this route stopped in Southeast Asia, typically Singapore or Bangkok. In 2013, Dubai overtook Singapore as the most frequented stop for air travel between Australia and Europe. Of the 150,000 passengers between London and Sydney in October 2013, 55,000 traveled through Dubai, while 40,000 traveled through Singapore. The increased competition between Australia and Europe has led to lower prices while the number of passengers between these regions has not increased. Since traffic between Australia and Europe supported many Southeast Asian carriers' flights to Europe, lower profit margins have resulted in a decrease in capacity between Western Europe and Southeast Asia.

In April 2013, Qantas formed an alliance with Emirates to cooperate on services between Australia and Europe. As of November 2015, the two airlines operate a total of 14 daily flights between Dubai and Adelaide, Brisbane, Melbourne, Perth, and Sydney. Most major European cities are now a one-stop journey from these cities. Qantas broke a 17-year alliance with British Airways on the route.

Europe
Air France-KLM and Lufthansa Group have lost considerable amount of traffic to Asia as a result of the Gulf carriers and have lobbied their governments to hinder further expansion of the Gulf carriers in Europe. The new carriers have taken away business travelers at a time when major European carriers are faced with stiff competition from low-cost carriers for regional flights.

However, the trade group for European airports, Airports Council International Europe, and travel, the European Travel Commission, support the expansion of Gulf carriers in Europe. Its president claims it is a lack of support for European carriers, not the support of Gulf carriers by their governments, that has caused European carriers to lose to their Gulf competitors.

Indian subcontinent
India is the largest market for the Gulf carriers, each of which serve at least ten destinations within India. For passenger traffic between the Indian subcontinent and U.S., in 2013, the Gulf carriers surpassed the market share of US carriers and their joint venture partners in Europe. In 2016, nearly half—1.3 million of 2.7 million—of passengers between India and the U.S. were carried by Gulf carriers, although a ban on in-flight electronics imposed by U.S. on flights from various Middle Eastern airports, including the hubs of the Gulf carriers, for part of 2017 increased traffic for Air India.

In 2013, Etihad acquired a 24% stake in Jet Airways, India's second-largest carrier. In 2017, Qatar Airways and the Qatar Investment Authority announced plans to launch a domestic airline in India.

Southeast Asia
As of 2015, two-fifths of traffic on Gulf carrier flights to Southeast Asia was primarily to or from Western Europe, the largest origin or destination on their Southeast Asia routes. Between 2005 and 2015, the number of routes operated by Gulf carriers to Southeast Asia increased from 14 to 54. The rise of the Gulf carriers and Qantas' partnership with Emirates at Dubai has shifted traffic on the Kangaroo route between Europe and Australia, which is too long to be flown non-stop, from major hubs in Southeast Asia (eg. Bangkok and Singapore) to the hubs of the Gulf carriers. Increased competition between Australia and Europe has led to lower prices while the number of passengers between these regions has not increased. Since traffic between Australia and Europe supported many Southeast Asian carriers' flights to Europe, lower profit margins have resulted in a decrease in capacity between Western Europe and Southeast Asia. The combination of the rise of the Gulf carriers and the growth and expansion of airlines in mainland China has led to increasingly lower profit margins for Singapore Airlines and Cathay Pacific.

United States
The arrival and expansion of the Gulf carriers has improved access between the US and Africa, India, and Southeast Asia—regions where US carriers have traditionally had limited services and where most traffic passed through European airports. Between 2008 and 2014, Gulf carriers' share of booked seats between Dallas-Ft. Worth International Airport and Mumbai rose from 2.8% to 69.9%, while the share carried by US and EU carriers fell from 81.1% to 28.7%.

Dispute over unfair competition
The three major legacy carriers in the United States—American Airlines, Delta Air Lines, and United Airlines—along with several major labor unions—Air Line Pilots Association, International; Allied Pilots Association; Southwest Airlines Pilots’ Association; International Brotherhood of Teamsters; Association of Flight Attendants-CWA; Association of Professional Flight Attendants; Communications Workers of America—have formed the Partnership for Open and Fair Skies to "restore a level playing field under the Open Skies agreements with Qatar and the UAE." On 28 January 2015, the Partnership for Open Skies released a white paper claiming that the Gulf carriers had received substantial subsidies; the same day, the CEOs of the three airlines began to lobby for a freeze in capacity of the Gulf carriers to the US and an investigation into the allegations.

The dispute has pitted several major airlines against rival airlines that benefit from partnerships with the Gulf carriers as well as many industry trade groups. JetBlue, which has a codeshare partnership with Emirates, and FedEx, which operates a cargo hub in Dubai, have both supported the open skies agreements the US has with the UAE. The Airports Council International-North America, a trade group for airports, has also strongly supported open skies agreements that attract foreign airlines to airports underserved by domestic airlines, stating that airports "should not be held hostage by U.S. airline decisions regarding which markets to serve". Meanwhile, the International Air Transport Association (IATA) and the US airline trade group, Airlines for America, have not taken a position on the issue, whose members count support for both sides of the issue.

Subsidies
The Partnership for Open and Fair Skies, along with another coalition, Americans for Fair Skies, contend that the Gulf carriers have received $42 billion in subsidies since 2004 and has called for a US government review of these allegations that, if true, would contravene the fair competition aspects of the open skies agreements the US has with the UAE and Qatar. They claim that the Gulf carriers have received substantial no-interest loans and subsidized ground services. Commenting on the alleged subsidies, the CEO of United Airlines remarked: "We’re not competing against airlines. We’re competing against the treasuries of Gulf nations, and that’s an impossible task."

Emirates has publicly stated that it has not received government funding beyond an initial US$10 million funding to start operations in the 1980s and US$88 million invested in infrastructure around the same time. The airline also contends that favorable bankruptcy provisions in the US are essentially a subsidy to the three major US legacy carriers—United, Delta, and American—which all restructured through Chapter 11 bankruptcy between 2005 (United & Delta) and 2011 (American) and which have been vocal in their claims that the Gulf carriers have received subsidies. Similarly, Etihad, based on a report it commissioned, has contended that American Airlines, Delta Air Lines, and United Airlines have received a collective $71.48 billion in subsidies since 2000, consisting of $29.4 billion saved through pension termination (including $23.08 billion in pensions paid by the Pension Benefit Guaranty Corporation), $35.46 billion of debt saved through bankruptcy ($30.96 billion in one-time debt relief and $4.5 billion in annual cost savings), $5.6 billion in fuel subsidies, and $0.99 billion in other subsidies and cost savings;  The report also notes that the three US airlines benefit from restrictive cabotage laws in the US (foreign carriers can't carry passengers solely within the US) and the Fly America Act (giving preference to US carriers for travel funded by the US government), but such benefits are difficult to quantify. The industry trade group US Travel Association, citing a 1999 report by the Congressional Research Service, contends that domestic US airlines received $155 billion in subsidies between 1918-1999.

Unequal operating environment
Labor unions are not legal in Qatar or the UAE. Based on data from 2010, Emirates' labor costs are half those of US-based American Airlines and United Airlines and just 40% those of European-based Lufthansa and Air France-KLM. Additionally, the Gulf carriers benefit from the lack of corporation and income taxes in their home states.

Profitability
Of the three carriers, only Emirates has publicly disclosed its financial earnings and profit. In fiscal year 2014-2015 (ending 31 March 2015), Emirates had a 4.555 billion dirham (US$1.240 billion) net profit on 88.819 billion dirham (US$24.185 billion) in revenue. According to the airline, it was 27th consecutive year of profitability for Emirates.

Landing rights restrictions
In May 2015, the Netherlands froze the expansion of landing rights of Gulf carriers at Schiphol Airport, near Amsterdam, due to concerns about unfair competition. The move prevents them from increasing to twice-daily flights, but has been criticized by shippers in the region for its detrimental effect on air cargo capacity.