A. A. TYRTOV

Job Seeker

Institute of Oriental Studies of the Russian Academy of Sciences

Keywords: "Open Sky", airline, United Arab Emirates, Qatar, USA

The air transportation market has recently been quite mobile. Despite the economic crises, traffic volumes continue to grow. This is largely facilitated by the availability of offers made available by the principles of "Open Skies"* - both from major airlines and the actively developing segment of budget transportation. All this, one way or another, leads to a change in the aviation market. And such changes often do not suit some old players who firmly believed in their own steadfastness.

The 69th Annual Meeting of Members of the International Air Transport Association (IATA) ^{was held in Cape Town, South Africa, in June 20131}. On the sidelines of this event, Tim Clark, President of Emirates Airlines, part of the group of companies of the same name, which is owned by the Government of Dubai (United Arab Emirates - UAE), spoke about the company's plans to organize trans-Pacific routes. According to him, the aircraft will fly to North America with transit stops in Asia. T. Clark stressed that in this way Emirates plans to maximize the use of open airspace agreements. Until then, Emirates ' competitors could remain convinced that passenger transportation would be based on the principle of corresponding cities, which, in their opinion, it would be advisable to offer through a transit transfer hub at Dubai Airport. However, the Emirates management, realizing the limitations of this vision for the development of the route network with such aircraft in its fleet as the Boeing B777 (from 305 to 451 passengers) and the Airbus A380 (from 525 to 853 passengers), looked much further. The UAE, having bilateral international agreements on the use of airspace with many states, including the United States, did not intend to limit itself in the opportunities provided for the use of all "air freedoms"**.

In 2006, Emirates tried to expand its mainline network by opening the Dubai - Hamburg - New York route, but it quickly closed. According to Clark, it wasn't the best time. It was planned to use the B777 - 300 in this direction. Only seven years later, in October 2013, the Dubai - Milan - New York route was opened, which began serving the B777-300. Emirates began operating three flights a day to Milan's Malpensa Airport. One of them is a transit route to New York.

OPEN SKY-PLAYING BY THE RULES

For the first time, the rules for air traffic were formulated at a conference in 1944 in Chicago, at which the Convention on International Civil Aviation was signed. Later

* "Open Skies" is an international policy concept aimed at liberalizing air services in order to create conditions close to free competition between airlines. Not to be confused with the 1992 Helsinki Treaty on Open Skies, which relates to military aviation.

* * Freedom of air - the right or privilege in relation to international air traffic granted by one state to another state or states within the framework of signed interstate agreements "Open Skies" to fly and land on its territory for the transportation of passengers, baggage and/or cargo (approx. author's note).

these rules were updated and updated. And, as has often happened in world history, it was the United States that initiated such regulations, of course, pursuing its own commercial goals under the slogan "liberalization of aviation services".

Currently, there are 8 rights or "freedoms of the air" ², which are fixed in each specific bilateral intergovernmental agreement. Within the framework of such an agreement, States define contractual air lines and exchange the granting of commercial rights that enable air companies to transport passengers, cargo and mail over the territories of the Contracting States.

Prior to 1992, the world civil aviation was developing quite calmly in terms of the use of rights. There were not many strong players in the market, and most of those who were there were in the United States. And it was American airlines that acted as the driving force behind the signing of new Open Skies agreements with other countries in order to open their markets to air carriers from North America. Since 1992. The United States has signed more than 100 such agreements.

Following the policy of liberalizing the international aviation market, the United States signed an Open Skies agreement with the United Arab Emirates in 1999 and with Qatar in 2001. The agreements provided mutual access - for American and Emirati airlines to national airports in the former case; and for American and Qatari airlines in the latter. Having opened direct service between Dubai and New York in 2004, Emirates operated direct flights to 8 US cities by 2014, and will expand its network to ten airports by 2016. At the same time, American airlines Delta and United still fly only to Dubai, performing one flight a day each.

QUOD LICET JOVI NON LICET BOVI*

In September 2014, the first publications appeared that some American air carriers launched a campaign against major Arab airlines, such as Emirates, Etihad Airways and Qatar Airways. They expressed "concern" about the rapid development of their competitors, which, in their opinion, is a consequence of active financial state support.

During the Aviation Policy Summit on September 16, 2014 in Washington, the Chairman of the US House Committee on Infrastructure and Transportation, Bill Schuster, expressed his position on these Middle Eastern carriers. According to him, they (Arab airlines) "belong to the governments. Their governments don't care about profit. They use them as a tool for economic development... and they win the market at the expense of our air carriers"³. In turn, Michael Robins, managing director of Government and Public Relations at the Pilots ' Association (ALPA), said that "The State Department may reconsider the Open Skies agreement when US interests are harmed. "⁴

These were the first accusations against the Emirati flagships of air transportation. Meanwhile, in October 2014, the first A380 was launched on the Dubai - Milan route, resulting in a 38% increase in passenger traffic in this direction.⁵ Moreover, Emirates later announced that from June 2015, the company plans to replace the B777-300 with an A380 on the Milan - New York route. All this, of course, could not contribute to the peaceful coexistence of American and Arab companies in the passenger transportation market.

In January 2015, three American airlines-Delta, United, and American-presented a 55-page report, " The Return of Open Skies: The Need to Respond to Subsidized Competition from state-owned airlines in Qatar and the United Arab Emirates,"⁶ in which they presented their arguments for renegotiating agreements with these Arab countries. The report was submitted to the US State Department, as well as to the Ministries of Transport and Commerce.

In particular, the first page of this report states that "to a greater extent, the United States assumed that each Open Skies agreement would consistently serve and advance the interests of the United States, creating conditions for competition on a market basis. In the vast majority of cases, this assumption was true. But it is becoming increasingly clear that in some special cases, the highly valued rights of the "Open Society" are often recognized.

* What is permitted to Jupiter is not permitted to the bull.

the data provided by the United States is being used in a manner inconsistent with open market competition and the interests of the United States. " ⁷

Based on this, it becomes quite obvious that free market competition should meet the interests of the United States, and if it does not meet, then, accordingly, there is no market competition. The report goes on to accuse Qatar, Dubai and Abu Dhabi of linking their economic development strategy to "massive expansion" on international passenger air routes through their hub airports. And, following this strategy, "they have created a vertically integrated, fully state-owned aviation sector that includes a monopoly on the provision of services and a set of relationships between government institutions, airlines, ground handling companies, airports, and state-owned banks."⁸

Thus, Qatar and the United Arab Emirates, in their opinion, use these airlines as a tool in implementing this strategy, providing state preferences and subsidies for their operating activities, which, according to Americans, amounted to more than $40 million over the past 10 years.

Three American airlines accuse Emirates, Etihad and Qatar Airways of unfair competition in the American market. In addition to 40-million subsidies and other preferences, they also accuse the three Arab carriers of using the "Open Skies" policy to their advantage, rapidly growing the fleet of wide-body aircraft, creating an oversupply on international routes, and" luring " air passengers. At the same time, it should be noted that the Agreement does not give Arab carriers any advantages over American ones in generating income, but only regulates the rules for using the national airspace and airports of the parties.

The study goes on to demonstrate the connection between members of the ruling dynasties in the UAE and Qatar and the aviation and banking sectors. Taking into account that the population of these countries is small, it is not difficult to assume that such a connection can be found. Moreover, the elite in power has enough relatives in these countries. And everyone needs to "find a place".

FORMING COALITIONS

The report by American carriers divided the aviation community into two camps, forming coalitions of opponents and supporters of preserving the existing agreements between the United States and the United Arab Emirates and the United States and Qatar.

The Americans were joined by European airlines that are part of international aviation alliances: Delta, along with AirFrance/KLM, are part of the Sky Team Alliance; United Airlines and Lufthansa are part of the Star Alliance; American Airways is part of the One World alliance with British Airways.

As a result of the creation of this coalition, the issue of new landing rights for aircraft from the Persian Gulf was "frozen" in a number of European cities until a decision is made on the results of consideration of charges against Arab carriers. Also, this three airlines were supported by the American Pilots Association( ALPA), a significant number of mayors of American cities, 21 senators and other political forces. All of them are actively calling on the US State Department to start consultations on "Open Skies".

In turn, Emirates was supported by the American low-cost airline JetBlue Airways, which works together with it in the framework of code-sharing*. The Arab side, in addition to JetBlue, was supported by American FedEx, Alaska Airlines, Atlas Air, Boeing, as well as the Business Travel Coalition (BTC), which protects the interests of the tourist community, and a number of other organizations. They, for their part, sent letters of support for the existing "Open Skies" policy to the State Department, the US Department of Transportation and Commerce. Moreover, the CU has created an OpenSkieTravel coalition, which aims to provide large-scale support for the principles of" Open Skies " on the part of Arab airlines.

So, the president of the American airline JetBlue Robin Hayes, defending Emirates, which seeks to maximize the benefits of the agreement on the use of airspace, stressed that the US policy on "Open skies"

* Code sharing - an agreement on the joint commercial use of a particular flight and aircraft of one airline by other carriers (author's note).

helps develop commercial aviation. This policy, in his opinion, allowed Emirates to increase the number of routes to the United States, including Boston. The result was a flight from Dubai to Boston, and JetBlue was able to serve flights on the Boston - Detroit route, which was previously exclusively served by Delta⁹.

Hayes ' announcement coincided with a meeting between the CEOs of American, Delta, and United airlines and the Ministers of Transportation and Commerce of the United States, where they presented their report on "unfair" competition. At the meeting, they made a proposal to review the US policy on "Open Skies" with Qatar and the United Arab Emirates. As an alternative, they put forward the slogan "Fair Sky", which, as it turned out, is not new. In the 1990s, this slogan was intended to limit the number of Latin American workers.

Proponents of maintaining the existing "Open Skies" policy draw attention to the fact that US air carriers themselves have enjoyed government support in the recent past. For example, Delta, United, and American have been granted extensive antitrust immunity for setting up joint ventures with domestic competitors on certain specific routes to Europe and Asia.

Currently, these American airlines continue to maintain antitrust immunity, industrial consolidation and the accompanying increase in ticket prices and additional fees, which allows them to make unprecedented profits. And now, according to the president of the MTC, Kevin Mitchell, some air carriers are shamelessly trying to close the American market from competition from foreign carriers.

Apparently realizing the flimsiness of his arguments and not receiving a quick response from the US State Department, Delta CEO Richard Anderson, in an interview with CNN, touched on a provocative topic, namely, the events of September 11, 2001, unequivocally hinting that the terrorists were from the Arabian Peninsula. This certainly caused a negative reaction from the UAE, which is one of the reliable US allies in the region.

Denis Sebright, President of the United States-UAE Business Council, called statements about the connection of Gulf airlines such as Emirates and Etihad to the events of September 11, 2001, "disappointing and irresponsible." Carsten Spohr, CEO of Lufthansa, did not support this message of R. Anderson, calling it a "cowboy approach to conducting discussions" ¹⁰. And this despite the fact that the German airline supported, in general, the position of its American partners.

In turn, US Department of Transportation spokesman B. Farber said that "the administration is adhering to its commitment to an Open Skies policy that benefits travelers, the US aviation industry, American cities and, in general, the economy through increased tourism, trade and jobs. "¹¹

It should be noted that the agreement on "Open Skies" contributes to the growth of price diversity and the number of available services for passengers and shippers. By forcing a renegotiation of existing agreements, the three U.S. airlines are trying to compete with Gulf Arab carriers for additional revenue, hoping to get help from the U.S. Congress to strengthen their positions in relations with Qatar and the United Arab Emirates, and thereby protect their dominance in the domestic and international aviation markets.

The U.S. government has a long history of providing government assistance to the aviation industry, whether it's aircraft manufacturers like Boeing or the airlines themselves. The U.S. Government provided substantial subsidies and other financial support to various national industries when they faced financial problems.

This has happened in the history of the automotive and aviation industries in the United States. In particular, this is confirmed by the report of the Risk Advisory Group, commissioned by Etihad, which provides the results of a study of the provision of state financial support to American airlines Delta, United and American in recent years in the amount of $70 billion ¹². Most of these funds were allocated under the national bankruptcy Code to write off debts, while the other part was transferred to their pension funds. Although, as stated by the representative of the coalition of supporters of American airlines Jill Zackman, "the process that falls under Chapter 11 (of the Code of Civil Aviation).

bankruptcy), is not a "subsidy" as set out in international trade law " ¹³.

By granting their national airlines antitrust immunity, the U.S. Department of Transportation allows them to coordinate ticket prices, passenger service quality, and flight capacity by shortening routes and changing schedules. And the membership of American airlines in international alliances-Sky Team Alliance, Star Alliance and One World-allows them to control most international routes and make a profit. This is confirmed by data on the income of American airlines, which have grown sharply recently, while the quality of passenger service has fallen. According to the 2015 Skytrax rating, Delta is on the 45th line of the top 100 airlines in the world, United is on the 60th, and American is on the 79th ¹⁴.

Resolving this conflict is an important issue for the UAE and Qatar, since aviation is the central point of the macroeconomic development plan of these countries and already accounts for a significant part of national GDP in their economies. Many business areas are highly dependent on the aviation sector. For example, the current strategy for modernizing Dubai is based on the " three T's "(trade, transport and tourism) as drivers of economic growth. Thus, the attack on Arab airlines can be considered as an attack on the strategy of economic diversification of the business of these countries, which poses a threat to the economic well-being of the Gulf countries.

Assessing the validity of accusations against Arab airlines requires special knowledge to understand the difference between such concepts as subsidy, capital investment and funds raised. But even today, many experts recognize that the presence of Arab airlines in the American market is a positive factor: the number of passengers has increased, and the cost of tickets has fallen, i.e. this is exactly what the liberalization of the aviation market implies.

A 2014 report by the U.S. Trade Council reported that the United States benefits from the presence of Arab airlines in the U.S. market totaling more than $16 million, providing more than 100,000 jobs.¹⁵ And the 71-aircraft order book makes Etihad the world's largest buyer of the B787 Dreamliner ¹⁶.

It should be noted that not many global policy initiatives have been as successful as the "Open Skies"policy. Thanks to it, the global aviation market has developed significantly over the past 20 years, and bureaucratic obstacles have been eliminated.

Nowadays, people travel much more than before. Airlines use modern aircraft, open new routes, improve service and offer tickets at an affordable price. This is exactly what it would seem that the three major US airlines were aiming for. However, today their accusations against Arab carriers look like an attempt to turn back the clock.

As noted above, the "Open Skies" policy, initiated almost 30 years ago, was aimed at developing aviation services between the United States and other international markets. At the same time, for example, Etihad has never hidden the fact that it received financing through the issue of shares and loans from the sole shareholder - the government of Abu Dhabi, which in 2003 decided to establish its airline as a key element of a long-term plan to diversify the economy, occupying its niche in the aviation market and taking advantage of the location of Abu Dhabi Airport.

EMIRATES, ETIHAD AND QATAR AIRWAYS GIVE AN ANSWER

By the beginning of June 2015, the discussion about government subsidies to the three leaders of the Persian Gulf passenger transportation market - Emirates, Etihad Airways and Qatar Airways, and their "unfair" approach to airline development, gradually became calm. Harsh words have disappeared from the speeches of American representatives of both the aviation business and government agencies. And in June, the first responses began to appear in the form of studies conducted by Oxford Economics on behalf of the Arab side, which very thoroughly refuted the accusations of American airlines.

Etihad Airways was the first to respond to the accusations of American airlines, providing in early June an extensive 60-page report to the US State Department and the Department of Commerce and Transportation, refuting the accusations of American air carriers in receiving-

research institutes of government subsidies and damage to the American aviation industry.

The Arab side emphasizes in the report that the funds received from the government of Abu Dhabi, which is the sole shareholder of the airline, are nothing more than equity, which it received in several tranches between 2004 and March 2015 in the amount of $9.1 billion, as well as borrowed funds in the amount of $5.2 billion, which should be returned ¹⁷. This was a period of rapid growth for Etihad Airways. Moreover, the airline pays attention to the fact that the borrowed funds are returned. So, in 2014, payments on these debts amounted to $800 million ¹⁸.

The situation is similar in the reports of Emirates and Qatar Airways, presented on June 29 and July 30, 2015, respectively (the reports can be found on the airline's websites). All the cash they have received over the past decade has been either shareholder investments that are paying off with interest, or borrowed resources that are successfully and regularly returned.

As for the so-called damage to the American economy, it is difficult to imagine how the already purchased passenger planes from Boeing and existing orders for the purchase of new ones (which, in fact, already implies the involvement of a large number of subcontractors and not Arab or Russian ones) can damage the United States. In particular, Qatar Airways alone operates 67 Boeings and ordered 152 more Boeings worth more than $50 billion.

According to Oxford Economics, Etihad alone created about 23,000 jobs in 2015, and its share in US GDP was $2.9 billion. Emirates, in its report, cites data from the US Department of Commerce that every billion dollars creates 5,359 jobs in the US, and this, in terms of new ones ordered in the 777s, can give the US economy more than 440,000 jobs.¹⁹ In addition, we should not forget about tourism and related businesses that benefit from the presence of Arab air carriers in the American market. Again, American financial institutions, such as Ex-Im Bank, are involved in financing transactions for the purchase of aircraft.

James Hogan, CEO of Etihad Airways, cites other airline markets where "airlines are responding to new competition by improving their own consumer offerings," ²⁰ such as Qantas Airways (Australia), which does not engage in disputes but improves the quality of its services. services.

* * *

Thus, the "Open Skies" policy initiated by the United States in the early 1990s to liberalize the international aviation market was timely and useful for the development of not only its own aviation industry, but also the entire world, including related industries such as tourism. It opened up access for American airlines to the markets of other countries, and their technological superiority both in the existing modern fleet for that time, and in the quality of aviation services provided, allowed them to receive significant benefits compared to local national carriers.

However, as time shows, nothing stands still, and American airlines gradually began to lose their leadership. Perhaps because of its apparent exclusivity and sinlessness, the confidence in which in recent decades has become clearly reflected in almost all areas of US activity.

Of course, it is still too early to say that the top three American airlines will lose their leading role in the global aviation business, but in the face of Emirates, Etihad Airways and Qatar Airways, they have met those strong players who are beginning to force other market participants to raise the quality of services to a new level that previously seemed superfluous. This requires financial investments both in the purchase of new modern aircraft, as well as in the introduction of advanced technologies and the development of infrastructure to attract passengers. But all this, along with an attractive pricing policy, makes flights more affordable for most citizens of the world.

The policy of the three largest US air carriers in this campaign is aimed, rather than at regulation, at fixing their oligopoly, and, above all, at the transatlantic segments of the passenger transportation market. Once again, American companies are trying to use political, not political, resources to increase their profits.-

night levers. This is not to say that the profits of these airlines are falling. Despite the loss of a number of international routes, it has been growing recently.

If, in general, we compare the existing potential of the American and Arab leaders of air transportation, then the former in terms of the number of aircraft fleets, routes, employees and passengers transported are two or even three times higher than the latter. And in terms of revenue, only Emirates is somehow close to the American top three.

Indeed, the attempt to renegotiate the "Open Skies" agreements with the United Arab Emirates and Qatar is rather an attempt by American airlines to bring the economic issue into a purely political sphere. In order for them to fully compete with foreign carriers, they should develop a route network, buy modern aircraft and offer tickets at an attractive price. Some progress in the work, in particular, in American Airlines, can be seen already now - the airline has begun to improve the quality of on-board catering (ketering).

We should be aware that the modern passenger transportation market has a surplus of offers, especially at the expense of new low-cost airlines. Competition puts a lot of pressure on airlines and forces them to reduce prices in order to stay in the market. Of course, inter-permeating air traffic and the use of "third countries" for organizing transit routes will continue to develop. And the Arab flagships of air transportation, apparently, are in the forefront here.

¹ UAE carrier plans to maximize Open Skies Agreements // Aviation week. 10.06.2013 - http://aviationweek.com/awin/uae-carrier-plans-maximize-open-skies-agreements

² The International Civil Aviation Organization (ICAO) - http://www.icao.int/Pages/freedomsAir.aspx

³ Allies home to fast-growing rivals for U.S. air carriers // Roll Call, 18.09.2014 - http://blogs.rollcall.com/the-container/geostrategic-allies-home-to-fast-growing-rivals-for-u-s- air-carriers/

⁴ Ibidem.

⁵ Emirates to add A380 service to Milan // Bussines Traveller. 07.10.2014 - http://www.businesstraveller.com/news/100932/emirates-to-add-a380-service-to-milan

⁶ Restoring Open Skies: The Need to Address Subsidized Competition from Stated-Owned Airlines in Qatar and the UAE // Skift, 28.01.2015 - http://skift.com/wp-content/uploads/2015/03/White.Paper-2.pdf

⁷ Ibidem.

⁸ Ibid.

⁹ U.S. Open Skies Policy Comes Under Scrutiny // Aviation week. 29.01.2015 - http://aviationweek.com/commercial-aviation/us-open-skies-policy-comes-under-scrutiny

¹⁰ Lufthansa CEO dismisses 'cowboy' tactics used by US carriers in Gulf spat // Arabian Business, 13.03.2015 -http://www.arabianbusiness.com/lufthansa-ceo-dismisses-cowboy-tactics-used-by-us-carriers -in-gulf-spat-585414.html#.VhFoneztmko

¹¹ Open-Skies Agreement challenged // New York Times, 06.02.1015 - http://www.nytimes.com/2015/02/07/business/us-airlines-challenge-open-skies-agreements.ht ml

¹² Financial & other governmental benefits provided to american airlines, delta air lines & united airlines // Risk Advisory Group, 14.05.2015 - http://www.businesstravel-coalition.com/documents/financial-other-government.pdf

¹³ Etihad Airways says US carriers get $70 bln in government aid // Harriyet Daily News, 15.05.2015 -http://www.hurriyetdailynews.com/etihad-airways-says-us-carriers-get-70-bln-in-governmen t-aid.aspx?pageID=238&nid=82453

¹⁴ The World's Top 100 Airlines in 2014 // Skytrax World Airline Awards - http://www.worldairlineawards.com/Awards/world_airline_rating.html

¹⁵ Emirates Airline assembles top team to rebut US carriers' allegations over subsidies // The National, 07.03.2015 - http://www.thenational.ae/business/aviation/emirates-airline-assembles-top-team-to-rebut-us- carriers-allegations-over-subsidies

¹⁶ Etihad orders 56 widebodies, plus 26 options // Airheadsfly.com, 17.11.2013 - http://airheadsfly.com/2013/11/17/etihad-orders-56-widebodies-plus-26-options/

¹⁷ Etihad Airways' Issues Rebuttal to U.S. Carriers' Unfair Subsidies Allegations // Skift, 02.06.2015 -http://skift.com/2015/06/02/etihad-airways-rebuttal-to-u-s-carriers-unfair-subsidies-allegatio ns/

¹⁸ Etihad in strongest bid yet to quash 'Big Three' subsidies claims // Arabian Business, 02.06.2015 -http://www.arabianbusiness.com/etihad-in-strongest-bid-yet-quash-big-three-subsidies-claim s-594723.html

¹⁹ Emirates' response to claims raised about state-owned airlines in Qatar and the United Arab Emirates, p. 177. 29.06.2015 - http://content.emirates.com/downloads/ek/pdfs/openskies_rebuttal/EK_Response_Main.pdf

²⁰ Etihad Airways' CEO James Hogan says keep skies open // Arabian Aerospace, 3.06.2015 - http://www.arabi-anaerospace.aero/etihad-airways-ceo-james-hogan-says-keep-skies-open.ht ml

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