Airline feud shadows industry amid 80pc surge in profit

Emirates has surged to the world's largest airline by international capacity from No. 30 in 1998. Photo / Getty

Global airlines buoyed by a record profit forecast are also grappling with how to mend a rift between the largest US carriers and their rivals in the Persian Gulf.

The annual general meeting of the International Air Transport Association began on this week in Miami with a prediction for 2015 earnings to soar almost 80 per cent to $29.3 billion. Within hours, Qatar Airways said the US airlines were mounting a protectionist threat and IATA's chief acknowledged the pressures unleashed by the dispute.

"It's no secret," Director General Tony Tyler said. "There is underlying tension in our industry."

His comment underscored how the trade group is trying to tiptoe around the US-Gulf spat. American Airlines Group, Delta Air Lines and United Continental Holdings want the US to reopen aviation-treaty talks with United Arab Emirates and Qatar on grounds that Emirates, Etihad Airways PJSC and Qatar Airways get improper government subsidies.

"Any rollback of liberal market access and Open Skies policies will reverberate across the whole world and lead to retaliation," Qatar Airways Chief Executive Officer Akbar Al Baker said during the conference's opening session. The Gulf trio has denied receiving any unfair assistance.

American CEO Doug Parker, whose airline is a partner with Qatar Airways in the Oneworld alliance, said he met with Al Baker in Miami and "we have a disagreement on this point."

"It has nothing to do with protectionism," Parker said. "It is about being able to compete against airlines, not governments."

While the issue is absent from the official agenda for the IATA event, some CEOs said the tussle inevitably will intrude on the gathering. The feud is a sobering counterpoint to the optimism on display among carriers benefiting from lower fuel prices savor the prospect of surging profits.

"It's a huge elephant and it's going to be in every room," Willie Walsh, CEO of British Airways parent IAG SA, said before the event. "We're all going to want to talk about it. Trying to run the AGM and pretend it doesn't exist is impossible."

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IATA is trying to steer around a dispute that is properly resolved by governments, not the industry, Tyler told reporters at a press conference.

"It's obviously important for us to be, as far as possible, united and agreed," Tyler said. "This is one on which our members have different opinions."

John Strickland, director at London-based JLS Consulting, said the industry would be well served by a full-throated discussion of the issues posed by the Gulf carriers' emergence as industry heavyweights.

Emirates has surged to the world's largest airline by international capacity from No. 30 in 1998, according to figures compiled by Delta, American and United. Qatar went to 10th from 90th, while Etihad is 13th. It didn't exist in 1998.

"It needs to be an open debate, not just whispers in corridors, because the airline business is changing," Strickland said in a telephone interview. "You still have the rock-solid markets of old, but you have new ones developing. Some carriers are seizing new opportunities and challenging the status quo. The question is, do you complain or do you follow their lead?"

No one predicts a quick resolution of the dispute. Among the people attending the meeting will be US Transportation Secretary Anthony Foxx, added to the list of speakers late last week. The Transportation Department is among the federal agencies reviewing the US airlines' Gulf complaints.

"It would be healthy for the industry to discuss it," IAG's Walsh said. "I don't think that's going to happen because I think people will want to avoid it and be diplomatic."

- Bloomberg