ASEAN has recently reached a milestone to open skies
agreements and the establishment of an ASEAN Single Aviation
Market, which will benefit customers with more choices as well as companies
in being more cost-efficient.
Over in Europe, the European Commission has adopted a new Aviation
Strategy for Europe with a Single European Sky, probably to tackle the
fierce competition in the air industry by placing the EU as a leading player in international
aviation whilst guaranteeing a level playing field.
Meanwhile, the open
skies dispute between the Big Three of the US airlines (American, Delta,
United) and the Big Three of the Gulf carriers (Emirates, Etihad, Qatar) is
still ongoing. The American airlines
claim that the Gulf governments provided $42 billion in subsidies to their
airlines, against open skies aviation agreements. The Gulf airlines argue that the amounts are
equity from their governments, who are the owners of their businesses, since the
airlines are all wholly owned by the government. The
Economist in their analysis also cited the example of the generosity of the
Gulf carriers to the media, which it felt was a conflict of interest in the
reporting by the media.
What is undeniable are the investments by the Gulf airlines
of other airlines. Qatar
Airways had a 10% stake in British Airways’ parent company IAG which it
upped to 12% recently, and it is eyeing more airline investments like Italy’s
Meridiana and India’s IndiGo. Etihad Airways
had invested 49% in Alitalia,
Italy’s national airline, as well as 29.21% in airberlin (Germany’s second
largest airline) and 40% in Air
Seychelles (national airline of Seychelles). Emirates Airline
has an alliance with Qantas where Emirates gain access to 50 points in
Australia and Qantas connects unto Emirates’ flights to more than 70 destinations. To meet the rapid growth of Emirates Airline,
the Dubai
government is investing $32 billion for a new airport Al Maktoum International
at Dubai World Central. Dubai International is already the world’s busiest
airport having overtaken from London Heathrow in 2014 and 2015.
Open skies policy is a double edged sword. Is it fair for private airlines to compete
with government owned airlines? The amounts that governments can inject into
their airlines business, whether it’s equity transferrals, interest-free loans
or debt guarantees are generally not something that private companies can match
up to.