Delta reduces service to Middle East; blames carrier subsidies

Atlanta-headquartered Delta Air Lines has announced it will terminate its flights between Atlanta’s Hartsfield-Jackson International Airport (ATL) and Dubai (DXB) effective Feb. 11, 2016.

Delta 777 on take-off
Photo provided by Delta Air Lines
As it has previously, the airline cited unfair competition by Persian Gulf carriers Emirates, Etihad Airways and Qatar Airways.

“The announcement comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and heavily subsidized airlines, and less than a month after Delta reduced service between the world’s busiest airport and the Middle East’s largest hub,” the airline said in a statement posted on the News Hub portion of its website.

Between 2008 and 2014, about 11,000 daily seats were added between the U.S. and DXB and Abu Dhabi International (AUH) in the United Arab Emirates (UAE) and to Hamad International Airport (DOH) in Doha, Qatar according to Delta, which added that more than 95 percent of those seats are flown by the three Gulf carriers.

“Of the 14 daily flights between the U.S. and Dubai, only two are operated by U.S. carriers,” the airline said. “Despite the increase in passengers traveling on these flights, the number whose journeys actually originate or end in the Gulf has essentially remained flat.” More on the importance of that last sentence later in the article.

Delta (NYSE:DAL), American Airlines (NYSE:AAL) and United Airlines (NYSE:UAL) have asked the U.S. government to open consultations with Qatar and the UAE to address the issue of more than $40 billion in government subsidies given to the Gulf carriers. 

In March 2015, Emirates president Sir Tim Clark called the issue of subsidies a red herring.

“All the debate about what constitutes a subsidy, what is fair or unfair competition under whose laws are just distractions from the real issue at hand – which is that the three biggest U.S. carriers, who together with their joint venture (JV) partners already control about two-thirds of international flights from the USA, want to further limit the international air transport choices available to American consumers, airports, local and regional economies,” Clark said at a media briefing following a meeting with U.S. government officials.

Then in June, Emirates issued a 210-page document that contained a point-by-point rebuttal of the allegations contained in a 55-page white paper issued by the legacy U.S. carriers. More details are available here.

Clark also said customers should be asking why the three legacy U.S. carriers are among the world’s most profitable airlines, yet nowhere close to being ranked best airlines for service.

Emirates A380 in flight
Photo provided by Emirate
As I and others have said before, service is indeed the crux of the matter.

The results of the 2015 SKYTRAX World Airline Awards, which are based on the opinions of travelers from over 160 countries, bear that out.

In the “World’s Best Airline” category, the three airlines that are drawing the ire of U.S. airline executives occupied the No. 1, No. 5 and No. 6 spots (Qatar, Emirates and Etihad, respectively). The first U.S. airline to show up in the “World’s Best” category is Virgin America, at No. 26. While Delta was first among the big three U.S. carriers, it was ranked No. 45 among the world’s top 100 airlines. United was ranked No. 60 and American No. 79.

Even a recent LinkedIn article by the founder of missed the mark. George Hobica ended his article by pointing out that, “[A]s more U.S. airlines eliminate service on other routes to the Middle East and elsewhere, Emirates, Qatar and Etihad will be free fill the vacuum with higher fares.”

Yes, but…

While his foresight may prove accurate, Hobica’s prediction ignores a reality that Delta itself pointed out: “Despite the increase in passengers traveling on these flights, the number whose journeys actually originate or end in the Gulf has essentially remained flat.”

If and when the Gulf carriers are in a position to raise their fares, those passengers who are now flying the Gulf carriers and connecting to other destinations will find other ways to get where they are going and the three Gulf carriers will feel the effects. Or passengers will choose to pay the higher fares because of the service they receive. Either way, it’s their choice, and that is as it should be.

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