Gulf carriers receive massive aid and other benefits from their governments, resulting in huge, artificial and unfair cost advantages. The United Arab Emirates and the State of Qatar have subsidized their airlines, Emirates, Etihad, and Qatar Airways, respectively, with over €39 billion in subsidies. The EU has been keen to liberalize air transport, but airlines cannot compete with state-subsidized carriers from the Middle East that do not play by the rules.
These massive and unparalleled subsidies have allowed these three airlines to expand at an unprecedented rate into markets they wouldn’t have otherwise been able to expand into if they were operating as true commercial enterprises without government subsidies. The subsidies have also allowed them to purchase considerable quantities of wide-body aeroplanes and flood existing aircraft routes with excess capacity (seat-dumping) while artificially lowering fares.
Why is this so serious?
It can be challenging to visualize the long-term impact that these subsidies will have on the European aviation market, industry employees, and consumers. While, there is a very real threat currently from this unprecedented, subsidized expansion (600 European-based jobs are lost for every route abandoned as a result of the predatory expansion of one of the three Gulf carriers), the long-term reality is far more dire.
Gulf airlines are artificially lowering ticket prices to distort the international airline marketplace and steal marketshare from EU airlines at the detriment of European jobs. As European carriers begin to lose long-haul routes to their subsidized competition, they are not able sustain their vital intra-European short haul routes, and Gulf carriers, with a monopoly on many international routes, will be able to set whatever price they like for tickets. The subsidized Gulf airlines are not just hurting European carriers and aviation workers, they are also bad for consumers and could be devastating for Europe’s economy. Aviation infrastructure is a strategic economic asset, not to be dominated by foreign interests. More seats are already offered between Europe and the Gulf than between Europe and China, Japan, and South Korea combined, while their GDP is 25x bigger than the UAE and Qatar. This is the direct result of subsidies and distortion of the marketplace.