CIBER Debate Focuses on Emirates and Open Skies

A dispute among U.S. and Gulf carriers over international routes might come down to differences in accounting practices, an Emirates Airlines official said Oct. 14, 2015, during a Center for International Business Education and Research (CIBER) forum in College Park, Md.

Under an arrangement known as “open skies,” airlines of many nations may freely compete on international routes, so long as they don't receive government subsidies.

U.S. airlines and some regulators argue that Emirates and other state-owned carriers receive these subsidies, which create unfair advantages. But Will Lofberg, vice president of international, government and environmental affairs at Emirates, disputed the claim. He said Emirates receives no subsidies, but differences in accounting practices between the two countries make this difficult to prove.

The real issue, Lofberg said, is old-guard carriers worried about losing control of a lucrative market. “Transatlantic flights are a goldmine,” he said during the forum, titled “Emirates and the Open Skies.”

Lofberg said only three carriers held 80 percent of those routes before Emirates started offering direct flights between Milan and New York City. He said only when Emirates became a competitive threat to U.S. carriers did U.S. policymakers take note.

If the U.S. is unwilling to have an open skies agreement with the United Arab Emirates, Lofberg said the United States should roll back open skies agreements with all state-owned carriers from countries such as China and Vietnam.

Professor Martin Dresner, Chair of the Logistics, Business and Public Policy Department at the University of Maryland’s Robert H Smith School of Business, outlined the counter perspective of U.S. carriers and policymakers.

These stakeholders allege that Gulf carriers have gotten $42 billion in state aid since 2004. Dresner said U.S. regulators are now sorting through the claims and counter claims, but so far Emirates and other Gulf airlines have not released their full financial statements.

The Emirates presentation included research showing its $3 billion impact on the U.S. economy, citing business with U.S.-based airports and companies such as Boeing.

Dozens of students at the CIBER event will visit UAE for a study abroad trip, where they will see firsthand how Emirates is using its geographic location as a strategic advantage.

Dresner agreed that the main advantage of Gulf carriers is not subsides but location: Midway between Europe and Asia, and near fuel sources. He said the vast majority of passengers on Gulf carrier flights are using the Gulf as a hub, not a destination.

Story by MBA candidates Anthony Uhl and Lauren Kessler.