Delta CEO Links “Big 3” Middle Eastern Airlines To Terrorists… Really?!

There’s a big battle brewing between the “big three” US carriers and the “big three” Middle Eastern carriers, whereby the US carriers are pressuring the government to intervene.

I explained this in a post several days backed, entitled “Should The Big Three Middle Eastern Airlines Be Stopped?”

Emirates-Dubai

What it basically boils down to is this:

  • The “big three” Middle Eastern airlines are government owned, so the US airlines claim they’re no longer competing with other airlines, but rather directly with governments
  • Clearly this wouldn’t be an issue if the Middle Eastern carriers weren’t gaining so much market share; this scares the US airlines, because the growth of the Middle Eastern carriers seems endless
  • Is this even really a fair complaint, when US airlines have also benefited from governments over the years?

Ultimately this comes down to a government policy debate. Should airlines that are government owned be allowed to compete with for-profit, privately owned airlines? As I’ve explained in the past, I think it’s a slippery slope. There are dozens upon dozens of government owned airlines, yet they’re only going after the “big three” Middle Eastern carriers.

While the point can’t be made if this is a government policy debate, what they’re obviously scared of isn’t that the Middle Eastern airlines are government owned as such, but rather that their goals aren’t to maximize profit for the airline, which is something US airlines can’t compete with. Instead the Middle Eastern airlines want to build up the infrastructure and accessibility of their cities/countries.

Anyway, Richard Anderson, Delta’s CEO, appeared on Richard Quest’s CNN show yesterday (Quest Means Business) to make his case for why the Open-Skies agreements need to be reworked. Here’s the segment:

My impression of Richard Anderson has always been that he’s a really bright guy, though this segment left me shaking my head, especially towards the end when he said:

“It’s a great irony to have the United Arab Emirates from the Arabian peninsula talk about that given the fact that our industry was really shocked by the terrorism of 9/11 which came from terrorists from the Arabian peninsula that caused us to go through a massive restructuring.”

Seriously?!?!?!?!

In fairness, Richard Quest is a really bright guy and asked some fantastic questions, though you’d think Delta’s CEO wouldn’t be so easily stumped.

Bottom line

As I’ve said before, I think the truth is in the middle. If the US airlines want to go after the “big three” Middle Eastern carriers, they really have to go after all airlines that are government owned. And if they do, that’s a slippery slope. Where does it stop — if they’re 100%, 50%, or 5% government owned?

At the same time I don’t buy the rebuttal of the Middle Eastern carriers saying “well, the US airlines just need to learn to compete on service.”

So while I’m all for fair competition, I think I side with the Middle Eastern carriers here. Part of competing in the global airline industry means accepting that life sometimes isn’t fair and that not all airlines are on a level playing ground, from staffing costs to capital to profit goals.

But if the argument is that it’s not “fair” to compete with government owned airlines, it hardly seems fair to single just three airlines out.

What do you think?

About lucky

Ben Schlappig (aka Lucky) is a travel consultant, blogger, and avid points collector. He travels about 400,000 miles a year, primarily using miles and points to fund his first class experiences. He chronicles his adventures, along with industry news, here at One Mile At A Time.

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Comments

  1. “by the terrorism of 9/11 which came from terrorists from the Arabian peninsula”

    Then go after Saudia, you twat.

    Lucky, the US can compete in service by hiring well, better, nicer, and more professional people, both on the ground and in the air. Regardless of the hard and soft products, a good FA can go a long way to improving the flight. You don’t rave about US FAs the way you do over Asian and Middle Eastern and some European carriers.

  2. As you point out, a lot of airlines are (partially) government owned and there’s nothing inherently wrong with that. There’s a strong case to be made that keeping an airline afloat can be beneficial to the economy of a nation and as such an important task for the government.

    However, I’m not sure the big Mideast carriers exist solely for the economic and logistic benefits that they bring to their host nations. I believe part of what the UAE and Qatar pursue with their airlines is to extend their political standing and so called ‘soft power’. There’s nothing wrong with that either – and in fact it just shows how wrong Richard Anderson is, as the goal is partly to remove themselves from the terror association – but I’m not surprised by the reaction of the US carriers either. It’s hard to operate into a purely economic logic if your competitor is willing to put aside the short-term economic benefits to pursue short-term political gains (and longer-term economic benefits).

  3. I have no problem with his comment their governments support terrorism and aren’t friends of the US or Israel, why I will never visit or fly on them.

  4. These days I advise my friends to fly Emirates when they can. I generally avoid the U.S. carriers. With their very unfriendly changes recently they have lost a lot of goodwill.

  5. Pretty weak…take care of your customers, provide better service, and you wouldn’t have to whine about your competition. I was already not a fan of Delta due to their recent slight of hand shenanigans…I’ll look for other options, thank you

  6. Well, their governments do sell cheap oil and gas to the US, import tons and tons of products from the US, and allow the US to operate military bases in some areas of those countries.

    As for Israel…well, fuck Israel.

  7. @Josh G

    That is just ignorance on your part. None of the governments behind the big 3 airlines are sponsoring terrorists. They are relatively neutral growing in the Middle East.

    And stop acting like Israel is the angel of the Middle East. As an American I find Israel absolutely incompetent in handling any situation and always turning to the U.S. for handouts.

  8. Idiot,stupid ignorant,just Jealous cause they cant compete with the excellent service provided by Mideastern airlines,american airlines fit for third world and only pick what suit them.

  9. To put the blame for US airlines’ financial woes on 9-11 seems a big stretch; I would concede it was probably a tipping point, though. Hopefully Anderson regrets the implications in his remarks. But back to the original argument, I don’t see how this is really that different from trade agreement violations that give one country’s industry an unfair advantage. For example, didn’t the US go after China for dumping steel into the US market at prices that were less than the cost to produce it? I’m not sure why this is different. Isn’t an open skies concept like a free trade agreement? We open our markets to each other, provided the playing field is reasonable level. Lucky, your assessment is dead on. It’s ultimately about the money. When and if Cubana starts flying to the US in a few years I doubt any of the big three US carriers are going to start complaining.

  10. USA should nationalize the airline industry and create one big flag carrier to compete against the Middle East airlines. That levels the playing field.

  11. @Josh G, so as an italian i have the right to say that i’ll never fly an US airline because of all the mess that your loved american government is causing around Europe. Now thanks to the “arab spring” promoted by your government we have war and destruction at less than a few hundred miles from our borders with thousands of refugees trying to enter illegaly in Europe through our country.

  12. My apologies for my previous, incoherent post. I guess I got upset by the outrageous quote from Mr. Dick Anderson.

    What, Delta Airlines hasn’t made enough profit lately? Delta Airlines hasnt screwed their freequent flyers enough lately? I guess the next thing to avoid true competition is to brand your competitors as anti-America and any passenger flying them as someone who “hates America.”
    PThis was truly a cheap shot from the Delta CEO. Does he really want to link flying with geopolitics? Here’s a question, what government has been waging war all over the Middle East for the past 13 years???

  13. I have to agree with Cee. And JoshG… Really? You clearly know nothing, less than nothing about this. I am a complete pacifist and zero affiliation with the Arab countries or religion for that matter.

    But I know that the UAE is neutral or an ally of the U.S. and does not support terrorism. In fact I just passed thru Abu Dhabi for a few days to attend the Redbull air race. Coming through immigration with 3 U.S. passports we are asked “first time here?” Followed by a huge warm smile and a big “Welcome!”

    The worst treatment I ever get coming thru immigration? Yep…you guessed it…the good ol US of A. Everyone in UAE was quietly friendly and made us feel like they truly valued our visit. Slightly off topic from this xenophobia…The Grand Mosque there was breath taking, the food and value for money was outstanding.

    IMO… people like Anderson and JoshG are bigots, what’s wrong with this world, and the reason we will always have war.

  14. Many other airlines are government-owned, but these are the only three that exist for geopolitical purposes. They are adding flights not to make money, but to hurt other airlines.
    Of course in the long run (looking at the next hundred years) the market forces might win out, and the fact that these middle-eastern governments are sinking so much money into these airlines might turn out to be a huge mistake.
    About the terrorism angle: no, 9-11 was connected to Saudi Arabia, but more recently, a lot of the money that ISIS has reportedly came from Qatar.

  15. The CEO looks shaken after all the negative press about vanishing award charts. Thought he atleast can find some refuge with the beaten-to-death terrorism argument, really fails miserably. More reason to dump Delta if he is lead by a man like this.

  16. Wow. What an ignorant thing for him to say. So he wants to act like a hick and go with the “Arabs are terrorists” argument? (I know that’s not what he said, but it really sounds like that’s where he was leaning. Nothing will get a GOP congress revving like the mention of terrorists. They have to appease their uneducated, Fox News watching constituents who are afraid of anyone with brown skin.)

    God. He’d rather sound like a complete and total bigoted idiot than improve his crappy airline and start treating his passengers like human beings. That’s what it all boils down to. American airlines suck and they know it. Period. And they want to be able to continue to provide as little as possible while demanding high prices. They don’t want us to have choice. They don’t want to have to spend money to improve their products, customer experience or passenger comfort. No. They want to run crying to their government and point at the ME and scream “terrorist” like a whiny tattle tell on the playground. They want a monopoly because they’re greedy a-holes.

  17. @ augias — I don’t think that’s quite fair. I don’t think they’re adding flights to hurt other airlines, but rather to build up their own infrastructure/significance. I think there’s a big difference between the two.

  18. @ wwk5d — I agree, but fundamentally I don’t think that the reason US airlines are or aren’t doing well is because of the friendliness of their staff. The cost disadvantage certainly works against them, and the fact that staff have a right to unionize in the US also means that management can’t be quite as “strong-armed.”

    But ultimately service as such isn’t all that important, in my opinion, when it comes to this debate.

  19. He should run for politicians.. twisting things around for his own benefits and explains why his ideas are better for the masses. sound familiar?

  20. There is a thin line between an old fashioned price war and dumping. I do think there is a fair argument to be made on behalf of US airlines that the Middle Eastern carriers are dumping capacity on US markets. Witness, as has been pointed out on this blog, Emirates use of an A380 at DFW, and now upgauging to an A380 on JFK-MXP. It is anti-competitive behavior, and does fall in the realm where government should consider trade remedies. This happens in the American domestic market as well: for example, look at United’s response to Virgin America’s entry into Newark

    I think a reasonable compromise could be reached, whereby Emirates, Etihad, and Qatar agree not to fly US-Europe, which is the expansion that US airlines are really worried about. In return they would be allowed unlimited flights to their hubs in the Gulf from the US. The only major market where US airlines would compete with the “ME3” is to India and East Africa, which are hardly served now as they are difficult markets to turn a profit on.

  21. @Haldami,
    Thank you for such a brilliant observation. It really takes a genius like you to figure it all out and you did an outstanding job. Thank you once again.

  22. A few months ago there was a great article in CAPA, highligthing that most of the growth for the ME airlines, comes from places where the US airlines haven’t had any presence or desisted from serving, i.e. India.
    I wonder why Mr. Anderson doesn’t complain about the monopoly in ATL or all the benefits that he geys from the city of Atlanta. We don’t even have ME airlines flying to ATL.

  23. There is a lot of emotion in the comments but here is what it boils down to, re: Anderson’s comments and allegations:

    1. Do the Middle East carrier receive government “subsidies” in form that violate the definition of such by the WTO and the Open Skies agreements?
    2. As to the blog post about not going after other foreign carriers, do they receive similar subsidies or are any government funding they receive within the bounds of WTO and Open Skies?

    That’s the issue as to whether Anderson has a point. To the extent that all carriers are within the terms of their international agreements, THEN you compete on the normal parameters any business competes on, e.g., price, quality, service, etc.

    Anderson raises valid points IF he has the documentation he claims. If he is incorrect, then the Middle Eastern 3 are just better at competing. Personally, I have a concern about any business having to compete in a free market with competitors that are highly government funded and not limited by the constraints of profit and loss. Granted, there is a balance and other countries have different economic systems and laws and global airlines, by definition, compete in an international market.

    To the point about profit and loss constraints, I think that is the point Anderson was making re: terrorism. I do not think he is “linking” the three ME carriers with terrorism per se. If not for your blog headline, I would not have taken it that way. I think his point goes back to the constraints of profit and loss which put more on purely private airlines as opposed to “government airlines.” I think he is pointing out the irony that carriers from the region from which the 9/11 terrorists came touching on the results of that P&L limitation, i.e. bankruptcy post-9/11 amid the industry downturn. A government subsidized carrier, perhaps one that is an arm of the government, would not have had to declare bankruptcy as Delta, American, etc. had to, actions that necessarily squeezed their ability to offer the top levels of service. You could argue it is not fair to make a blanket statement regarding terrorism and the region, a region that happens to be home to those ME airlines. But it’s a pretty common statement for anyone to say “Well America did this” and lump all US citizens and businesses into one pot. You can argue that is not an accurate of fair statement to make even when not trying to paint all associated entities with a negative brush, but it’s a common rhetorical statement and it would be easier to boil the ocean than trying to stop the use of such discussion points.

  24. Delta’s true motto: Driving Every Loyalty Traveler Away!

    This comment against ME carriers is completely inappropriate. Anderson knows DL’s BE product does NOT hold a candle to carriers like EY, EK, and QR, so he has taken a tact of claiming unfair competition rather than making a better product for his customers in the international market.

    Then again, it comes from the DL CEO whose airline is doing everything in its power to destroy the traditional frequent flyer loyalty program. DL implemented spending requirements for US residents MQD’s and then went to a revenue based system for the accrual of RDMs which often results in travelers receiving 30 to 60 percent fewer miles than they did under the previous SkyPeso program. DL does not even have a SkyPeso award chart available and placed a cap on AMEX MR transfers, after it touted that its members would experience better award availability in 2015.

    Ben, you had the foresight to abandon UA for AA, but I don’t think we would have ever anticipated that United would copy Delta in such a precise manner. United then blindly copies Delta without having its product or operations via PQDs & RBS for RDMs.

    I hope AA keeps the traditional frequent flyer program intact, as true competition is needed in the US airline market. Otherwise, it’s time to forget about the miles earned via flying and just buy the best valued product, regardless of carrier or manufacture spend via credit cards.

  25. Funny thing he said they are competing , I just don’t see how are they competining while devaluing their mileage program which is becoming lesser attractive.

  26. I wonder when Boeing will step in. The will lose a lot of big customers in the Middle East airlines if the open skies policy is reworked.

    It would be interesting to know how much they make from the U.S. carriers compared to the ME3.

  27. @Charles great question. we could add up (would take a while) but would be interesting to see the number of Boeing aircrafts in US carriers and M3

    Delta just went with Airbus (321) with its expansion.

    I want to be a fly on the wall to see if M3 is using (We will by Airbus vs Boeing) as a card to push US politicians with it behind closed doors.

  28. For a minute there I thought I was watching Faux “News”!

    Seriously, these sheikhdoms (UAE, Qatar, and Bahrain) were created in the 1970s by the West (mainly the British) and they remain strong Western allies and bases for our troops in the middle east. Also, the Saudis contribute so much to the US economy since the mid-1970s and helped contain the Soviets during the cold war and the spreading of the Iranian revolution of late 1970s. They continue to assist our foreign policy of containing Putin by their recent driving down the oil prices (which Delta did not pass the savings to its customers) by increasing oil production. Sure, they might not agree with Israel over its treatment of the Palestinians but that hardly make them terrorists or terrorist sympathizers. They are actually semi-allies with Israel as they disagree with Hamas and Hezbollah in theory and practice … research and find out!

    Wait a minute! Didn’t the US bail out the airline industry after 9/11???

  29. @Andy @cee
    You 2 might want to Google Hamas and Qatar before you jump allover JoshG. The Qatari government is putting up the Hamas top leadership and is their most active supporter together with the Turkish government, so yes there is a government that support terrorists and owns a ME3 carrier.

    It’s just too bad Etihad and Emirates gets put in the same box with QR since UAE is probably after Israel the best run country in the region and don’t have a government supporting terrorists.

    Just saying.

  30. The US carriers are making record profits providing subpar to mediocre service and getting away with it because the 3 recent mega-mergers have greatly decreased competition, tilting the playing field in favor if the US Big 3 and locking in the US flyer who has nowhere to turn. With things going so well, what the US Big 3 are afraid of is for someone to come in and rock the boat to cause them to lose their oligopolic hold on the US flyers. The competitive forces that would be put in motion by the 3 stellar ME airlines would “rock the boat”, so they must be defeated.

    If you ask me, I’d say that anything that threatens the US Big 3’s oligopoly it is a Good Thing…

  31. I find it hard to believe that the big 3 US Airlines have not received government assistance of their own over the years? If not outright funding then government intervention in labor disputes to make the employees accept concessions to help out the airlines? Every time I have seen, read about, or have been forced to hear this Anderson guy over the years makes me embarrassed that people might find out how loyal to Delta I have been.

  32. Isn’t it telling just how hated the three big US carriers are if the “heroes” of this story are the three Gulf States carriers? They aren’t exactly paragons of business virtue.

    This is an industry that worldwide has been unable to generate the cost of capital and even in the best of times (like now) doesn’t really generate healthy margins. It’s never, ever had a rational market. Governments interference is constant. Most nations think that having airline service is a public policy issue. They’re probably not wrong.

    Internationally, US government policy for a long time has been Open Skies. Why? Because they thought that would favor US travelers with lower fares. Secondarily, it would favor US airlines — which provided well paying jobs to US voters too. Now everyone knew all along that foreign carriers were subsidized more than US carriers but that wasn’t all that critical because the subsidies weren’t used to expand service but were instead used to prop up existing flag carriers who had labor costs that were as high (or higher) than the US carriers. Additionally, EU rules (among others) provided a check on subsidies. Moreover, the US domestic aviation market was large enough to provide feed that provided an advantage to the US airlines that overcame the relative lack of subsidies that US carriers received. (I’m not saying that US carriers aren’t subsidized at all – but the reality is that the subsidies are usually indirect and far less than other nations. Moreover, airline taxes that US travelers pay generally have paid for all of these subsidies. Emirates’ claims about how US carriers are subsidized are pretty lame if you read into them). The Gulf carriers are different, however. They don’t really have to worry about making money. In general, their labor policies are cringe worthy. Their purpose is to help their nations as a hedge against when the oil inevitably runs out. Isn’t that for those nations to decide (though we can all make our own decisions about their labor policies)?

    I live in DFW and enjoy seeing the beautiful Emirates A380, the Qatar 777, and the Etihad 777. Are these rational? No. Is this what Delta, American, and United are worried about? Maybe not. But none of the US carriers could make India work because of the Gulf carriers. Is that enough to be worried? It’s enough to start the conversation especially when Emirates has service to Milan.

  33. Kabobs, spot on. Yes, Dick Anderson forgot to mention the billions of taxpayer dollars Delta and the other US flagged carriers received after 9/11. No loan mind you, just a handout from the taxpayer to the airlines because……well just because.

    Also Dick forgot to mention his airlines near monopoly in ATL and all the concessions Delta receives from the local, State (and Federal) governments. He’s a hypocrite.

  34. Brian, re the Emirates JFK-MSP service, if Dick Anderson is concerned about that, maybe Delta should fly non-stop from their main hub (ATL) to Milan. As an ATL based flyer who will be heading to Milan later this year, if I have to connect on Delta at JFK anyway, I’m going to choose Emirate.

  35. @No Name

    One person’s terrorist is another person’s freedom fighter. Just ask the Haganah, the Irgun and Lehi.

  36. I’m not too sure what the Dick is huffing, but I want some! At least on my days off, since it’s obviously pretty mind bending.

  37. Not surprised coming from a guy that brags about being the CEO of Delta on the safety video and that he runs the best airline, bla, bla, bla…. but at the same time he is stabbing his loyal customers on their back. He is jealous that the Big 3 from the ME are just setting a new standard for flying that he knows he will never be able to offer because he is greedy and could not care less about his customers.

  38. Why does it matter who owns the airlines – government, trust fund, individual …
    I think what matters is the cost structure. If American Airlines can prove that the costs of Middle Eastern airlines is much less due to factors not in their control, maybe then they have a case. Only maybe, cause globalisation means we are looking to buy the product from whoever can produce it at the least cost ( more efficiency ).

  39. It’s a different story altogether if the middle eastern are selling bellow their costs, and their governments subsidizing these loses for economic and political development. That’s what he means by governments vs airlines. Hmmmm…

  40. Now this jfk – mxp (or any other such) service doesn’t seem to be promoting economic development of the country , but just seems to be a jab on their competitors. This is what he and others are complaining about. Also, I think they’re overdoing this by upgrading to an a380 just because they can.

  41. Dear Delta (the innocent ones in the skies and on the ground)
    When you choose to short change all your members with a devalued program and over priced redemption seats with a non working website I’m sure its right to blame it on the Gulf Carriers
    When you choose to offer sub par food on board it a fault of the Gulf carriers
    When you choose to have 30 year old beat up old aircraft with surly flight attendants again all because of the gulf carriers
    Cramped inhumane coach seating blame it of the Gulf carriers
    Horrible ignorant untrained phone agents who don’t know their sky team partners or how to book in the correct class of service blame it on the Gulf Carriers

    Cry me a river even though you are destroying customer loyalty one day at a time
    I simply cant run fast enough from your horrible program hard product and culture which gets no respect from me
    I remember years ago when folks though Delta was bad. Now they are serious about achieving the permanent perception and reality
    Learn how to compete not monopolize into the market
    Cheers

  42. More competition always benefits the consumer. And if the whiny US carriers don’t like it they should improve their product and/or reduce prices to compete. Or shut up.

  43. I don’t believe a word that slime bag says. The legacy carriers conned the government into consolidating the industry in the name of benefitting the consumer. All they have done is line their pockets and given the consumers the shaft. I’m not surprised Anderson is whining to prevent competition.

  44. @dwonderment, living in ATL, I fly DL almost exclusively and I do not recognize the airline that you describe. It sure is not DL. Not sure where the vitriol is coming from but that is a strong overexaggeration. Whether or not their product is subpar is not the question. The question is are the ME3 in violation of Open Skies and WOT guidelines. The quality of Delta’s product is irrelevant to that.

  45. His remarks were in response to the ME3 accusations that government intervention after 9-11 which was required to prevent the total collapse of U.S. aviation and the economy…. amounted to subsidies. Funny that wasn’t mentioned in the article, and the responses here make that sound like something it isn’t. He said that it’s ironic that those claims came from countries where the terrorism originated from. That’s all. And it’s the truth…

  46. What rubbish. You have taken Mr. Anderson’s comments completely out of context. As a lifelong Delta flyer, I can tell you that I cringe when I have to fly on another airline. Also, I routinely pay for my first class seat and as a result, I receive frequent flyer points that I can use to upgrade myself to first class when I choose via the pay with miles option. The food is excellent on Delta. The FA are polite and courteous. The airplanes are spacious and always clean. I don’t know what the issue is? When I lived in Miami and had to flow on American I used to dread the experience of flying on dirty, crowded airplanes. Just not even the same class as Delta. If you are looking for a discount experience, maybe Delta isn’t the airline for you. If you are looking for handouts? Maybe Delta isn’t the airline for you. If you are looking to pay a fair price for a superior flight experience? Well, Delta is ready when you are.

  47. @JanetJacksonEmporiumFlyer Janet, Say hi to Michael, would you?. We miss him…. just trolling around
    I believe the discussion is about the difference between Delta and the “Big 3” Middle Eastern Airlines. I agree that Delta is superior (for now) than AA. “Big 3” Middle Eastern Airlines are superior to Delta.

  48. To ignore the fact that US carriers are at a pricing disadvantage is delusional. Whether it is the ridiculous rules set forth by Unions, airport fees, maintaining a necessary / extensive but costly domestic network. The costs the US carriers must endure are considerably more. I will laugh when all the EK lovers get their wish and the only domestic carrier that will be left is Spirit. Emirates is run by the Uncle of the PM of the UAE. The Airline not only dumps it’s capacity (as the largest A380, B777ER carrier flying) in the US without concern of dealing with a BOD or Stockholders that are interested in making a profit. Their long term goal is to drive all US carriers out of business. So be it that may well happen and the idiots in this country will be at the mercy of very unfriendly Middle Easter despots.

  49. It’s as if the Middle East airlines are the only ones better than the US carriers. Asian airlines are so much better even against the ME3. If the US airlines want to be competitive, appealing to patriotism isn’t going to solve their problems. That didn’t work for the US auto industry against the Japanese carmakers and it’s not going to work with flyers. What they need to do is to make themselves more competitive in terms of hard and soft product. I would not fly United or Delta internationally when the likes of Singapore Airlines and Cathay Pacific are available going to my destinations.

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