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U.S. airlines losing Asia market share

U.S. airlines have lost at least five percentage points of their share of flight bookings from the United States to the Indian subcontinent and Southeast Asia since 2008, due to fierce competition from Gulf carriers, according to data seen by Reuters.

More recently, U.S. carriers have seen an erosion in their share of bookings to Milan, according to a report the U.S. airlines sent to the White House and the departments of State, Transportation and Commerce. The 55-page white paper is not yet public.

The report says the combined share of bookings between the United States and the Indian subcontinent for Delta Air Lines, United Airlines and American Airlines has fallen to 34 percent in 2014 from 39 percent in 2008. The drop includes bookings on the airlines’ joint-venture partners, such as British Airways and Air France.

In the same time, Emirates Airline, Qatar Airways and Etihad Airways have surpassed them. The Gulf airlines’ share of that market has jumped to 40 percent from only 12 percent seven years ago, according to the report.

The report sheds light on the intensifying battle between the U.S. carriers and rivals from Qatar and the United Arab Emirates since “Open Skies” agreements authorized commercial flights between those countries and the United States more than a decade ago.

The data shows that the Gulf carriers have eroded U.S. airlines’ market share even beyond the subcontinent, although bookings to the region resulted in the largest revenue hit so far, Delta Chief Legal Officer Ben Hirst said in a telephone interview.

U.S. airlines and their joint-venture partners’ share has fallen to 36 percent from 43 percent of the market between the eastern United States and Southeast Asia, according to the report. The region includes Vietnam, Thailand, Indonesia, Malaysia and the Philippines.

Gulf carriers, meanwhile, expanded their share of bookings to 13 percent from just 1 percent.

The U.S. airlines are stepping up efforts to persuade the American government to alter or terminate the Open Skies pacts.

The white paper, citing confidential financial statements from the Gulf airlines, alleged that their rivals have received subsidies from their home governments contrary to U.S. trade policy. The report says loans, tax exemptions and other support totaled more than $40 billion since 2004, which the Gulf carriers used to pay expenses that airlines typically must cover themselves, such as aircraft acquisitions.

“We fully expect the government to act on the evidence,” Delta’s Hirst said, adding, “From the U.S. airlines’ standpoint, we’re competing with (foreign) governments, not private businesses.”

An official from the U.S. State Department said the agency was carefully reviewing the claims and coordinating with other agencies.

“The U.S. government takes seriously the competition concerns raised by our airlines,” the official said in an email on condition of anonymity. “However, we remain committed to the Open Skies policy, which has greatly benefited the traveling public, the U.S. aviation industry, American cities, and the broader U.S. economy.”

The report says the Gulf carriers could drive ticket prices down to a point where U.S. airlines could not afford to stay in certain markets, costing hundreds of jobs. They say government subsidies enable the Gulf carriers to buy planes and add capacity in excess of demand, forcing industry-wide price cuts on certain routes.

But advocates for travelers say that slashing prices and improving service is precisely what Open Skies agreements are intended to do.

“From the passengers’ point of view, they want as many choices as possible,” said Erik Hansen, a senior director at the U.S. Travel Association, a non-profit industry group based in Washington.

Hansen said he had not seen the report and could not comment in detail on its findings, but added that Open Skies pacts have improved the U.S. balance of trade. He said a change would “send a message that the U.S. is willing to implement protectionist policies if just a few airlines protest.”

Executives of the Gulf carriers dispute the U.S. carriers’ charges that they have received unfair subsidies and bailouts.

“We have no problem with competition. In fact, we relish it,” Emirates Airline President Tim Clark said in a statement last week.

The Gulf airlines are pushing to expand their reach. U.S. carriers have lost their share of bookings from New York to Milan since Emirates announced service there in 2013 as a stopover on the way to Dubai. Emirates’ share has jumped to 19 percent since then, while the share held by U.S. airlines and their partners has fallen to 78 percent from 85 percent.

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