It's Official: US Govt Investigating ME3 Finances

pu · Fri Mar 20, 2015 1:12 am

"The Obama administration....is in the early stages of studying claims that Gulf airlines have received market-distorting subsidies..."

"...alleged subsidies of more than $40 billion ... must be taken seriously...."

"...The (U.S. government) interagency team...[asked]...the U.S. airlines...several technical and clarifying questions about the data...contained in their report...

My prediction, previously stated on another thread, is that there will be a compromise here something along the lines of ME3 are limited to their status quo service to the US while the Ex-Im Bank and other Boeing-friendly programs are kept in tact.

Pu

http://www.reuters.com/article/2015/...on-regulator-idUSKBN0MF07D20150319

29erUSA187 · Fri Mar 20, 2015 1:20 am

Good. Even if they can't find anything, at least they are taking the claims/accusations seriously. Here's hoping they find some illegal finances!

Miami · Fri Mar 20, 2015 1:20 am

Well, good. Maye this will finally end all the nonsense.

GSPSPOT · Fri Mar 20, 2015 1:29 am

This is insane. Pissing matches never end well.

flyDTW1992 · Fri Mar 20, 2015 1:32 am

While in a general sense I'm not really taking sides in all this nonsense, I'm definitely not up to speed on any international legal ramifications of this situation...Say the US Gov't were to find something...What exactly could they do about it??

lesfalls · Fri Mar 20, 2015 1:35 am

I'm hopin EK will still be able operate their JFK-MXP route . Good luck to the U.S. government .

S75752 · Fri Mar 20, 2015 1:48 am

Well, this should be interesting. I wonder what the results with whatever result they conclude.

If they conclude that subsidies happen, will there be actual limitations and consequences to the ME3, like limiting traffic rights or removing the open skies?

If they conclude that no subsidies happen, will the US3 be liable for slander/libel?

thekorean · Fri Mar 20, 2015 1:55 am

Quoting S75752 (Reply 6):

Hard to prove they intentionally lied.

SWADawg · Fri Mar 20, 2015 1:55 am

This will probably not end well for the ME3. I suspect they need the U.S. for their global expansion plans a lot more than the U.S. needs rights to operate the the Mid East.

pu · Fri Mar 20, 2015 1:58 am

Quoting S75752 (Reply 6):
If they conclude that no subsidies happen, will the US3 be liable for slander/libel?

The US politicians will look at the election map for 2016 and decide this issue accordingly.

US3 employees alone are enough to impact elections in at least Texas, Georgia & Illinois. Maybe also Florida, Michigan, Minnesota, Colorado, Virginia, N Carolina, Ohio? and ????
....plus the employees of their regional airline partners, travel industry partners, airport vendors and subsidiaries/outsource partners.

Personally, given the nature of politics and US elections which are often very close on the national level, I can't imagine that the administration and/or Congress will simply do nothing. It's not a matter of right and wrong, fair or unfair, which airline has the best food, etc. it's just politics.

Pu.

[Edited 2015-03-19 19:00:51]

sunrisevalley · Fri Mar 20, 2015 2:00 am

Quoting GSPSPOT (Reply 3):
This is insane. Pissing matches never end well.

Sounds like the WTO investigatons. All sides will be able to claim victory. I hope all the "haircuts" that the US carriers have inflicted on their creditors under Chapt.11 will be determined as subsidies to the US industry.

trex8 · Fri Mar 20, 2015 2:09 am

Quoting sunrisevalley (Reply 10):
I hope all the "haircuts" that the US carriers have inflicted on their creditors under Chapt.11 will be determined as subsidies to the US industry.

Everyone knows its a subsidy , just like the tax breaks airlines (and a whole bunch of other industries ) get for all sorts of things. But they are transparent unlike what the ME3 are accused of. They are also available to everyone in the US and hardly distort the ability of one carrier to compete with another in the same market.

Prost · Fri Mar 20, 2015 2:41 am

Sunrise alley, Air Canada didn't file bankruptcy?

thekorean · Fri Mar 20, 2015 2:47 am

Quoting sunrisevalley (Reply 10):

They do not get a dime from the government. It is not a subsidy.

Whatever they get from creditors its between them and the creditors.

PPVRA · Fri Mar 20, 2015 3:44 am

Quoting sunrisevalley (Reply 10):
I hope all the "haircuts" that the US carriers have inflicted on their creditors under Chapt.11 will be determined as subsidies to the US industry.

I'm not a fan of chapter 11 and I'd like to see it eliminated for good, but it ain't a subsidy. In fact, it has kept the US airline industry from recovering at a better pace, rather than boosting it.

silentbob · Fri Mar 20, 2015 3:50 am

Quoting SWADawg (Reply 8):
I suspect they need the U.S. for their global expansion plans a lot more than the U.S. needs rights to operate the the Mid East.

I suspect that the political ramifications will have a lot more impact than what the US airlines need. There is a large US military presence in Qatar and the US needs that a lot more than they need a happy US3.

Quoting pu (Reply 9):
The US politicians will look at the election map for 2016 and decide this issue accordingly

As if this study will be released to the public at a time when it could impact the election.

thekorean · Fri Mar 20, 2015 3:51 am

Quoting PPVRA (Reply 17):

I think the opposite, more countries should have it.

It saves jobs, as opposed to companies being liquidized altogether, straight away.

BD338 · Fri Mar 20, 2015 3:58 am

I really hope the US Govt. finds something and initiates protectionist policies to support the ailing US3. That way they can continue to limit true competition in cozy JVs with their European partners, charge the customers a premium for mediocre service and not have any outside competition that might just benefit the customer rather than the US3 investors. I might be a tad cynical.

thekorean · Fri Mar 20, 2015 4:10 am

Quoting BD338 (Reply 20):

There are competitions here. EK, EY and QR are not the only other options.

strfyr51 · Fri Mar 20, 2015 5:03 am

Quoting SWADawg (Reply 8):
This will probably not end well for the ME3. I suspect they need the U.S. for their global expansion plans a lot more than the U.S. needs rights to operate the the Mid East.

You are CORRECT!! All of this was to put the ME3 on notice that we aren't going to let them come here and do whatever the damn well please. Canada limited their scope, the US might limit their scope and Germany is looking into their scope.
Hell it was a good plan twhile they had it but did they REALLY think the USA-3 were going to let them siphon off passengers and they weren't bringing any? They SAW what the USA-3 were booking in profits and hey saw How they were booking them.
They expected to feed at the trough and Not bring any food to contribute.
This is America!! We're going to get a piece of the action.

TheFlyingDisk · Fri Mar 20, 2015 5:07 am

The ME3 should really welcome the US govt investigation into their finances - should they get a clean bill of health as a result they can use it to slam naysayers & other governments looking to implement protectionist policies.

Only good can come out from this.

tommy1808 · Fri Mar 20, 2015 5:15 am

Quoting flyDTW1992 (Reply 4):
Say the US Gov't were to find something...What exactly could they do about it??

they can simply do whatever the hell they want with their airspace and airports. They can limit frequencies, capacities, airports to fly to, set a limit on transfer pax.... whatever they think up.
Semi-Open sky with max 50% transfer pax beyond their hubs sounds like a good idea to me.
Best regards
Thomas

lightsaber · Fri Mar 20, 2015 5:37 am

Quoting GSPSPOT (Reply 3):
This is insane. Pissing matches never end well.

Agreed. But this has already gone to far. There have been famous pissing matches that did great economic damage. Let's see where this goes.

Quoting TheFlyingDisk (Reply 21):
Only good can come out from this.

My opinion varies on which ME3 airline we are discussing. I think we'll find 3 different answers. One I think will be exonerated. One will be iffy. But I think one is subsidizing.

Lightsaber

thekorean · Fri Mar 20, 2015 5:46 am

Quoting tommy1808 (Reply 22):

Well how are they going to enforce 50% connecting PAX?

parapente · Fri Mar 20, 2015 5:59 am

I think Emirates will welcome this.They have 2 areas of competition.The US3 and the ME2+T.The former they can compete happily with.The latter ones - who are simply copying the concept Emirates invented ( non stop from anywhere to anywhere via a globally central hub) are harder for Emirates to 'see off'.Looks like the US Gov't might do the heavy lifting for them!

strfyr51 · Fri Mar 20, 2015 6:08 am

I doubt here will Be any sanctions no matter What they find. AND?? No matter what they USA3 want. the ME3 will still fly to the USA but maybe NOT with the number of A380 trips they had originally planned.
So they'll be cranking up their 777's and A350's And I think that was the jist all along. They'll be forces to join one of the Alliances and like it if they want to camaign their A380's with any regularity.

pu · Fri Mar 20, 2015 6:14 am

Quoting parapente (Reply 25):
non stop from anywhere to anywhere via a globally central hub)

Ever hear of the Americas?

How do you fly from Sao Paulo to New York via Dubai? LA to Tokyo via Doha? Toronto to London via Abu Dhabi?

Additionally, there is a gigantic air trade from Seoul in the North down to Sydney in the South that only perversely would ever visit the Persian Gulf.

.
.
.
This "globally central hub" idea is a catchphrase many have unquestionably bought into, which in turn leads them to unquestionably accept ideas like a potential order for 200 A380s without any government help, guarantees or subsidies. It's just so damn central to the whole world of course they can grow this fast without any extra help, right?

Pu

(note: I actually don't mind if the ME3 are fully subsidized. That's just life. I do mind the possible dishonesty and I fully agree the US can do whatever they like about it)

tommy1808 · Fri Mar 20, 2015 6:29 am

Quoting thekorean (Reply 24):
Well how are they going to enforce 50% connecting PAX?

connecting flights are on one ticket, counting how man of those go to their hub and how many go beyond isn't rocket science.

Best regards
Thomas

Passedv1 · Fri Mar 20, 2015 7:46 am

Quoting pu (Reply 9):
Personally, given the nature of politics and US elections which are often very close on the national level, I can't imagine that the administration and/or Congress will simply do nothing. It's not a matter of right and wrong, fair or unfair, which airline has the best food, etc. it's just politics.

Quoting silentbob (Reply 16):
Quoting pu (Reply 9):
The US politicians will look at the election map for 2016 and decide this issue accordingly

As if this study will be released to the public at a time when it could impact the election.

The election is still over a year away. I don't see why it couldn't be released before the election. This will largely depend on what the findings are and what the Electoral College map is looking like. If this could swing votes, then this SURELY will be released. If it helps the Dems, the white house will get this released. If it helps the Rep., there will be investigations-etc. on capital hill demanding the WH release, all the noise the republicans will be making will be worse than the contents of the report so it will be released.

Anyway, never underestimate the will of the american congress when it comes to shoring up votes.

sierra3tango · Fri Mar 20, 2015 8:19 am

Quoting lightsaber (Reply 23):
My opinion varies on which ME3 airline we are discussing. I think we'll find 3 different answers. One I think will be exonerated. One will be iffy. But I think one is subsidizing.

Totally agreed, trouble being from the US3 perspective is that the exonerated one will almost certainly be the biggest threat
to them and also the one with the biggest O&D pax loads

The US3 were not wise to 'lump' all of the ME3 together into the same argument/ paper

speedbored · Fri Mar 20, 2015 8:29 am

Quoting lightsaber (Reply 23):
My opinion varies on which ME3 airline we are discussing. I think we'll find 3 different answers. One I think will be exonerated. One will be iffy. But I think one is subsidizing.

My thoughts exactly.

I can see EK coming out of this whole sorry mess in an even stronger commercial position.

Be careful what you wish for, US3.

enzo011 · Fri Mar 20, 2015 9:15 am

Quoting thekorean (Reply 17):
I think the opposite, more countries should have it.

It saves jobs, as opposed to companies being liquidized altogether, straight away.

Depends, if you save companies that are supposed to collapse, all you are doing is breeding a sense of entitlement, no matter what we do we always have Ch.11 to bail us out. We can then "emerge" stronger. But what would happen if the company actually goes bankrupt? There will still be demand that will either be taken over by a competitor, or a new company/companies will take its place. What you are in effect doing is just keeping the same corporations in business rather than build new competition.

Alfons · Fri Mar 20, 2015 10:24 am

ME is a customer of many US export goods, it will never happen that the US gov will hurt this relationship. It does need to answer to the allegations for the sake of not ignoring its own industry, but it will try to find a balanced solution which will please both parties.

No popcorn needed here.

parapente · Fri Mar 20, 2015 11:28 am

reply 27

Ever hear of the Americas?
How do you fly from Sao Paulo to New York via Dubai?

You could - but obviously you wouldn't. So?
The fact remains the Dubai is nearly perfectly situated relative to the World's landmasses (the other half is the Pacific) to be the ideal place to make the stop.
True traveling between North and South America is not one of them.But the fact you need to use this example really makes the point.You could have said LA to Beijing. Of course it does not naturally make sense for every flight in the whole world - hardly likely since its a sphere- but it covers a huge proportion.Clearly enough to worry the American airlines.
The point is that they have natural Geography on their side.What they did not have until recently was the infrastructure and aircraft.But they do now......

scbriml · Fri Mar 20, 2015 11:36 am

Quoting pu (Reply 27):
This "globally central hub" idea is a catchphrase many have unquestionably bought into, which in turn leads them to unquestionably accept ideas like a potential order for 200 A380s without any government help, guarantees or subsidies. It's just so damn central to the whole world of course they can grow this fast without any extra help, right?

Your quoted examples conveniently ignore the fact the Dubai is a superb location for connecting a very significant proportion of the World's population masses. No single location is good for the whole planet, but...

Quoting parapente (Reply 35):
The fact remains the Dubai is nearly perfectly situated relative to the World's landmasses (the other half is the Pacific) to be the ideal place to make the stop.

It would be difficult to find a better location for a mega-hub.

dtw2hyd · Fri Mar 20, 2015 12:06 pm

Wow. That is quick. I was thinking US will put this on back burner until Feb '17.

I guess Sir TC asked for an apology from the two DOT interns met him on Tuesday. They probably got mad and recommended immediate investigation.

I hope Dubai masters realized by now this has got out of control than it need to be.

Dubai should do few things ASAP

Send a team from "Dubai Government" (Protocol is important)
Don't ask for any apologies from your competitors
Don't reject any apologies (Big No No for Americans)
Don't threaten to sue competitors
Put a gag order on Sir TC
Call off all paid PR (Who were tasked to go after US3)
Don't dump capacity (Bad timing)
Open your "audited" books

So far everything Sir TC did added fuel.

H.E.AAB is wise enough to keep quiet after one interview.
Hogan simply said it is up to the government to decide what is subsidy.

[Edited 2015-03-20 05:12:04]

[Edited 2015-03-20 05:41:48]

scbriml · Fri Mar 20, 2015 12:13 pm

Ah, good to see the campaign is still in full swing!

Quoting dtw2hyd (Reply 35):
Send a team from "Dubai Government" (Protocol is important)

To do what, exactly? Not required.

Quoting dtw2hyd (Reply 35):
Don't ask for any apologies from your competitors

No reason not to if false, unproven accusations have been made.

Quoting dtw2hyd (Reply 35):
Don't reject any apologies (Big No No for Americans)

Let's cross that bridge when we get to it.

Quoting dtw2hyd (Reply 35):
Put a gag order on Sir TC

Good luck with that.

Quoting dtw2hyd (Reply 35):
Call off all paid PR (Who were tasked to go after US3)

But it's OK for the US3?

Quoting dtw2hyd (Reply 35):
Don't dump traffic (Bad timing)

'Dump traffic'?

Quoting dtw2hyd (Reply 35):
Open your "audited" books

The books are audited, not "audited".

JU068 · Fri Mar 20, 2015 12:15 pm

A hypothetical question... what if they find that Qatar and Etihad have been receiving subsidies but not Emirates? (not a crazy scenario)

What would happen then?

tommy1808 · Fri Mar 20, 2015 12:18 pm

Quoting scbriml (Reply 36):
The books are audited, not "audited

I would assume after Enron and other it is fair to spell it "audited" in any case, since it just means a little bit more credibility than not.

Best regards
Thomas

futureorthopod · Fri Mar 20, 2015 12:30 pm

Quoting BD338 (Reply 17):

I really hope the US Govt. finds something and initiates protectionist policies to support the ailing US3. That way they can continue to limit true competition in cozy JVs with their European partners, charge the customers a premium for mediocre service and not have any outside competition that might just benefit the customer rather than the US3 investors. I might be a tad cynical.

Yes that is exactly what they would do

BestWestern · Fri Mar 20, 2015 12:39 pm

Quoting strfyr51 (Reply 19):
You are CORRECT!! All of this was to put the ME3 on notice that we aren't going to let them come here and do whatever the damn well please.

Like order billions of dollars worth of american aircraft?

Regretfully, the ME3 will probably (and hopefully) resort to a nice juicy Boeing order 'freeze' until it all blows over - that should wake people up to the political reality.

In a "you want our money, allow us some of your money' way. Boeing orders are worth far more to the US economy than a few route rights.

Without the ME3, there is a huge hole in the 787 and 77x sales books.

Quoting dtw2hyd (Reply 35):
Send a team from "Dubai Government" (Protocol is important)
Don't ask for any apologies from your competitors
Don't reject any apologies (Big No No for Americans)
Don't threaten to sue competitors
Put a gag order on Sir TC
Call off all paid PR (Who were tasked to go after US3)
Don't dump traffic (Bad timing)
Open your "audited" books

Do you want them to roll over and wag their tails also?

Delta stepped well over the line with the 911 accusation and deserve all the crap back in return - yet you call for a gag order on them?

[Edited 2015-03-20 05:47:34]

[Edited 2015-03-20 05:48:46]

ytz · Fri Mar 20, 2015 12:40 pm

There's finding a subsidy. And then there's imposing a penalty. We'll see what comes of this. It's just the first step here.

I suspect, nobody comes out happy or everybody come out happy depending on how you look at it.

Cubsrule · Fri Mar 20, 2015 12:41 pm

Quoting enzo011 (Reply 31):
But what would happen if the company actually goes bankrupt? There will still be demand that will either be taken over by a competitor, or a new company/companies will take its place.

. . . with enormous transaction costs to the company and, in many cases, losses for employees and vendors. How much value do those costs add?

dtw2hyd · Fri Mar 20, 2015 12:52 pm

Quoting BestWestern (Reply 40):
Do you want them to roll over and wag their tails also?

That would be an added bonus, to speedy recovery of the relationship.

Quoting BestWestern (Reply 40):
Delta stepped well over the line with the 911 acquisition and deserve all the crap back in return - yet you call for a gag order on TC!

Watch the interview (or) read transcript. Delta CEO did not blame ME3. There is a whole thread for this.

ytz · Fri Mar 20, 2015 1:26 pm

Quoting pu (Reply 9):
US3 employees alone are enough to impact elections in at least Texas, Georgia & Illinois. Maybe also Florida, Michigan, Minnesota, Colorado, Virginia, N Carolina, Ohio? and ????

Have a look at map of the Boeing supply chain. I don't think there's a state they don't touch. And a lot of the US3 hub states are not swing states in play.

All that said, the penalty phase will involve other considerations, like input from Boeing, JetBlue, etc.

And if they really consider economic impact, one can only look at places where there is competition (like New York) and where there isn't competition (like Detroit) to see the impact on prices. Detroit has DL and LH. OneWorld won't bother playing there with BA or AA. As a result, it's worthwhile for many Detroiters to fly from Canada!

Quoting speedbored (Reply 30):
I can see EK coming out of this whole sorry mess in an even stronger commercial position.

I wouldn't go that far. But for the US3, EK is clearly target #1. And it's also their weakest subsidy case of the ME3. I don't think they'll get everything they want on that front.

And if all this stands, TK and the Chinese carriers will be coming next. So the precedents here are very important.

PC12Fan · Fri Mar 20, 2015 1:32 pm

Quoting GSPSPOT (Reply 3):
Pissing matches never end well.

PanAm1971 · Fri Mar 20, 2015 1:32 pm

This will end quietly through negotiations before any findings are made public. There will be a short press release when this is done. This is the LAST thing Washington wants to deal with. Subsidies or no-this issue needs to go away. The US3 have issues that are not caused by subsidies. Washington knows that. The potential costs of zealous treaty enforcement outweigh the benefits... on so many levels. It's that simple.

penguins · Fri Mar 20, 2015 1:45 pm

Quoting pu (Reply 9):
US3 employees alone are enough to impact elections in at least Texas, Georgia & Illinois.

The three states that will be "most affected" are states that almost always vote the same.

I hope this teaches Mr. al Baker and his lot to keep their mouthes shut.

moo · Fri Mar 20, 2015 1:49 pm

Quoting thekorean (Reply 13):
They do not get a dime from the government. It is not a subsidy.

They got to offload a tonne of debt in terms of employee pension obligations to the central government fund.

So yes, they got a lot from the government.

jayunited · Fri Mar 20, 2015 2:00 pm

Quoting pu (Reply 9):
The US politicians will look at the election map for 2016 and decide this issue accordingly.

US3 employees alone are enough to impact elections in at least Texas, Georgia & Illinois. Maybe also Florida, Michigan, Minnesota, Colorado, Virginia, N Carolina, Ohio? and ????
....plus the employees of their regional airline partners, travel industry partners, airport vendors and subsidiaries/outsource partners.

Personally, given the nature of politics and US elections which are often very close on the national level, I can't imagine that the administration and/or Congress will simply do nothing. It's not a matter of right and wrong, fair or unfair, which airline has the best food, etc. it's just politics.

I think you are absolutely correct politics will play a part and it is already playing a part in this case. The website set up by AA, DL, UA, ALPA and other U.S. aviation organizations has a petition page where they are asking their employees or members to sign a petition which is then compilied with others and sent to the U.S. Chamber of Commerce and to local members of Congress.

The website claims that if nothing is done there will be at least 11 million jobs at risk here in the U.S. aviation industry and even more staggering is the claim that if unchecked the ME3 threaten $1.5 trillion in nationwide economic activity supported by the U.S. avaition industry. These numbers alone will get Washingtons attention and make it a political issue and the way the US3 and their allies are framing this issue here in the U.S. almost guarantee that the US 3 will at the very least win part of this case especially if Congressional members get involved and I don't see how they wouldn't be invlolved with this issues if not directly then indirectly working behind the scenes. With both Democrats and Republicans trying to be the jobs champion and with the US3 claiming at that up to 11 million U.S. jobs are at risk I think this case and issue will turn political very fast.

http://www.openandfairskies.com/subsidies/

Who is online

Popular Searches On Airliners.net