As we discussed in Business Travel iQ Analysis in March, there are different points of view about how free market economies work.
Several US airlines have protested to the US government that some Gulf states allegedly subsidise their home carriers, specifically Emirates, Etihad and Qatar, giving them an unfair competitive advantage. They argue that this is in breach of the Open Skies agreement.
Yet these are the same US carriers which have benefited in the past from Chapter 11 protection from creditors and bankruptcy.
The Gulf carriers' subsidies row is now threatening the viability of the long established Association of European Airlines (AEA). The International Airlines Group (IAG) (parent company to British Airways, Iberia and Vueling) has quit the body, allegedly over this issue, at the end of March and subsequently joined the European Low Fares Airline Association (ELFAA).
ELFAA counts Norwegian, Wizz Air, Ryanair and easyJet among its members. The IAG empire does include Iberia Express and Vueling, both of whom are low-cost carriers, but it seems a strange move.
Buyers should note that this is more than IAG chief Willie Walsh throwing his toys out of his pram.
Informed sources say AEA members are divided over the issue of state subsidies with some traditional carriers, eg Air France KLM, wanting to restrict Gulf carriers' activity in Europe. Others, eg British Airways and Iberia, are opposed to any intervention as they champion an open aviation market (whether it is relevant or not, readers should note that Qatar also owns about 10% of IAG).
IAG boss Willie Walsh
In any event, the move will probably see ELFAA changing its focus and becoming a new trade association for all European airlines.
For buyers this is interesting for two reasons:
1) The free market issue. Free markets and competition can push down fares. A stronger body favouring non-intervention makes that more likely. Of course, low-fare markets can also restrict choice.
2) The industry association issue. Industry associations, like airlines, have often enjoyed monopoly status. After all, if their mantra is acting in the interests of its members there should be little, if anything, with which to quibble. However, as with AEA and ELFAA, sometimes one association's idea of what's good for members is different from that of another. Hence, for travel buyers there is both ACTE and GBTA; some buyers belong to one, others to the other and some even to both.
The airlines are now going through the same exercise – there is no monopoly on what might be the better option for potential members.