For some time now the question of whether or not Dubai-based Emirates Airline receives subsidies has been a hot button issue.
     The “Partnership for Open and Fair Skies Coalition,” a group representing Delta Airlines (DL), United Airlines (UA), and American Airlines (AA), has called on U.S. regulators to provide a level playing field and halt the expansion of the Gulf carriers.
     Although Etihad (EY) and Qatar Airways (QR) are involved as well, sources say the main target driving the coalition is Emirates (EK), which has emerged as a leading carrier, aircraft buyer, and employer of people in commercial aviation.
     Delta CEO Richard Anderson (right) has been campaigning for the replacement of Open Skies with a “Fair Skies” policy, which would take into consideration disparities in income taxes, labor laws, and subsidies when creating bilateral agreements.
     “We are broadly in favor of Open Skies— but we’re in favor of Fair Skies.”
     “A number of those carriers are not airlines, they are governments.
     “They have huge subsidies and structural advantages,” Mr. Anderson said.
     European carriers, namely AF/KLM and LH, have brought similar allegations forward.
     In December, Lufthansa and Air France-KLM Royal Dutch Airlines wrote a joint letter to the European Commission asking it to take steps against the Middle Eastern carriers, accusing them of distorting the market by virtue of their alleged state subsidization.
     Jean-Cyril Spinetta, (left) the honorary chairman of the Air France-KLM Group said, “If you compete with [Gulf carriers] in an open sky situation, it’s sort of suicide.
     “It means European airlines will disappear.”
     But in Europe, as in the USA, opinions are divided.
     “We see no future in a protectionist aviation policy in Europe,” said Air Berlin’s CEO Stefan Pichler (above right).
     Air Berlin (AB), it should be mentioned, is the cash-strapped, second-largest German legacy carrier, which has received huge cash infusions from its major shareholder, Etihad.
     In the USA, a consumer advocacy group called Travelers United as well as aircraft manufacturer Boeing and FedEx have sided with EK, EY, and QR.
     FedEx CEO David Bronczek accused the U.S. carriers of being motivated in their call for action against EK and others out of a fear of competing with them.

The Empire Strikes Back

     Now Emirates Airlines (EK) has issued a 200+ page document outlining its position. The Emirates manifesto submitted to U.S. regulators has also been launched out to the world aboard the EK website.
     Although EK calls for moderation in the discussion about subsidization, the airline is not shy of defending its position.
     “U.S. legacy carriers got the facts wrong, got the law wrong, and set their sights on an outcome that will be wrong for American consumers, communities, and the national economy,” Emirates insists.
     A “protectionist bid to restrict consumer choice” and words like “discrediting Emirates” jump off the page of the Emirates first paragraph, which concludes with, “U.S. legacy carriers built their case on wrong legal standards, asking the U.S. government to act against the law by imposing a unilateral freeze.
     “The Big 3’s white paper is littered with self-serving rhetoric about ‘fair trade,’ ‘level playing field,’ and ‘saving jobs,’ but their mess of legal distortions and factual errors falls apart at the slightest scrutiny”; “bullyboy tactics and browbeating,” Emirates insists.

Who Got It Right?

     Looking at the situation at arm’s length is revealing.
     The Emirates document just released reveals, among other things, that certain losses resulting from fuel hedging options going wrong were transferred to EK’s main stockholder Investment Corporation of Dubai (ICD) during the 2008/2009 accounting period, with the purpose of “not presenting a misleading portrayal of EK operations by means of paper losses under ‘mark to market’ accounting,” highlighting that ultimately all resulting payments from these contracts were paid by EK using its own cash and no losses were absorbed by either ICD or the Dubai government.
     “The ability to transfer accounting losses to a 3rd entity, no matter who ultimately paid the resulting monies, certainly falls clearly under the category of an advantage,” a source told FlyingTypers.

A Matter of Interpretation

     Taking a broader view, in a world of many languages and opinions, it can be reasoned that a large portion of the claims and counterclaims here center on interpretation regarding the Word Trade Organization’s (WTO) “Agreement on Subsidies and Countervailing Measures” (SCM agreement) and whether SCM applies to (air) services or is covered in the WTO’s General Agreement on Trade in Services (GATS).
     “Where EK accuses the U.S. legacy carriers of ‘framing their complaint in terms of their own narrow interests,’ it must be said that commercial interests are naturally limited to the narrow scope of one’s own activities, and rightly so—a commercial enterprise is for profit, and any other behavior would not be condoned by shareholders,” our source said.
     “Emirates tact of interpreting bankruptcy restructuring under the strict terms of Chapter 11 (and the subsequent ability to shed considerable debt under certain circumstances) as a subsidy received by US carriers, does not comply with the intent and the interpretation of applicable U.S. law.”
     In the Emirates document, Sir Tim Clark, CEO of EK, states:
     “We have been profitable for 27 years straight, and unlike our accusers, we have never depended on government bail-outs or protection from competition.
     “In fact, we were told right from the start by the government of Dubai that Emirates has to deliver profits and stand on its own feet.” That statement by the esteemed Clark may not be wrong—but, alas, it is also not the complete picture.
     “It is not unfair to conclude here that EK’s case may not be as rock-solid and strong as they may want the public—and even more, the industry—to believe,” another FT source said.
     Then there is the jobs creation question.
     In their calculations of how many jobs EK has created in the markets they serve, no one—not even the U.S. carriers—has ever denied that EK has created a multitude of jobs.
     But isn’t the question really: Have these jobs been created at a disadvantage for the home carriers, e.g. would these jobs likewise exist if Emirates had not stepped into these markets, and would the home carriers possibly employ more staff if EK and others hadn’t?
     While to date it is unclear which side will ultimately gain the upper hand when a decision comes down in all of this, it seems certain, at this point, the sure winners are the law firms and lobbyists.
     At the heart of the matter there seems to be little room, if any, for compromise, as both EK and the U.S. legacy carriers have a number of points to make.
     Brett Snyder in his blog “Cranky Flier” writes:
     “The real issue is in fifth freedom flights.
     “Of the freedoms of the air, the fifth is becoming one of the more controversial.
     “Emirates isn’t flying Dubai-Milan-New York because it can’t fly it nonstop.
     “(EK) flies (the route) because it thinks it can undercut everyone else in the market and use low costs to its advantage.”
     “If you think about it, [in Open Skies] the Gulf carriers could fly from Dubai to pretty much anywhere in Asia or Europe and then on to the U.S., causing serious damage to the U.S. carriers,” Cranky Flier said.
     American Airlines CEO Doug Parker (right) spoke about the Emirates service from New York to Milan:
     “I know enough about this business to know you can't launch A380s from Milan to JFK. I don't care what your cost structure is, there's no possible way you can generate enough revenue on the route to pay the cost of flying that airplane over."
     “It’s hard to see the U.S. overturning the Emirates initiative to build its airline company,” said TIACA Hall of Famer and Middle East expert Bill Boesch (right).
     “The U.S. has powerful military interests in the Middle East that are being served via the Gulf States, which could hold sway in any decision in favor of the U.S. airlines.”
     All of this has not been without its lighter moments either.
     Asked how he feels about working so closely with the top executives of American and Delta, United’s CEO Jeff Smisek (left) said:
     That’s easy. I hate these guys. And they hate me.”
Geoffrey/Jens/Flossie

   Summer means fun . . .
   It also means being closer to the kids, and for longer than perhaps any other time of year.
   Our older daughter Florence, (left to right in 1991 with parents and siblings, Emily and Ralph; and today with dad, Geoffrey) who graciously edits Air Cargo News FlyingTypers (thereby making this journal a more intelligent read), is in real life a writer.
   When she was barely 18, The Scholastic Art & Writing Awards named Flossie among the best writers in America. (Scholastic Magazine is distributed to grade schools across the USA, and the Scholastic Corporation owns the lucrative Harry Potter franchise)
   In any case, Scholastic gave Flossie her first job out of college, overseeing the same awards each year that she had won in 1998.
   Flossie won for writing about her brother, Geoffrey Arend II, who is now an accomplished actor and currently starring in CBS’s Madam Secretary.
   But when Geoff was little (nowhere near six-foot-four, or the great physical health he now enjoys) he was sickly and had trouble with asthma.
   Flossie captured this and became briefly famous for putting a part of her life experience, while growing up, to poetry.
   Then she moved into adulthood, graduated from college, and went to work just as it happens to everyone else.
   Recently, she began writing again.
   This week she woke up bright and early one morning and hammered out this piece about the Marine Air Terminal at nearby LaGuardia Airport.
   So as we near Independence Day in the United States, we also ready ourselves for a little break.
   You can read more of Flossie’s writing at here, and at www.flossiewrites.com, and follow her adventures in knitting at www.flossieknits.com.
   Maybe we can encourage her to write some more things about air cargo.
   Perhaps a tome with a title like, “The Ballet of the Forklift Trucks.”
Geoffrey

     I grew up at the Marine Air Terminal in New York City. At the time I was unaware of the unique perspective it afforded me—how few children gestated in the belly of a great, round terminal, nourished by ephemera and the hollow, high-topped sound of cavernous spaces carved in marble. I was a wild thing in a civilized cave, hiding behind wooden benches salvaged and meticulously arranged by my father, who recognized their beauty and inherent historical value, and saved them from the garbage heap. Each had a steel propeller inlaid in its sides, as if at some miracle moment the propellers would thrust outward from the wood, rotate frontwise, and the benches would steal away in flight. They lined the rounded walls of the Marine Air Terminal’s atrium, which pumped the people in from the streets and fed them to their flights down ventricular hallways. My father had also placed four benches in the center of the room, facing outward, their sides aligned so each propeller had a mirror image in its neighbor. The negative space they created behind them—a small square of Marine Air Terminal real estate—was my island, and I comforted myself by lying on my back on the floor and looking straight up at the round ceiling, which was tiered with concentric circles leading up to a circular skylight, like some great windowed eye staring at the sky. The iris of that eye was the mural my father saved from obscurity. The great WPA-artist James Brooks painted his earth-toned “Flight” along the upper walls of my cave—it was my very first picture book. If you stood in the center of the MAT and rotated slowly, the story of man’s ascension to the clouds was depicted in vivid detail.

     I suppose it was through the great eye of the Marine Air Terminal that I first saw the world.
     The sound. The sound of the Marine Air Terminal is most visceral to me. I’m sure it had a smell, too, something of lemon-waxed floors and ocean salt, tinged by the oily residue of Jet A. But the sounds stay with me, even now, as sonorous and forlorn as tolling bells. The clack of hard-heeled shoes traversing the marble floors, the rumble of conversations diluted by space and hovering in the air like vapor, the distant sound of Glen Miller’s Moonlight Serenade permeating every corner. My father had outfitted the rotunda with speakers fed directly from his office, and so his music was everyone’s music. It played in the background like a halo of sound descended from on high, out of reach but always there, as if it were the sound the environment naturally generated in its relaxed state—a law of nature.
     My father’s office. Carefully curated, beautifully preserved, it encompassed three impeccable rooms overlooking the road leading to the Marine Air Terminal. The first room held his secret sound system, housed behind a wall—the same sound system that gave the Marine Air Terminal its voice. His desk faced the door, as if he were always readying himself for a visit. The room to the left of his desk was like a mini living room, complete with a couch, a small TV, and a mini-fridge. He had an autographed picture of Mickey Mantle on a shelf, which I remember quite distinctly. If you asked me what else was on the shelf I couldn’t tell you, but I can clearly remember the photo and its signature. The mini-fridge held M&Ms and sodas, and—my favorite—Planter’s Cheese Balls, which no longer exist. If I told you I felt melancholy about the satisfying crunch of biting into a chilled Planter’s Cheese Ball I would understand, but could not align myself, with your confusion.

     The room to the right of his desk housed a small cabinet with toys belonging to myself and my older brother, Geoff, and a spiral staircase that ended with a door to the Pan Am Shuttle. The wall showcased a large piece of art created by my father—a magnesium stencil silhouette of birds in flight, hung behind glass panels and backlit by white light. Another of his salvage pieces, my father rescued the birds from Building One at Newark Airport. The birds had once flown above the arrivals/departures doorway, but my father discovered them in the trash while delivering editions of Air Cargo News to Newark Airport. Building One at Newark was another of my father’s preservation pet projects. While the Port Authority had initially sanctioned renovations on the historic terminal—and in the process, destroyed much of the art and architecture of the place, despite a book my father published in 1978 in dedication to the building—later, in 1981, my father was able to halt further destruction with the help of Port Authority’s new aviation director, Robert J. Aaronson.
     Geoff and I often raided the fridge for icy M&Ms and cheese balls and sat in front of the toy cabinet, sliding open its doors to remove our toys. We played on the spiral staircase and at its bottom, opening the door to peek out at the other side of the airport. I remember thinking it was my Narnia, and the spiral staircase the equivalent to Lewis’ famous Wardrobe. Our favorite thing to do, however, was to open the office door and chase each other down the hallway, which was circular and closed—a loop that slanted slightly inward and felt dizzying to run on. Whoever made it back to my father’s door first was the winner. This was a wonderful game for me, but must have been torture for my asthmatic brother. Next door to my father’s office was the office of the North Beach Club, which had been furnished with the remnants of several First Class Lounges. Bathed in warm browns and rich, deep burgundies, the space felt shuttered and dark, so unlike the bright, filtered white light and steely greys of my father’s Bauhaus-inspired office. If Geoff and I were very good, my father would open his office window and we would stick our heads out—the windows being tall and wide, like the windows of a factory—and watch the planes come roaring overhead.

     I was an airport brat. I thought Rocco’s Yankee Clipper café was my extended kitchen, and the MAT was my living room. I got free gum at the newspaper stand and raced at top speed down every corridor, and when my father lost his office at the MAT—how quickly this world forgets those people who work, tirelessly and often thanklessly, to preserve its legacies—I felt like I had lost a dear, old friend.
     I don’t know what music they’re playing in the Marine Air Terminal anymore. I wonder what they’ve done to my father’s office, and whether anyone truly knows everything he did to breath life back into an Art Deco Grande Dame no one wanted anymore. I look at pictures of the MAT’s interior online and feel wistful for those times when I felt ruddy-kneed and free to roam, quiet in my thoughts among the cacophonous sounds of the airport. My father saved the Marine Air Terminal for everyone, but I can’t properly quantify how thoroughly it saved me.
     I’m an airport kid. You wouldn’t understand.
Flossie

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