Laptop ban stirs long-running Gulf subsidies dispute with US

It might look like a security issue, but the laptop ban on flights to the US from some destinations in the Middle East has inflamed an increasingly bitter trade dispute.

The restrictions imposed by the US Department of Homeland Security in late March cover 10 airports in predominantly Muslim countries and affect nine airlines, including the UAE-based Emirates and Etihad and Qatar Airways.

Even before the new measures came into force, the big three Gulf operators were in conflict with US rivals Delta, American Airways and United. The Americans claim the Gulf companies receive government subsidies that constitute unfair competition.

So far Gulf airline executives have avoided making any direct connection between the laptop ban and the subsidies dispute but the introduction of the restrictions has coincided with a notable stepping up of the rhetoric.

Qatar Airways CEO Akbar Al Baker, speaking during an Arabian Travel Market event in Dubai in April, said of the three US carriers: “They are self-centred and swindle their customers.”

In remarks that came as Qatar Airways announced that San Francisco was to become its 15th US destination, Al Baker noted that the Gulf carriers invest heavily in the US and create jobs there.

The US airlines have been lobbying for an end to the Open Skies agreement with Qatar and the UAE over the allegation of unfair government subsidies, which the three Gulf carriers reject. The Gulf carriers scored a win last July when the Obama administration said it was taking no action on the complaints of the US airlines.

While Al Baker said he did not believe the laptop ban was commercially motivated, that has not deterred industry analysts from speculating about a possible connection. Their suspicions were heightened when a similar UK ban on onboard laptops, also announced in March, did not include flights from Dubai, Abu Dhabi, and Qatar. The Gulf carriers have meanwhile challenged the need for the restrictions given the high-level of security at their hubs.

The restrictions constitute a potential double blow following President Donald Trump’s executive order seeking to ban migrants from seven majority-Muslim countries. Emirates Airline’s president, Sir Tim Clark, acknowledged that the original order in January had affected bookings with the carrier, which relies on the US market for 11 per cent of its revenue. “The rate at which our bookings were growing started to flatten out and go south,” he told Business Insider.

Facing a potential drop in bookings from business travellers who want the option of working during flights, the Gulf carriers are now lending laptops or tablets to premium customers on affected routes. Much of their revenue comes from long-haul passengers who change planes at their Middle East hubs and have the option of alternative routes.

Since the ban though, Emirates has reduced flights to the US from 126 to 101 a week, citing weaker demand. Etihad and Qatar are maintaining their existing schedules for now, with the latter insisting a small decline in business is manageable.

The International Air Transport Association, the industry’s trade association, has also weighed in. Its director-general Alexandre de Juniac said the laptop ban was an intolerable addition to the challenges already facing airlines.

In a speech in Montreal in March, he raised the anomaly of the US and UK listing different airports in their ban and asked why laptops should be considered a risk on some flights but not on others.

In the long term, the open-ended US restrictions may have limited effect on the Gulf carriers. They have grown their business partly on the basis of the high level of facilities provided, particularly for premium travellers, in contrast to a “no frills” trend in the wider industry.

Emirates, which continues to provide door-to-door limousine rides to its business class customers, was named 2016 airline of the year by the Skytrax consultancy, with Qatar Airways coming in second place. Emirates was even undisputed leader for the fourth year in a row in the inflight entertainment category.

Meanwhile Qatar’s Al Baker has been able to use the negative publicity surrounding United Airlines after a passenger was dragged off one of its flights. He said it would never allow a passenger to be ejected in this way to make room for its staff to fly instead. “Even if [our] chief executive needed to travel, he would sit in the jump seat.”