Counting the Cost

The fight for the open skies

What is at stake in the battle over US airlines’ allegations of unfair state subsidies to three Persian Gulf carriers?

Aviation connects the world, but a battle for air supremacy has erupted between the legacy carriers of the United States and three airlines based in the Persian Gulf.

Delta Air Lines, United Airlines and American Airlines, the three biggest US carriers, say they have evidence that their fast-growing rivals Emirates, Qatar Airways and Etihad Airlines are receiving unfair government subsidies, something that goes against aviation’s Open Skies policy.

Open Skies is basically a policy concept aimed at making international commercial aviation fair. It wants a free-market environment, with minimal government influence or intervention. The most significant agreement actually signed was in 2007 between the US and the European Union.

The US airlines have now turned their attention to the Middle East, claiming that since 2004, the Gulf carriers have received subsidies worth $42bn.

More specifically, Etihad made losses of $4bn in 2013, but received more than $17bn in subsidies from Abu Dhabi over the last decade. Qatar Airways got $16bn in subsidies from its government since 2004. And Dubai gave Emirates $5bn, some of which went to cover losses from trading fuel contracts, also known as hedging.

Not surprisingly, the Gulf carriers refute all of this and say it is a US problem, linked to their own poor service and old planes. But the claims are being investigated, which could lead to the Gulf carriers being shut out of US skies.

So how will the battle affect the air industry? What is at stake? Are only Gulf airlines getting government subsidies? And can the US actually shut Middle Eastern Airlines out of the US skies?

Paul Gregorowitsch, the CEO of Oman Air, talks to Counting the Cost.

Brazil: Petrobras and the cost of corruption

The Brazilian oil company Petrobras has been mired in a decade-long corruption scandal.

Finally it has put a price on the whole affair: $2.1bn. It was known as the ‘Carwash scandal’ and it damaged the popularity of the Brazil’s president, who was Petrobras’ former chair. There is no suggestion of wrongdoing by Dilma Rouseff.

Alan Fisher reports from Itaborai in Brazil on how the fortunes of one company affected an entire economy.

The China-Pakistan economic corridor

Pakistan’s economy is hamstrung by the failure of successive governments to get to grips with the lack of infrastructure. And with a population fast approaching 200 million, Pakistan’s economy is losing up to six percent of GDP just because of a lack of power and infrastructure bottlenecks.
Now Beijing has unveiled plans to invest $46bn in the world’s sixth-most populous country. The One-Belt-One-Road project to connect inner China with the Middle East and Europe is also linked to $33bn worth of energy projects and coal-fired electricity plants and almost $10bn on road and rail projects.

Money will flow through Chinese banks to Chinese companies which will employ Chinese workers – just what China needs to stimulate growth.

What is China’s interest in Pakistan? And what will Pakistan get out of it?
Nicole Johnston reports from Islamabad. And Asad Ali, an analyst with IHS Global Insight, joins Counting the Cost to discuss Pakistan-China relations, and how the One-Belt-One-Road project will affect Pakistan and its people.