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Top 3 Ways the U.S. Favors Middle East Airlines Over U.S. Airlines

Stocks in this article: BA DAL

WASHINGTON ( TheStreet) -- As the big three Middle East carriers continue their rapid expansion into the U.S., the threat to domestic carriers intensifies as the government assists  Emirates AirlineEtihad Airways and  Qatar Airways  in inexplicable ways, said the president of the leading airline pilot union.

Emirates, Etihad and Qatar are all state-owned carriers capable of trading short-term profits for the potential of expansive air service, said Lee Moak, president of the Air Line Pilots Association, in an interview.

"All three airlines have a similar business model, and that is to take over all the international flying in the world," Moak said. "They continue to add routes and order aircraft, and they are willing to do that at a financial loss."

Oddly, government policies appear to tilt in favor of the Middle East carriers at the expense of domestic airlines. For instance, the State Department wants to place a U.S. Customs and Border Protection at a pre-clearance facility in Abu Dhabi even though no U.S. airlines fly to Abu Dhabi. Etihad would be the primary beneficiary.

Similarly, the Export-Import Bank enables low-cost financing for foreign buyers of Boeing (BA) aircraft, but no one offers similar assistance to U.S. airlines when they buy aircraft.

Last week, the Middle East airlines were flexing their muscles in the U.S.

On Tuesday, the UAE's Emirates, which is based in Dubai and owned by Dubai's government, put an Airbus A380 with 489 seats on the LAX-Dubai route, replacing a 237-seat Boeing 777-200LR. Emirates now operates 63 weekly flights from Dubai to seven U.S. destinations, including Dallas, Houston, Los Angeles, New York, San Francisco, Seattle and Washington.

On Wednesday, Qatar announced it will begin daily DFW-Doha service in July 2014, when both Qatar and Emirates will serve Dallas. Qatar should have an advantage, given that it -- like hub carrier American -- is a member of Oneworld, which it joined on Oct. 29.

Qatar has announced 2014 service to Oneworld hubs in Miami and Philadelphia. It already serves Chicago, Houston, New York and Washington.

For its part, Etihad plans to begin LAX-Abu Dhabi service in June. Etihad already flies Abu Dhabi to Chicago, New York and Washington Dulles. Etihad's strategy includes buying minority ownership in troubled airlines of other countries, something it has done or plans at seven carriers. So far, it has not revealed any plans to invest in a U.S. airline.

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