Foreign airline strikes back in aviation fight

A Middle Eastern airline that is involved in a dispute over foreign airline subsidies that has roiled the U.S. aviation industry is striking back against claims it has received unfair assistance from its government. 

Unions that represent parts of the U.S. airline industry have alleged Middle Eastern airlines like Qatar Airways, Etihad Airways and Emirates Airlines have received more than $42 billion in subsidies since 2004. 

Etihad said in a new report that was released late on Thursday night that the largest U.S. airlines, Delta, United and America, have received benefits of their own from the American government worth $71 billion since 2000. 

{mosads}The United Arab Emirates-based airline said its figures are based on bankruptcy debt relief, pension termination, fuel subsidies and other benefits that have been historically given to U.S. airlines. 

“Since 2002, US carriers have benefitted from protections provided under Chapter 11 of the United States Bankruptcy Code,” the report said. “These protections allowed United Airlines, American Airlines and Delta Air Lines (and their antecedents) to restructure and eliminate debt, while receiving protection from creditors.” 

The Open Skies fight has touched off a lobbying brawl that has exposed a rift between domestic airlines and travel and consumer groups that argue U.S. carriers are trying to prevent competition for international flights.

Unions that represent U.S. airlines workers have formed campaigns to pressure the Obama administration to question the Gulf carrier subsidies. 

One such group, known as the Partnership for Open & Fair Skies, released a study of its own on Friday questioning whether the Gulf airlines are creating new demand for international travel as their supporters have said in defense of the foreign carriers. 

“The Gulf carriers assert that their service stimulates new traffic in key U.S. markets, bringing substantial numbers of new passengers to the United States. We find little — if any — evidence that this claim is true,” the author of the report, Darin Lee, said in a statement. “An analysis of the data shows that the Gulf carriers do not meaningfully stimulate new traffic. Instead, they are using their subsidized capacity to grow their networks at the expense of U.S. and other carriers.” 

Travel industry and consumer groups have, meanwhile, accused the airlines of trying to reduce competition for international flights and being hypocritical about subsidies given the amount of fees they now charge passengers that are not taxed by the government. 

“Since 2007, airlines have collected $20 billion in bag fees — all of it totally tax-free and kept as pure profit,” the U.S. Travel Association said Thursday. “Your [big] three airlines have also benefited from tens of billions of dollars in taxpayer-funded pension write-offs and bankruptcy protections. How are these not government subsidies?” 

The Obama administration said earlier this month that it’s launching a review of the airline industry’s claims — far short of the full-scale international negotiation the U.S. airline industry has called for.

The administration has said it is taking a look at the allegations against the Middle Eastern carriers because they “are of significant interest to stakeholders and all three federal agencies.”

The decision was seen as a victory for U.S. airlines, but it has done little to quell the lobbying campaign about Open Skies that has ramped up this spring. 

The Partnership for Open & Fair Skies touted a letter supporting the domestic airline position that was signed by members of the House Judiciary Committee on Thursday. The signatures follow a prior announcement that 262 House members had signed on to support the opposition to the Gulf Carrier subsidies.

A spokeswoman for the group said the signatures show “there is a tremendous groundswell of bipartisan support from Congress to ensure a competitive playing field for U.S. airlines and aviation workers”. 

“The House plays an important role in promoting competition, and we welcome their support in addressing the serious market distortions that Gulf subsidies are causing,” Partnership spokesperson Jill Zuckman said. “We urge the Obama administration to sit down with Qatar and the UAE to resolve these blatant and unyielding violations of Open Skies.”

A group known as OpenSkies.travel that was created by the Business Travel Coalition countered that Etihad’s survey showed the U.S. airlines were being hypocritical in their campaign against the Gulf carriers. 

“This report confirms that the United States has found numerous ways to financially help its airline industry become established and profoundly advantage it in ways to enable the most powerful and profitable airlines in the world,” OpenSkies.travel founder Kevin Mitchell said. 

“At a time when the Big Three’s profits are being driven to record highs by the benefits of antitrust immunized alliances, customer service cost cutting and avoidance of ticket taxes on billions of dollars of revenue from ancillary services, it represents arrogance-in-the-extreme to demand protection from competition,” Mitchell continued. “Freezing Gulf carrier access to U.S. markets would be the ‘Mother of all Subsidies’ and stick American consumers with vastly higher fares and much diminished travel options.”