Senators: Gulf airline subsidies are ‘distorting the market’

A group of 21 senators said Thursday that Middle Eastern airlines that have come under fire for allegedly receiving subsidies from their government owners are “distorting the market” for international flights from U.S. airports. 

Unions that represent employees of the largest U.S. airlines, known collectively as the Big Three, have alleged Middle Eastern airlines such as Qatar Airways, Etihad Airways and Emirates Airlines received more than $42 billion in subsidies since 2004.

The major U.S. airlines — Delta, United and American — say the payments to their Middle Eastern competitors violate the spirit of the Open Skies agreements between the U.S. and the governments of Qatar and the United Arab Emirates, which own the airlines. 

{mosads}They want the Obama administration to launch a review of the claims with the Middle Eastern governments, which would involve a delicate set of negotiations that critics have said would upset other areas of foreign policy. 

The senators said in a letter to the departments of Transportation, Commerce and State on Thursday that the Obama administration should launch the talks with the Middle Eastern nations because Gulf airlines are currently receiving an unfair advantage over U.S. carriers. 

“We are writing in regard to recent reports that over the past decade the governments of Qatar and the United Arab Emirates (UAE) have granted over $40 billion in subsidies and other benefits to their state-owned passenger carriers,” the lawmakers wrote to Secretaries Anthony Foxx, Penny Pritzker and John Kerry. 

“We are concerned that these actions by Qatar and the UAE may be distorting the market in favor of their state-owned airlines and violate our bilateral Open Skies agreements,” they continued. 

Travel and consumer groups have argued that U.S. airlines are making the allegations of Open Skies violations against the Middle Eastern carriers because they are trying to prevent competition for international flights.

The Gulf airlines have argued, meanwhile, that they fly to parts of the world that are underserved by U.S. airlines, making them an important part of the nation’s economy. 

“It is far too important for the U.S. economy for multiple reasons for the activities of the Gulf carriers to be cut back, because once you do that and you start closing the Open Skies that you have today, there’s enormous ramifications,” Emirates CEO Tim Clark said in a recent interview with the British BBC network. 

“The U.S. economy would be severely affected by a closure, shutting down of the Open Skies arrangement which has manifested, produced huge amounts of wealth for aerospace, Boeing, General Electric … as well as everything else,” he continued. 

Unions that represent the employees of the largest U.S. airlines have formed campaigns to pressure the Obama administration to question the Gulf carrier subsidies, include one — the Partnership for Open and Fair Skies — that organized the Senate letter on Thursday. 

“These senators are standing up for the U.S. aviation industry and American jobs and we thank them,” a spokeswoman for the group, Jill Zuckman, said in a statement. 

“Their formal request to the Departments of Transportation and State to open consultations with Qatar and the United Arab Emirates (UAE) for violating Open Skies policy, clearly indicates the importance of the U.S. government enforcing its trade agreements,” she continued. “Republicans and Democrats alike understand what’s at stake for the U.S. aviation industry and how these foreign subsidies are undermining American jobs.”

The Obama administration launched a domestic review of the claims against the Gulf airlines, but it falls far short of the full-scale international negotiation Big Three U.S. carriers have called for. 

The senators said Thursday that they hope the administration’s review leads to a broader look at the alleged violations of the Open Skies agreements. 

“We understand and appreciate that the Departments of Transportation and State are carefully reviewing this situation,” the lawmakers wrote. “Should it be determined that these governments are providing subsidies in violation of Open Skies agreements and policies, we urge you to take immediate action to ensure that the agreement is being enforced, including by requesting consultations with the governments of Qatar and the UAE.” 

The lawmakers added that the alleged Open Skies violations could cost U.S. airline workers their jobs if they are left unchecked. 

“International flight routes are extremely competitive and we fear that these subsidies may have led to market distortions,” the lawmakers wrote. “If so, failure to take action could cause harm to the U.S. passenger airline industry and the broader U.S. economy, including significant job losses.” 

The letter was signed by Sens. Amy Klobuchar (D-Minn.); Johnny Isakson (R-Ga.); Gary Peters (D-Mich.); Mark Kirk (R-Ill.); Richard Durbin (D-Ill.); James Inhofe (R-Okla.); Debbie Stabenow (D-Mich.); Rob Portman (R-Ohio); Ben Cardin (D-Md.); John Hoeven (R-N.D.); Sherrod Brown (D-Ohio); Mike Lee (R-Utah); Claire McCaskill (D-Mo.); David Perdue (R-Ga.); Al Franken (D-Minn.); Tammy Baldwin (D-Wis.);  Martin Heinrich (D-N.M.); Elizabeth Warren (D-Mass.); Ed Markey (D-Mass.); Cory Booker (D-N.J.) and Orrin Hatch (R-Utah).