What to Know About Gulf Airline Subsidies

On Mar. 5 three major U.S. commercial airlines released a report alleging that three Persian Gulf airlines are receiving unfair subsidies from their respective governments.

Representatives from American Airlines, Delta Airlines, and United Airlines say that over the past ten years, the governments of Qatar and the United Arab Emirates have given about $42 billion to Qatar Airways, Emirates Airlines, and Etihad Airways.

An Emirates Airlines Boeing 777. Carlos Delgado: Wikipedia Commons photo.

An Emirates Airlines Boeing 777. Carlos Delgado: Wikipedia Commons photo.

Assuming the allegations are true, these subsidies are in violation of the international “Open Skies” agreements between the U.S. and the two Gulf countries.

The U.S. State Department says that Open Skies agreements are designed to promote increased travel and trade between countries.

On their website the State Department says, “Open Skies agreements do this by eliminating government interference in the commercial decisions of air carriers about routes, capacity, and pricing, freeing carriers to provide more affordable, convenient, and efficient air service for consumers.”

Article 12 of the U.S.-Qatar agreement and the U.S.-U.A.E. agreement protects all airlines, “from prices that are artificially low due to direct or indirect government subsidy or support.”

The Chicago Tribune says that, “The alleged subsidies include interest-free loans with no repayment terms, government assumption of fuel-hedging losses, subsidized airport charges and free land.”

All three U.S. airlines and are calling upon the Obama administration to review their allegations. Bill Shuster, Chairman of the House Committee on Transportation and Infrastructure, is also asking the executive branch to review the possible violations.

If the Obama administration finds that the Gulf airlines have received unfair subsidies, it will begin a process of “consultations” with the U.A.E. and Qatar.

“Our goal is consultations,” Casey Norton, an American Airlines spokesman told The Washington Post. “If the governments agree to open those discussions, they should determine any possible remedies. We have asked to put a freeze on current operations until the matter is discussed by appropriate governments.”

The Gulf carriers maintain that they have not been competing unfairly. Tim Clark, President of Emirates Airlines, said that his company would be providing a “line-by-line response” to the report that was released earlier this month, according to Reuters.

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