Two groups of U.S. airlines are in a dogfight over whether the Trump administration should crack down on two Middle Eastern countries that are offering low fares to their customers and increasingly expanding their operations into the U.S. due to their governments' help.
At issue are Open Skies agreements in which Qatar and the United Arab Emirates agreed with the U.S. that they won't allow their governments to artificially lower fares as a result of government subsidies.
Delta, United, and American Airlines, along with some members of Congress, are petitioning the Trump administration to address the billions of dollars they claim Abu Dhabi and Doha are funneling toward their own airlines, and as a result, undermining the U.S. carriers' ability to compete internationally.
They say that since 2004, the UAE and Qatar been given more than $50 billion in subsidies to their state-run carriers Emirates, Etihad Airways, and Qatar Airways, which they say is a violation of Open Skies.
The U.S. has negotiated more than 100 Open Skies agreements with various countries since the early 1990s. The policies were “designed to eliminate government involvement in airline decision-making about routes, capacity, and pricing in international markets,” according to the U.S. State Department.
While it is common for airlines to receive limited government subsidies, organizations such as the Partnership for Open and Fair Skies claim that Qatar and UAE are global outliers because of the “magnitude” of the subsidies and the extent to which the Gulf carriers are interfering with the market to assist their own airlines. In other words, some subsidies are fine, but these two countries are taking it to a whole new level.
As a result, the Gulf carriers are putting American jobs in jeopardy as they expand their operations into the U.S. The Partnership for Open and Fair Skies argues that each time a Gulf carrier ousts a U.S. carrier from a route, 1,500 U.S. jobs are lost.
“If we enforce our Open Skies agreements, the U.S. airlines will be able to compete on a level playing field with the Gulf carriers,” said Jill Zuckman, chief spokesperson for the Partnership for Open and Fair Skies. “It means we will have a healthy U.S. aviation industry and we’ll be able to preserve American jobs.”
Zuckman argues that the alleged “trade-cheating” threatens 1.2 million American jobs and that enforcing the agreements will preserve them.
“We can’t just allow U.S. companies or industries to be devastated by countries that are breaking the rules,” Zuckman said.
The other side
But not all airlines or travel groups support taking action against Gulf carriers. U.S. Airlines for Open Skies, a coalition including JetBlue, Atlas Air Worldwide, FedEx, and Hawaiian Airlines, is concerned that meddling with the agreements would lead to retaliation from the Gulf countries and could threaten the Open Skies agreements the U.S. has established with other nations. For example, FedEx has a hub in Dubai and is concerned they could face consequences if U.S. carriers cry foul.
“Caving to the demands of Delta, United, and American tells our trading partners that when we don't want to compete, we are going to change the rules — a message that opens the door to retaliation from other countries who might not want to compete with the United States,” said Andrea Christianson, spokesperson for U.S. Airlines for Open Skies.
“Reopening the Open Skies agreements with the UAE and Qatar would pull a string that could unravel the entire network and the benefits it has brought to the U.S. economy and global aviation system,” Christianson added.
They also claim that the three legacy carriers have not cited any specific violation of the Open Skies agreement.
“The legacy carriers claim they want the Trump administration to ‘enforce’ Open Skies agreements, but haven't pointed to any specific violation,” Christianson said. The group notes that the Gulf countries would be violating the agreement only if the airline offered “artificially low” ticket prices as a result of “direct or indirect governmental subsidy or support.”
Additionally, Christianson pointed out American Airlines, Delta, and United have not taken advantage of a procedure overseen by the Department of Transportation under the International Air Transportation Fair Competitive Practices Act, where airlines can address concerns related to anti-competitive, discriminatory, or unjustifiable activities a foreign government or airline is committing against U.S. carriers.
“Congress created the Department of Transportation process to vet the very concerns being raised by Delta, United, and American,” Christianson said. “If the legacy carriers are confident in their claims, they should welcome the opportunity to present them for independent review.”
Congress gets involved
But while airlines remain divided on the issue, more than 300 members of Congress from both sides of the aisle have come together since 2015 to urge the Obama and now the Trump administration to take action against Gulf carriers.
Most recently, congressional delegations including Colorado, Arizona, and West Virginia submitted letters this fall to members of the Trump administration including Secretary of State Rex Tillerson and Secretary of Transportation Elaine Chao, backing strict enforcement of the Open Skies agreements on behalf of American jobs.
The Colorado delegation, including Republican Reps. Mike Coffman and Doug Lamborn, noted that the aviation industry is a “pillar of Colorado’s economy.” They cited that 7.5 percent of the jobs in the state are related to aviation, which includes 7,500 jobs connected to the nation’s largest airlines.
“The reason bilateral trade agreements exist is to make sure we are creating an even playing field for both domestic and foreign companies,” Coffman said in a statement. “Enforcement of these are not only vital to our commerce and economy, but also to ensure that the consumer has a variety of options when it comes to transportation.”
The Colorado delegation pointed out in their letter that just five years ago, Gulf carriers had only 12 flights a day into the U.S. Now they operate up to 36 flights, and no U.S. carrier flies into Qatar or the United Arab Emirates. They argue the high level of subsidies are inconsistent with the Open Skies agreements and that by not acting, long-term interests of American aviation are at risk, along with middle-class jobs.
"Enforcing the Open Skies agreement is upholding what’s already in place to protect against trade abuses. The Gulf carriers' subsidies harm American companies and our economy as a whole,” Lamborn said in a statement. “There's no reason foreign governments should be able to use this power to negatively impact our lives."
Additionally, the Partnership for Open and Fair Skies, which unsuccessfully lobbied the Obama administration to take action, sent a letter to Trump in November supporting his efforts to enforce international trade agreements.
“Indeed, our nation’s passenger airline industry is under threat from the very trade cheating behavior you have singled out as president,” the letter states.
The Partnership says it plans to continue to meet with members of the Trump administration, who they say have recognized the support for action among members of Congress.
The other group of airlines, which opposes action against the Gulf countries, wrote its own letter to Congress in August.
The letter argues that Open Skies agreements support more than 15 million jobs in U.S. tourism and hospitality industries, but that the jobs are threatened by the requests of the three large carriers.
Clifford Winston, a senior fellow in economic studies at the Brookings Institution, argues that carriers interested in taking action against the Gulf carriers are only concerned about their own well-being.
“Let’s face it, the carriers are not interested in doing this to improve consumer welfare,” Winston said. “They want to improve their own welfare. Anything that they want is designed to help them. And what helps them? Less competition.”