A4FS Responds to James Zogby

Our Bias Against Unprecedented Trade Violations
By Captain Lee Moak

Yesterday, James Zogby, President of the Arab American Institute, penned a strongly worded Op-Ed that, while full of bluster at the approach and content of the campaign against Gulf airline subsidies by their home governments, actually did much to support the point that Americans for Fair Skies has been making from the beginning of its campaign: that there is no defense for the massive airline subsidizations coming out of two countries on the Arabian peninsula that are distorting the international aviation marketplace and threatening American jobs. Since 2004, the United Arab Emirates and Qatar have violated the agreements established in Open Skies by providing over $40 billion in subsides to their three international carriers. The result has been a systematic devastation of airlines across the globe through an artificial lowering of seat price and a resulting distortion of the market.

When Americans for Fair Skies undertook the responsibility of educating the public on the subsidy issue and initiated its request that the United States government fulfill the obligation outlined under the Open Skies Agreements to defend its aviation industry in the face of unfair competition [1], it did so with a clear purpose and fact set. This is not about race or ethnicity. This is about a massive and unprecedented trade violation that is threatening a critical component of the U.S. economy and the hundreds of thousands of jobs it creates. And yes, it is undertaken by Middle Eastern governments rich with oil money. Mr. Zogby suggests that pointing that out the location and financial circumstances of these governments is “troubling.” What I find troubling is that he would make such a leap, himself engaging in a smear campaign that is beneath the notable organization that he represents. Further, Mr. Zogby’s sudden “expertise” in international aviation is puzzling, and questionable, given that he demonstrates little knowledge of the fact-based evidence and instead relies on tired arguments and a study from 1998 rather than addressing the current evidence available to the public.

Subsidies
Article 11.2: Each Party shall allow each airline to determine the frequency and capacity of the international air transportation it offers based upon commercial considerations in the marketplace [2].

The Middle Eastern airlines that are currently being highlighted for taking part in these massive trade violations – Qatar Airways, Etihad and Emirates – spent years flatly denying the existence of these Gulf subsidies. When the extent and sheer scale of the subsidies came to light with an evidentiary finding that clearly and methodically demonstrates the subsidy violations [3], their argument switched from denial of the existence of such subsidies to the claim that U.S. doesn’t understand the difference between equity and subsidy. We do actually. As does the rest of the world, as the definition of a “subsidy” is clearly defined by the World Trade Organization [4] and that is the basis of the subsidy violation evidence.

The unprecedented expansion of the three subsidized carriers resulting from these subsidies has not significantly increased the number of seats required for routes, rather, distorted the seat allocation through artificially lowering the cost of seats and dumping capacity onto routes through the use of new wide-body aircraft [5]. These three airlines can and do operate at a continual loss; yet expand into markets they would never be able to fairly compete in “given the commercial considerations of the marketplace” without the billions in subsidies they are receiving [6]. This is a violation of Open Skies and the basis of our entire campaign.

Competition
Article 11.1: Each Party shall allow a fair and equal opportunity for the airlines of both Parties to compete in providing the international air transportation governed by this Agreement [7].

After denying the subsidies proved ineffective for the three subsidized carriers, they then attempted to argue that the U.S. airlines were simply frustrated because they couldn’t compete. U.S. aviation, however, cannot nor should not be expected to compete within the open marketplace created by Open Skies against airlines that are merely arms of their government, with all of the financial, labor, and regulatory benefits resulting from such a relationship. Competition isn’t competition at all when the playing field is not level.

Consultations
Either Party may, at any time, request consultations relating to this Agreement. Such consultations shall begin at the earliest possible date, but not later than 60 days from the date the other Party receives the request unless otherwise agreed [8].

The fundamental point being made is this: the countries of Qatar and the United Arab Emirates have violated Open Skies through their subsidization of their airlines. Because they hold an Open Skies Agreement with the United States, the U.S. has the right (as do both the UAE and Qatar) to request consultations relating to this Agreement. This is a trade dispute among allies. And one that can and should be worked out through the established Open Skies policy.

The U.S. Department of Transportation has clearly stated, “If aviation partners fail to observe existing U.S. bilateral rights, or discriminate against U.S. airlines, we will act vigorously, through all appropriate means, to defend our rights and protect our airlines [9].” The time for consultations is now. Our Open Skies Agreements call for it, the U.S. Department of Transportation calls for it, Americans for Fair Skies calls for it. This isn’t about who is doing the subsidizing, its about what the subsidizing is doing to a vital American industry and the hundreds of thousands of jobs it provides.

Captain Moak is currently the President of Americans for Fair Skies and is a former Delta Boeing 767 pilot and former president of the Air Line Pilots Association, International.

[1] http://www.state.gov/documents/organization/114970.pdf
[2] http://www.state.gov/documents/organization/114970.pdf
[3] http://www.thestreet.com/story/13051277/1/report-says-gulf-airlines-got-39b-with-more-to-come-in-illegal-subsidies.html
[4] https://www.wto.org/english/docs_e/legal_e/24-scm.pdf
[5] http://blogs.star-telegram.com/sky_talk/2014/12/a380s-leaving-dfw-arent-exactly-full-of-passengers-local-aviation-website-says.html
[6] http://fairskies.wpengine.com/2015/03/thai-airways-loses-money-etihad-airways-loses-even-more-money-and-is-the-fastest-growing-airline-in-the-world/
[7] http://www.state.gov/documents/organization/114970.pdf
[8] http://www.state.gov/documents/organization/114970.pdf
[9] US Federal Register / Vol. 60, No. 85 / Wednesday, May 3, 1995 / Notices 21845

Published on TheHill.Com: Our Bias Against Unprecedented Trade Violations