The Gulf Carrier Dispute: U.S. Carriers Notch A Nice Win

By Rob Britton
Adjunct Professor, McDonough School of Business at Georgetown University

News that the U.S. Department of State will hold talks next month with the United Arab Emirates and Qatar is, to this longtime observer of U.S. international aviation, a significant victory for American Airlines, Delta Air Lines, and United Airlines. For almost 18 months, these three airlines and their union partners have worked hard to spread the clear evidence that the three airlines from these small nations, Emirates, Etihad Airways, and Qatar Airways, have been — and continue to be — receiving billions of dollars of cash from their government owners, distorting competition worldwide.

Secretary of State John Kerry and senior officials at the State Department understand that the two Gulf nations are massively subsidizing their carriers with billions of dollars in cash, in violation of U.S. Open Skies agreements. And now State is trying to work out a remedy.

Not surprisingly, the media and many in Washington are mischaracterizing this milestone as a “loss” for the U.S. airlines. On the contrary, it is a serious setback for the Gulf carriers and their government owners.

The State Department could easily have declined to take any action at all. Instead, it confirmed the evidence collected by American, Delta, United and seven labor unions, proof gathered in a painstaking, multi-year investigation. Why was such a lengthy and painstaking investigation required? Because neither the UAE nor Qatar require the kind of honest and transparent reporting of financial data that we take for granted in the U.S. Furthermore, it has been reported that the U.S. delegation is headed by Undersecretary of State Catherine Novelli, who is highly experienced with trade issues from both private sector and government perspectives (she was formerly a senior executive with Apple and a former assistant U.S. Trade Representative). Indeed, Ms. Novelli’s bio notes that one of her duties is to “address global challenges in a transparent, rules-based, and sustainable system.” She is precisely the sort of person who has looked carefully at the evidence and will recommend appropriate action.

The fact is, this issue will take time and diplomacy to work out a solution. These nations are determined to use their significant financial resources to undermine the global aviation business, even if it requires taking massive losses on flights that make no rational, economic sense. Using $42 billion in subsidies and other unfair benefits, such as abusive labor practices, they are undermining American jobs.

The same thing is happening in Europe. In June, the EU transport commissioner called for renegotiation of the terms under which the subsidized Gulf carriers enjoy broad access to European markets. Within the last year, the governments of France, Germany and the Netherlands have all instituted freezes on new Gulf carrier flights to their countries because of the harm from the massive subsidies.

It’s great news that the U.S. government is finally recognizing the severe economic damage that the Gulf carriers are inflicting on our nation. And it’s even better news that our government officials have decided to vigorously enforce the rules and level the playing field for hundreds of thousands of American workers in the U.S. aviation industry.