Three Big U.S. Airlines Allege Additional State Subsidies to Qatar Airways

Days after the U.S. government said it intends to hold “informal” discussions with two Persian Gulf governments over a trade dispute brought by three big U.S. airlines, the U.S. carriers said they have uncovered evidence that the government of Qatar provided additional subsidies to Qatar Airways.

Qatar Airways has vehemently denied receiving subsidies and posted rebuttals on U.S. regulatory dockets. On Wednesday, Doha-based Qatar Airways wasn’t immediately available for comment, nor was the Qatar Embassy in Washington. Its U.A.E.-based rivals, Etihad Airways and Emirates Airline also have denied being subsidized.

American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc., 18 months ago said they had documented $42 million in subsidies and unfair benefits given to three big Gulf carriers since 2004 by their state owners. The three U.S. companies lodged a trade complaint with their government, asking it to modify liberal air treaties with Qatar and the U.A.E., and to freeze additional flights to the U.S. by the three fast-growing Gulf carriers.

Last week, the U.S. State Department told the U.S. carriers and their labor-union allies that it remains committed to its “open skies” aviation policy, under which liberal air treaties are struck to boost passenger choice and help the broader economy through increased travel, trade and job growth. But the government, saying it takes seriously the competition claims raised by some U.S. carriers, said it plans to hold “informal, technical discussions” in July with the U.A.E. and Qatar.

On Wednesday, the big U.S. airlines said their forensic investigators had found further evidence of trade-distorting state aid, based on financial statements Qatar Airways filed with a corporate registry office in Singapore. Those documents, the U.S. side alleges, indicated that Qatar Airways received more than $7 billion in aid in the fiscal year ended in March 2015, and has commitments from its government for a further $3.7 billion in subsidies.

Law firm Wilmer Cutler Pickering Hale and Dorr LLP, which is representing the big U.S. carriers, found the new evidence in the spring, according to Partnership for Open & Fair Skies, the lobby of the three U.S. carriers and their labor allies. The lawyers found that the Qatar government transferred 72 planes, cash and other assets with a value of $5 billion to the airline and injected $2.2 billion in cash. Furthermore, the government authorized an additional $3.7 billion, the Wilmer Hale report said.

Another group of U.S. airlines that opposes the position of American, Delta and United was invited to meet State Department officials on Wednesday about the trade dispute. The group, which includes FedEx Corp., Alaska Airlines Group Inc., JetBlue Airways Corp. and Hawaiian Holdings Inc., has expressed concern from the outset of this fight that rolling back liberal air treaties could cause economic damage and possible retaliation.

The State Department Wednesday confirmed that it met with representatives of the U.S. airlines, travel, tourism and cargo industries, as part of its regular contact with stakeholders interested in Middle Eastern aviation issues. As for the new allegations involving Qatar, the department said it is “carefully and thoroughly reviewing the claims by some U.S. carriers that the Gulf carriers are benefiting from government subsidies that are distorting the market.”

Originally Published on The Wall Street Journal.