262 House lawmakers side with airlines in Open Skies dispute

By Keith Laing

A bipartisan group of 262 House lawmakers is pushing the Obama administration to wade into a dispute over foreign airline subsidies that has roiled the U.S. aviation industry.

Unions that represent parts of the U.S. airline industry have alleged Middle Eastern airlines like Qatar Airways, Etihad Airways and Emirates Airlines have received more than $42 billion in subsidies since 2004.

The lawmakers said Thursday in a letter to Secretary of State John Kerry and Transportation Secretary Anthony Foxx that the Obama administration should investigate the subsidies because U.S. airlines say the payments violate the spirit of the Open Skies agreements between the U.S. and the governments of Qatar and the United Arab Emirates, which own the Gulf carriers.

“We are concerned that Qatar and the UAE are using these subsidies and other unfair practices to distort the market in favor of their state-owned airlines, contrary to U.S. Open Skies policy,” the lawmakers wrote.

“These actions artificially boost these state-owned carriers and undermine the principles of open competition essential to the airline industry,” the letter continued. “According to available research, each daily international roundtrip frequency lost/forgone by U.S. airlines because of subsidized Gulf carrier competition results in a net loss of over 800 U.S. jobs.”

The fight over the Open Skies agreements has exposed a rift between airlines and travel and consumer groups that argue U.S. carriers are trying to prevent competition for international flights.

Unions that represent U.S. airlines workers have formed campaigns to pressure the Obama administration to question the Gulf carrier subsidies.

Travel industry and consumer groups have, meanwhile, accused the airlines of trying to reduce competition for international flights.

The Obama administration said earlier this month that it’s launching a review of the airline industry’s claims — far short of the full-scale international negotiation the U.S. airline industry has called for.

The administration has said it is taking a look at the allegations against the Middle Eastern carriers because they have been “asserted in a publicly available report, are of significant interest to stakeholders and all three federal agencies.”

The decision was seen as a victory for U.S. airlines, but the lawmakers said the administration should request the full consultations the U.S. government is entitled to under the Open Skies agreements that have been in place since the early 2000s.

“The subsidies that Qatar and the UAE have provided to their state-owned carriers have led to market distortions and unfair competition in international aviation,” the lawmakers wrote. “Failure to address these practices will lead to significant job losses in the United States and set a dangerous precedent that could lead to further harm to the U.S. airline industry and the broader U.S. economy.”

Travel groups dismissed the show of support for the airlines’ position in the Open Skies debate as a byproduct of “limitless lobbying” by the industry.

“The limitless lobbying resources of airlines and their unions are clearly going to allow them to be heard, but we remain convinced that the inarguable merits of keeping Open Skies intact will win the day,” U.S. Travel Association Senior Vice President of Public Affairs Jonathan Grella said in a statement.

“Air passengers are already suffering because competition and choices have been virtually wiped out of the marketplace by airline consolidation,” Grella continued. “Plus, we haven’t heard anyone dispute the reality that breaking Open Skies agreements would drastically harm the overall U.S. economy and jobs—and likely have a chilling effect on all of the trade and security agreements the U.S. has negotiated in good faith. And all of this as the Big Three [airlines] are enjoying record profits anyway.”

Originally published on TheHill.Com: 262 House lawmakers side with airlines in Open Skies dispute

americans4fairskies2015262 House lawmakers side with airlines in Open Skies dispute
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New Poll: Nearly 80 percent of Americans believe the U.S. government should act to end Open Skies trade subsidy violations

New Poll: Nearly 80 percent of Americans believe the U.S. government should act to end Open Skies trade subsidy violations

WASHINGTON, April 27, 2015 /PRNewswire-USNewswire/ — A survey of American voters conducted during the week of April 20, 2015 shows that over 79% of American voters believe that the U.S. government should act to remedy trade violations of Open Skies Agreements and stand up for American workers. The poll results have been formulated from the responses of 2,409 registered voters in San Francisco, Chicago, Atlanta, Dallas, and Washington DC. The nonpartisan, issue-based poll was conducted by Premiere Political Communications of Austin, Texas on behalf of Americans for Fair Skies.

Americans broadly agree that the U.S. government needs to act to end aviation trade agreement violations:

• 74 percent feel the U.S. government should take action to remedy violations if it was proven that foreign partners were violating the Open Skies agreements they signed with the United States.
• 79 percent of voters feel that the U.S. government should take action to resolve these subsidy violations rather than waiting for the consumer-driven marketplace to work out a solution.
• 79 percent of voters feel it is a national security risk to allow the viability of our aviation infrastructure to be threatened due to its important relationship supporting the U.S. military in times of crisis.

For over 10 years, the governments of Qatar and the United Arab Emirates have subsidized their airlines, Qatar Airways, Etihad, and Emirates, with over $42 billion in violation of the Open Skies aviation trade agreements they signed with the U.S. These subsidies have resulted a significant distortion of the private, open marketplace, allowing these airlines to artificially lower the cost of seats, dumping excess seat capacity on routes, undermining the principles of fair competition outlined in the trade agreements and threatening U.S. aviation jobs.

“The poll shows that Americans are ready to see the U.S. government stand up for aviation workers and find solutions to aviation trade violations that threaten the viability of a critical national industry and the hundreds of thousands of jobs it creates,” said Captain Lee Moak, President of Americans for Fair Skies. “The time for consultations between nations to resolve this issue is now.”

For a complete breakdown of poll results, please visit http://fairskies.wpengine.com/april-2015-poll-results.

americans4fairskies2015New Poll: Nearly 80 percent of Americans believe the U.S. government should act to end Open Skies trade subsidy violations
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Qatar Airways shareholders considered dissolving the carrier in 2009, US dossier claims

Qatar Airways shareholders considered dissolving the airline five year ago, amid mounting liabilities, according to a new dossier released by US airlines.

Delta Air Lines, American Airlines, and United Airlines, under the umbrella of Partnership for Open and Fair Skies, have released financial records of Qatar Airways, Emirates and Etihad Airways obtained after a two-year investigation.

Based on this evidence, the US airlines claim their Gulf counterparts have received $42 billion in subsidies and other state benefits since 2004.

The investigators claim they managed to obtain financial statements, charter documents and other records from corporate registries in various countries where the Gulf carriers have local operations.

The worldwide search spanned nearly 30 jurisdictions, including Singapore, Australia, India, Belgium, Ireland, Malta and the United Kingdom, and yielded 44 documents totalling 1,021 pages – all of which are now available online.

The investigation unearthed 19 years of Qatar Airways’ financial statements. In the 2009 financial statement, which was audited by Ernst & Young, it was reported that the airline had accumulated losses that exceeded 50 percent of the share capital. In accordance with the articles of association of the company, an emergency general meeting (EGM) had to be convened to decide whether the situation required a dissolution of the company, decrease its stake or take any other suitable measures, the documents claim.

At the meeting on September 8 2009, the shareholders resolved to continue operations as adequate financial support was made available to meet any liabilities, the documents claim. Qatar Airways did not respond when contacted by Arabian Business for comment.

Both Etihad and Emirates have strongly denied that they have received subsidies, while Qatar Airways’ CEO Akbar Al Baker is due to address the allegations in presentations scheduled for May 13.

Originally published at ArabianBusiness.com: Qatar Airways shareholders considered dissolving the carrier in 2009, US dossier claims

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U.S. Airlines Claim to Document Subsidies at Gulf Rivals

Delta hired gumshoes to find back call for Open Skies treaty revisions

April 20, 2015

As the battle intensifies over U.S. airlines’ allegations of unfair state subsidies to three Persian Gulf rivals, a look at how the American carriers gathered data to support their claims sheds light on the vast financial reporting divide between the two sides.

Alarmed by the rapid U.S. expansion of Emirates Airline, Etihad Airways and Qatar Airways, Delta Air Lines Inc. two years ago hired forensic accountants to learn more about the overseas carriers’ funding. All three are government-owned, and Etihad and Qatar don’t issue public financial statements.

The effort—later joined by American Airlines Group Inc. and United Continental Holdings Inc.—culminated in a trade complaint lodged in January with the U.S. government. The U.S. carriers claim the documents they found show the Gulf trio has received $42 billion in subsidies and unfair benefits since 2004, including about $17 billion for Abu Dhabi-based Etihad, and $16 billion for Doha-based Qatar Airways. The Gulf carriers say they are commercial enterprises that aren’t state subsidized.

Delta hired investigators to dig into their financial histories. The three U.S. carriers say their gumshoes discovered about a year ago that they could request and obtain copies of financial statements for the three from corporate registry offices in some countries where the Gulf airlines operate.

The investigators, which the airlines wouldn’t name, searched in nearly 30 jurisdictions, assembling their dossier mostly from documents filed in the U.K., Singapore, Australia, India, Belgium and Ireland, said Jill Zuckman, spokeswoman for the U.S. airlines’ coalition, called Partnership for Open & Fair Skies. They also used bond-offering prospectuses for the Gulf carriers and their governments to compile the information.

The picture remains incomplete, Ms. Zuckman said, given the often interlocking relationships among the Gulf governments, airlines, airport authorities and aviation service providers. The U.S. coalition, which previously issued only a summary of its claims, said it will release all its documents on Tuesday, giving the Gulf carriers their first chance to evaluate and respond to the assertions.

The U.S. airlines said they amassed 44 documents totaling 1,021 pages. The Wall Street Journal has viewed many of them, at least one of which is in Flemish. Among other information, they indicate that international auditors at times endorsed two of the airlines as viable businesses—or “going concerns”—contingent on further financial backing from their shareholders.

In Etihad’s 2013 annual report, for example, KPMG LLP said it audited the accounts on a going-concern basis “notwithstanding the fact that the group had accumulated losses of $3.76 billion” as of December 2013. KPMG said it had prepared the 2013 statements based on approval of $3.5 billion in additional shareholder funding in 2014 by Abu Dhabi’s ruling body.

The U.S. carriers, citing at least nine years of Etihad financial statements, claim such shareholder funding was part of $17 billion in state subsidies provided to Etihad since 2004.

Etihad says it has received equity investments and loans from its government. It says it can’t comment on specific claims because it hasn’t seen the full documentation behind the U.S. carriers’ previously issued summary.

The U.S. airlines said they also assembled 19 years of annual accounts for Qatar Airways that show it received $16 billion in total subsidies since 2004.

In Qatar Airways’ 2009 financial statement, auditor Ernst & Young LLP reported that the current- and previous-year losses exceeded 50% of company capital. A special meeting was convened that year to weigh options including dissolving the company. Shareholders decided instead to fund its liabilities.

In the same statement, the auditors noted that the government loans were non-interest bearing, had no specific repayment terms and could be converted to equity because repayment wasn’t likely to occur in the foreseeable future.

Qatar Airways said Chief Executive Akbar Al Baker is expected to address the U.S. carriers’ allegations in presentations scheduled for May 13.

Emirates has published its financial statements for the past 13 years and is starting to make earlier reports available as well. But the U.S. carriers claim they also uncovered evidence that it received at least $5 billion in subsidies since 2004.

Among other things, they pointed to a reduction from 15.1 billion U.A.E. dirhams to 5.6 million dirhams in fuel-price hedging contracts on its books between 2008 and 2009, a time when many airlines took hedging losses after jet fuel prices tumbled. The majority of the contracts were transferred to a Dubai government holding company, the financial statement said. PricewaterhouseCoopers LLP audited the books.

Emirates declined to comment on the hedging contracts. Last week, it said it had requested that the U.S. government release the materials received from the U.S. airlines, as well as information it had requested from them, so Emirates can “defend itself against the pernicious falsehoods that have wrongly been advanced against it.”

Emirates, Etihad and Qatar Airways say they abide by International Financial Reporting Standards. Qatar’s books also make that claim. All three companies say they have earned their burgeoning traffic with superior service and a range of new destinations. KPMG, PricewaterhouseCoopers, and Ernst & Young declined to comment on client accounts.

The U.S. carriers want the Obama administration to revise existing “open skies” air treaties with Qatar and the United Arab Emirates to account for the purported government aid. Meanwhile, the U.S. carriers also want the government to freeze additional Gulf airline service to the U.S., retroactive to January, restricting planned new routes.

The Gulf carriers and open skies air treaties generally have won support from U.S. cargo airlines, discount carriers such as JetBlue Airways Corp., and U.S. airport and tourism groups. Centre for Aviation, a respected Australian aviation researcher, took the U.S. airlines to task in a recent report for failing to account for the customer benefits such new airplanes, exotic destinations and lower fares provided by the Gulf carriers and not demonstrating serious harm to U.S. airlines by their expansion.

Write to Susan Carey at [email protected] and Rory Jones at [email protected]

Originally published at WSJ.com: U.S. Airlines Claim to Document Subsidies at Gulf Rivals

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Durbin sides with airlines in Open Skies dispute

By Keith Laing

Sen. Dick Durbin (D-Ill.) is pushing the Obama administration to wade into a dispute over foreign airline subsidies that has roiled the U.S. aviation industry.

Unions that represent parts of the U.S. airline industry have alleged Middle Eastern airlines like Qatar Airways, Etihad Airways and Emirates Airlines have received more than $42 billion in subsidies since 2004.

Durbin said in a letter to Secretary of State John Kerry and Transportation Secretary Anthony Foxx that the Obama administration should investigate the subsidies because U.S. airlines say the payments violate the spirit of the Open Skies agreements between the U.S. and the governments of Qatar and the United Arab Emirates, which own the airlines.

“I write to express my concern regarding recent reports that the three largest airlines of the Gulf States of Qatar and the United Arab Emirates (UAE) are receiving substantial government subsidies,” he wrote. “Market distortion caused by state subsidies give these airlines an unfair advantage over U.S. carriers. As such, I urge you to carefully review this situation and consider appropriate action to uphold the legacy of our Open Skies agreements.”

The Obama administration said earlier this month that they are launching a review of the airline industry’s claims similar to the one Durbin suggested because the allegations against the Middle Eastern carriers “are asserted in a publicly available report, are of significant interest to stakeholders and all three federal agencies.”

Originally published at TheHill.Com: Durbin sides with airlines in Open Skies dispute

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Labor Voices: When ‘open skies’ means unfair advantage

By James P. Hoffa

Unfair labor practices are once again hurting U.S. workers and threatening jobs here in Michigan and across America. This time, the threat is coming from overseas, as three airlines from the Middle East — Qatar Airways, Etihad Airways and Emirates — are embracing shady financial practices and anti-worker policies to undercut U.S. companies.

These Persian Gulf region air carriers are distorting the market with unfair advantages, and hoping no one notices. U.S. airlines are accountable to their shareholders and operate as private businesses. They respond to pressures in the marketplace and must negotiate contracts with their unionized employees.

In contrast, Qatar Airways, Etihad Airways and Emirates are run as extensions of the countries they serve. In direct violation of the international Open Skies agreement, recent evidence shows the governments of Qatar and the United Arab Emirates (UAE) are pumping billions of dollars into these companies through subsidies, supportive public policies and state-funded construction. These billions provide the airlines with an enormous benefit that upends the international aviation market and undermines global competition standards.

A recent report shows that these subsidies and unfair benefits have totaled $42 billion over the last decade alone. With that much government cash, no wonder these airlines are expanding! With no pressure to earn profits, provide a living wage or control costs, these state-funded enterprises jeopardize American businesses, threatening jobs and consumer choice in the process.

It’s as if a foreign government were manufacturing cars on the cheap in its own country and then selling them by the thousands in U.S. cities at below-market rates. That’s not competition — it’s a tactic straight out of the old monopolist playbook. It’s also one the U.S. government has rejected for decades.

To make it worse, these airlines operate with minimal oversight. In stark contrast to the U.S., airline regulators in Qatar and the UAE are anything but independent. The chairman of Emirates, for example, also serves as the president of the Dubai Civil Aviation Authority, Dubai’s equivalent of the FAA. He is also a director of the UAE’s General Civil Aviation Authority. This would be an absurd conflict of interest anywhere else, but for big companies in these countries, it’s just how they do business.

The Gulf airlines tilt the playing field through other, more sinister policies enforced by their governments. Both Qatar and the UAE outlaw labor unions and offer almost no protection for their workers. The abysmal treatment of workers in Qatar has already drawn widespread condemnation in the lead up to the World Cup, for example, and rightfully so. Conditions for workers in these countries are so poor that their jobs are often compared to indentured servitude. Workers are suffering in Qatar and the UAE, but the airlines save billions as a result.

Access to our skies must be equitable. Like any international accord, these agreements must be enforced. The Teamsters urge U.S. negotiators to revisit the Open Skies protocols with the countries that are receiving governmental support to ensure fairness. American workers can compete with anyone in the world when the playing field is level, but everyone has to play by the same rules.

James P. Hoffa is president of the International Brotherhood of Teamsters.

Labor Voices

Labor Voices columns are written on a rotating basis by United Auto Workers President Dennis Williams, Teamsters President James Hoffa, Michigan AFL-CIO President Karla Swift and Michigan Education Association President Steven Cook.

americans4fairskies2015Labor Voices: When ‘open skies’ means unfair advantage
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U.S. Airlines Have Paid the Government $250 Billion — Amazingly, Some Claim They Are Subsidized

By: Ted Reed

Of all misguided statements that have been in the debate regarding the $39 billion government subsidies of the three Middle East carriers, the most misguided ones suggest that it’s fine because U.S. airlines are also heavily subsidized.

A government report that surfaced recently shows that U.S. airlines received $155 billion in federal subsidies between 1919 and 1998. The report was unearthed by Kevin Mitchell, chairman of the Business Travel Coalition, who found it online after he saw it mentioned in The National, a UAE publication.

The report makes for fascinating reading. It briefly and accurately relates the history of government spending on the airline industry over the 79 years ending in 1998. It was compiled by the Congressional Research Office, which answers questions for members of Congress.

But it is overstatement to call it a “bombshell report,” as the U.S. Travel Association — which represents travel agents and supports the status quo for Mid-East carriers — has done.

Of the $155 billion in spending through 1988 outlined in the report, the vast majority, $140 billion, was spent by the aviation trust fund that supports Federal Aviation Administration spending.

The report does not mention that since 1971, U.S. airlines and their passengers have contributed about $247 billion to the fund, according to Federal Aviation Administration historical data.

The airlines and their passengers today contribute about $10 billion annually to the fund, which currently holds a surplus of about $13 billion. The rest has been spent.

In other words, the U.S. airline industry generally pays for what it gets from the government.
In general, this is not what happens in Qatar, the United Arab Emirates, and Abu Dhabi and Dubai, the two largest Emirates. A report compiled for American, Delta and United demonstrates that the governments of the four entities have provided about $39 billion in subsidies to three airlines — Qatar Airways, the flag carrier of Qatar; and Etihad Airways and Emirates, flag carriers of the UAE.

To be fair, these airlines have a valid argument when they say that many countries subsidize airlines, particularly start-up airlines. That is exactly what happened in the U.S, where the commercial aviation industry began with contracts to mail carriers.

“The irrefutable and germane point of the {Congressional} report is that countries around the world have spent substantial sums of money to establish their commercial aviation industries and, in doing so, they follow the best-practice model of the U.S,” Mitchell said. “The Middle East 3, and their home countries, are no different in this practice.”

But it’s not at all clear that the startup of the U.S. airline industry and the startup of the Gulf airline industry are parallel events.

The book “American Airlines, US Airways and the Creation of the World’s Largest Airlines,” which I wrote with Dan Reed, tells how US Airways and American got started.

American’s earliest predecessors included Robertson Aircraft. One day in 1926, a young aviator named Charles Lindberg “loaded mail into a DH-4 biplane operated by Robertson and flew it from St. Louis to Chicago,” the book says.

US Airways began in 1939 as All American Aviation. Its “unique, cutting- edge concept involved airborne airplanes picking up mailbags suspended from cables in isolated sites in the Allegheny Mountains of western Pennsylvania,” the book says. “It seemed like a good idea at the time.”

In 1925, the Congressional Research Report noted, Congress passed the Kelly Act, which enabled the Post Office to contract with airlines to provide air mail service. The 1930 Watres Act changed the formula a bit. A key was that “the Post Office began requiring that air mail contractors carry passengers {in the hope that} passenger traffic could eventually lead to a reduction in the need for air mail subsidies.”

Once airlines got going, the government provided more subsidies during the ensuing half-century. From 1925 to 1970, the subsidies to airlines totaled about $9 billion. Additionally, from 1926 to 1970, the federal government spent about $1.5 billion to build airports.

Government spending on Mid-East airlines has followed a somewhat different pattern since the founding of Emirates in 1985, Qatar in 1993 and Etihad in 2003.

Rather than gradually building a system to provide the benefits of a new technology to their citizens, the Mid-East governments in question rapidly spent billions of dollars to build three subsidized airlines and gigantic airports and to fill them with the world’s most expensive aircraft, following business models that involve taking advantage of treaties that never envisioned such a thing in order to siphon passengers from the world’s established airlines, which must make money to survive.

Please don’t try to tell me that’s the same thing as helping to fund a risky start-up venture that used tiny aircraft to pick up mailbags suspended from cables at isolated sites in the Allegheny Mountains.

Originally published on Forbes.Com: http://www.forbes.com/sites/tedreed/2015/04/14/u-s-airlines-have-paid-the-government-250-billion-amazingly-some-claim-they-are-subsidized/

americans4fairskies2015U.S. Airlines Have Paid the Government $250 Billion — Amazingly, Some Claim They Are Subsidized
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Americans for Fair Skies commends US government action regarding the Gulf Subsidies

A statement from Americans for Fair Skies:

“We commend the action by the U.S. Departments of Transportation, State, and Commerce to open formal proceedings on the airline subsidies by the United Arab Emirates to Etihad Airways and Emirates Airways and Qatar to Qatar Airways. This is an important first step towards restoring fairness to our skies and stopping the largest trade violation in history.

There will certainly be a diversity of opinions on this matter, but one thing we should all agree on is the freedom to have this dialogue with our government and for our government to have formal consultations with the UAE and Qatar. We believe the evidence is clear: Etihad, Qatar, and Emirates would not be commercially viable without national subsidies. The more then $40 billion in subsidies have instead allowed these airlines to distort the international aviation marketplace and threaten American jobs.

We look forward to presenting our formal case to the U.S. Government in the docket.”

Learn more at fairskies.wpengine.com

americans4fairskies2015Americans for Fair Skies commends US government action regarding the Gulf Subsidies
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Americans for Fair Skies Calls for Investigation into Allegations of Emirates’ Pilot Pushing

Americans for Fair Skies Calls for Investigation into Allegations of Emirates’ Pilot Pushing
UAE Government Cannot Fairly “Investigate” It’s Own State-Owned, State-Subsidized Airline

Washington, DC – In response to today’s Wall Street Journal story, “Pilot Workload at Emirates Under Question,” Americans for Fair Skies is calling on the U.S. government to investigate whether Emirates, an airline with ten current and two forthcoming daily flights into the United States, is safely operating its airline amid serious allegations of underreporting pilot-duty hours so that its pilots can work beyond established safe flight and duty time hours.

Said Americans for Fair Skies President, Lee Moak: “The safety allegations reported today in the Wall Street Journal are very serious, but we cannot be confident that the United Arab Emirates will take the investigation seriously. How can we know whether the UAE government, which also owns and operates Emirates Airways, is truly going to address its own declared problem? Evidence provided to the U.S. government and made available to the public has already made it clear that the UAE is subsidizing its two state-owned international airlines, Emirates and Etihad, in violation of the Open Skies agreement they signed. This alone tells us that they willing to break the rules for their own benefit. It’s not a far stretch to believe that they would handle the alleged safety violations the same way they have mishandled their Open Skies agreement. If Emirates is cheating their financial books, how do we know they are not also cheating their pilot flight hours’ books, just like dozens of Emirates pilots are accusing the airline of doing, according to the Wall Street Journal?”

The UAE has announced that Ismail Al Balooshi, the director of aviation safety at the General Civil Aviation Authority, will lead the investigation. Mr. Balooshi reports to the Board of the Civil Aviation Authority, which includes High Highness Sheikh Ahmed Bin Saeed Al Maktoom, the head of the Dubai Civil Aviation Authority and also the Chairman of Emirates Airways. Said Moak: “There is a clear conflict of interest here that requires independent investigation.” The General Civil Aviation Authority in the UAE is akin to the Federal Aviation Administration (FAA) here in the United States. Having the chairman of an airline leading its own safety oversight authority is a conflict of interest.

Should the United States investigate the allegations of Emirates Airways, which according to the Wall Street Journal, “underreports time on duty to the aviation regulator in the United Arab Emirates, meaning pilots at times exceed daily-duty limits that exist to protect their health and the safety of flights,” the UAE could be at risk of losing its Category 1 International Aviation Safety Assessment (IASA) rating from the Federal Aviation Administration. It is necessary for nations to maintain proper records to maintain their Category 1 rating, which Emirates, an arm of the government, is accused of not doing properly.

Learn more about Americans for Fair Skies, a grassroots coalition formed to restore fairness to our Open Skies, at fairskies.wpengine.com.


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The Tilted Playing Field in International Airline Competition​

By: Rob Britton
In recent years, three Gulf-based airlines — Emirates, Etihad, and Qatar Airways — have expanded into the U.S. market at a rate that far exceeds growth in the market. They have done so in violation of Open Skies agreements and with massive backing from their governments. Fortunately, the men and women of the U.S. airline industry are fighting back, urging fair competition.

A recent opinion piece under this masthead, “Airlines Squabble Over ‘Open Skies’ Treaties,” argues that “airlines are a systemically critical part of our economy.” I wholeheartedly agree. According to the industry group Airlines for America, the U.S. airline industry drives nearly $1.5 trillion in U.S. economic activity while directly and indirectly supporting more than 11 million jobs. But the author of the piece, Richard Finger, clearly hasn’t spent much time studying airlines, or the facts surrounding the expansion of these Gulf carriers. As someone who has worked in and observed the industry for over 40 years, I am eager to set the record straight.

Airlines play a huge role in the economic success and development in all 50 states, which is precisely why Mr. Finger should understand that ensuring free and fair competition with Emirates, Etihad, and Qatar Airways is so important. These Gulf carriers have received more than $42 billion in subsidies and other unfair benefits from their governments in a clear violation of U.S. Open Skies policy. They are using these advantages to expand rapidly and flood the U.S. marketplace – threatening American companies and jobs.

All 112 Open Skies aviation agreements (not treaties, as Mr. Finger calls them, because unlike treaties they do not require Senate ratification) signed by the United States have been built upon on a key tenet of U.S. international aviation policy: to “Ensure that competition is fair and the playing field is level by eliminating marketplace distortions, such as government subsidies.” If a country wants open access to the U.S. marketplace, the largest in the world, they cannot massively subsidize their airlines. Unfortunately, this is exactly what the UAE and Qatar have done and continue to do. Even as I write this, Etihad has announced plans for a second daily (494- seat) A380 from New York to Abu Dhabi.

Mr. Finger attempts to characterize UAE and Qatari support for their airlines as “amorphous,” but a recent report specifically identifies the nature of the subsidies and other unfair benefits. This report was the result of two years of work — work made more difficult by the fact that none of these three airlines release financial statements that would meet U.S. standards of completeness and transparency.

After examining the extensive nature of governmental support the Gulf carriers enjoy, it is just plain wrong to claim, as Mr. Finger does, that U.S. carriers receive comparable benefits. First, the Chapter 11 process is not, as he says, “synonymous with subsidy.” It is a restructuring supervised by an independent judiciary. The process does not involve taxpayer money. Furthermore, under established international trade law, Chapter 11 reorganizations are not considered subsidies. And many other countries have similar procedures in place.

A second, related point: taxpayers are not liable for any restructuring of airline pension plans in bankruptcy. Mr. Finger equates the Pension Benefit Guarantee Corporation (PBGC) with American taxpayers, but that agency neither receives taxpayer funds nor is backed by the “full faith and credit” protection of the U.S. Government. According to the PBGC website, it “collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over.” In fact, in most legacy airline bankruptcies since 2001, the PBGC has actively protected creditors’ rights against debtor air carriers and acted vigorously to minimize its liabilities. For example the PBGC prevailed in the American Airlines case, convincing the bankruptcy court to prevent American Airlines from terminating its pilots’ pension plan and to impose liens on $91 million in American’s foreign assets to secure a potential PBGC liability.

Bankruptcy reorganization has been painful for legacy airline employees, retirees, and creditors, but it has yielded many positive results. Carriers emerged stronger and more competitive, most employees still have their jobs and the entire economy has benefited from unprecedented stability. Given the pivotal importance of airlines to the nation, we all gain from an airline industry that no longer wobbles. This process, however, has been difficult for U.S. airlines, and contrasts starkly with the billions of government dollars the Gulf carriers have received in interest-free loans, equity infusions and more.

Third, Mr. Finger calls provisions of the Air Transportation Safety and System Stabilization Act, passed 11 days after the attacks of September 11, 2001, a “bailout.” I was working at American Airlines on 9/11, and we sure didn’t see it that way. In providing $5 billion in grants and enabling $10 billion in loan guarantees, lawmakers were simply responding to the potential economic damage of a severely weakened domestic industry after an unprecedented disaster. The act provided $860 million to American in 2001-02. When you consider that in late 2001 and early 2002 American often lost $15-20 million in a single day, that welcome support would only fund six to eight weeks of losses (net losses for American’s parent company in 2001-02 totaled $5.3 billion). It’s important to distinguish between modest, one-time emergency support following a catastrophic attack on the U.S. and the ongoing, “business as usual” subsidies the UAE and Qatar provide to their three mega-carriers, on demand, with blank checks.

Fourth, Mr. Finger criticizes tax-exempt bonds issued that enable airlines to modernize their terminals. As joint public/private facilities, airports are complex entities, and most observers – and certainly travelers – appreciate modern and efficient facilities. And, fundamentally, the funds come from debt that airlines must repay. In contrast, the UAE and Qatari governments are spending billions of dollars to expand their airports at no cost to the Gulf carriers. Qatar recently completed the $17 billion Hamad International Airport to facilitate Qatar Airways’ expansion, for example. Dubai is spending $7.8 billion to expand capacity at Dubai International Airport and Abu Dhabi is expected to complete a $6.8 billion expansion of its airport this year.

Finally, I would like to close with a personal comment: as a longtime airline employee, I object to Mr. Finger’s inflammatory rhetoric targeting my former employers and coworkers. His piece is peppered with righteous indignation: “As a taxpayer it is unfair, at every economic hiccup, to shower this industry with gratuitous taxpayer dollars,” he writes. He describes U.S. companies as “whiny” and characterizes my colleagues in the business as “spoiled children.” The hundreds of thousands of men and women working in the U.S. airline industry deserve to be treated with more respect. We are simply seeking the opportunity to compete on a level playing field — to bring people together safely, reliably, and at a fair price.

Rob Britton has worked in and near the airline industry since 1984, and specializes in researching and explaining this complex and changing business to varied audiences. He is an adjunct professor at the McDonough School of Business at Georgetown University, and an annual guest lecturer at 25 business schools worldwide, including Kellogg, Wharton, and London Business School. You can reach Rob at [email protected] or on Twitter at @PlanelySpeaking

americans4fairskies2015The Tilted Playing Field in International Airline Competition​
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False Analogies: From Paper Airplanes to Massive Gulf Subsidies

Qatar Airways, Etihad, and Emirates have received more than $40 billion in subsidies by their home governments in the past 10 years [1]. Over the past few days, those arguing in favor of the Gulf subsidies have referenced a nearly two decades old report that highlights the beginning of aviation in the United States, starting in 1918, and ending before the Open Skies agreements between the U.S. and UAE and Qatar were signed. To compare these current subsidies to a nearly 20-year old report on the founding of aviation in the United States as we first took to the skies with early test-flights is like comparing a Boeing 777 to a paper airplane. The comparison is actually laughable.

Any comparison of the evidentiary findings regarding the current Gulf subsides, which have been presented to the U.S. government and made available to the public, to unrelated and outdated research on the founding of the U.S. aviation industry is an absurd and desperate attempt to distract from the real fact-based evidence on the Gulf subsidies [2].

The facts are straightforward. The definition of subsidy has been clearly defined by the World Trade Organization [3]. Open Skies Agreements forbid subsidies that take away the opportunity for fair competition determined by the commercial considerations of the marketplace [4]. The governments of the United Arab Emirates and Qatar are presently fueling their airlines with billions in government subsidies that are unfairly distorting the marketplace and removing the opportunity for fair competition. These subsidies are a direct violation of Open Skies agreements that they signed.

United States government must immediately engage these two countries in the formal consultations process, outlined and made available to all parties in Open Skies Agreements, to bring about an end to these subsidies, which threaten U.S. aviation jobs by distorting the international marketplace [5].

Americans for Fair Skies is a grassroots coalition, established with the aim of restoring fairness to our Open Skies policies. They are asking the U.S. government to take action regarding the subsidy violations of the Open Skies Agreements with the United Arab Emirates and Qatar.

Learn more at fairskies.wpengine.com.

[1] thestreet.com/story/13051277/1/report-says-gulf-airlines-got-39b-with-more-to-come-in-illegal-subsidies.html
[2] forbes.com/sites/tedreed/2015/03/02/note-to-mid-east-airlines-you-have-some-questions-to-answer/
[3] wto.org/english/docs_e/legal_e/24-scm.pdf
[4] state.gov/documents/organization/114970.pdf

americans4fairskies2015False Analogies: From Paper Airplanes to Massive Gulf Subsidies
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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.

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.

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.

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

americans4fairskies2015A4FS Responds to James Zogby
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A Deal Is a Deal

By Tim Canoll

Roll Call– In recent weeks, it has become abundantly clear that Qatar and the United Arab Emirates are in breach of their air service agreements with the U.S. and that the Obama administration must act swiftly to restore balance. These countries have unfairly subsidized three of their airlines — Emirates Airline, Etihad Airways and Qatar Airways — and have thus posed a direct threat to the economic security of our U.S. aviation industry and the 11 million jobs that it supports.

Last week, the U.S. government opened a period for public comment in regards to the massive subsidies these Gulf airline carriers receive, and we are pleased the administration is taking this issue seriously. We urge members of Congress to also weigh in by joining our call for a level, competitive playing field for U.S. airlines and aviation workers and stopping these carriers from exploiting loopholes in our Open Skies agreements.

Since 2004, the governments of Qatar and the United Arab Emirates have provided $42 billion in subsidies and other unfair benefits to these three airlines. Because these airlines receive massive government subsidies, they are growing at an astounding rate and expanding their global presence without the normal concern for financial profitability.

That means our airlines aren’t competing with other airlines — they are competing with the treasuries of very wealthy nations.

The U.S. aviation industry is not alone: Carsten Spohr, chairman of the executive board and CEO of the Lufthansa Group, says that other global airlines are being “increasingly attacked” by heavily subsidized Middle Eastern carriers. A basic premise of Open Skies is that airlines would compete on a level playing field, but today, we instead find ourselves competing with gulf carriers receiving blank checks from their governments’ coffers. In addition, the governments of Germany and France have publicly stated their concerns about the massive government subsidies being provided to the Gulf carriers and the impact they have on the aviation marketplace.

When James Hogan, president and CEO of Etihad Airways, was recently asked about his airline receiving $6 billion in equity infusions, he could have denied it, but he didn’t. Instead, he defended the infusions saying, “Why can’t a state invest in growing an airline to create jobs?”

This violation of our international agreements is unacceptable and threatens the careers of highly trained U.S. pilots and others in the aviation industry.

It’s time for the United States to tell the UAE and Qatar that a deal is a deal. The Obama administration should open consultations with Qatar and the UAE immediately, as allowed by the existing air transport agreements, to get the facts about these airlines’ finances. In addition, the administration should request a freeze on current passenger service by these countries’ airlines while consultations are under way.

We need our government — both in the executive branch and our elected officials in Congress — alongside us in the fight for a strong and vibrant U.S. airline industry. All we ask is that U.S. companies have a fair opportunity to compete in the global marketplace so that they may continue to support North American aviation jobs.

Capt. Tim Canoll is president of the Air Line Pilots Association, International.

Originally published at RollCall.Com: A Deal Is a Deal

americans4fairskies2015A Deal Is a Deal
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Americans for Fair Skies’ Statement on APFA’s Open Letter to Actress Nicole Kidman

Washington D.C. (April 2, 2015) – This morning, Laura Glading, President of the Association of Professional Flight Attendants (APFA), sent a letter to actress Nicole Kidman requesting she step back from her prominent role in an advertising campaign for Etihad Airways – a company the Wall Street Journal has publicly reported ‘may fire women if they become pregnant’ and forces flight attendants to live in ‘confinement’ in secure compounds.[1] Americans for Fair Skies supports fair labor practices and has released the following statement in response to the letter from APFA:

“Ms. Kidman, a UN Women Goodwill Ambassador, is a strong advocate for global women’s rights and we find her appearance in an advertising campaign for an airline well known for its discriminatory practices towards those it employs to be both puzzling and unsettling. We support the APFA in their request that Ms. Kidman cease her relationship with Etihad Airways and hope she will instead choose to continue using her considerable talent and fame to support female workers, and all workers in need of fair labor practices, both in this instance and around the world.”

Americans for Fair Skies is a grassroots coalition, established with the aim of restoring fairness to our Open Skies policies. They are asking the U.S. government to take action regarding the subsidy violations of the Open Skies Agreements with the United Arab Emirates and Qatar.

Learn more at fairskies.wpengine.com.

[1] “Persian Gulf Airlines Groom New, Global Flight Crews,” Wall Street Journal, December 3, 2014: http://www.wsj.com/articles/persian-gulf-airlines-groom-new-global-flight-crews-1417646586

americans4fairskies2015Americans for Fair Skies’ Statement on APFA’s Open Letter to Actress Nicole Kidman
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