Mid-East subsidies threaten the integrity of civil air transport

Every year, airlines transport passengers literally billions of miles around the globe safely, reliably and efficiently.  No other mode of transportation, and no other industry, comes close to matching the worldwide performance of the airline industry.  It is a remarkable achievement, but it did not happen by accident.

It started in 1944 when the administration of President Franklin D. Roosevelt invited the allied powers to a historic conference in Chicago to plan for a post-war world where civil aviation would become an important instrument of peace and commerce.  The initiative reflected remarkable vision.  In the years leading up to war, aviation had become an instrument of economic and political rivalry among nations that subsidized their own airlines and frustrated the opportunities of airlines of rival states.

The Chicago Conference was designed to stop those practices and to usher in a new era of cooperation among states to foster a civil air transport industry isolated from state sponsored rivalry.  The chairman of the U.S. delegation to the conference, also the president of the conference, addressed this subject in his opening remarks, stating unequivocally the position of the United States that “devices such as subsidies…designed to drive other planes out of the air” would not be U.S. policy and that the United States “would oppose any such policy if it were practiced by others.”  The chairman of the U.K. delegation spoke next, stating “we want to discourage and, when possible, to end subsidies whether they be opened or concealed.”

The conference produced the Chicago Convention, the successful multilateral treaty that forms the charter, the constitution if you will, of the air transport system today.  Over 190 countries are party to the convention, including virtually all of the members of the United Nations.  The convention established the highly respected International Civil Aviation Organization and empowered it to promote the goals of the convention, including investigating “subsidies paid to airlines from public funds.”  But it left the implementation of route rights to bilateral agreements between governments.

Since the 1990’s, the United States has pursued a policy to liberalize the operation of international air services by negotiating new bilateral agreements with each of its trading partners.  These Open Skies Agreements eliminate government interference with airline pricing, routes and capacity, all in a continuing effort to provide more affordable and convenient air services for the flying public.  They ensure carriers of both sides a “fair and equal” opportunity to compete in the market.

Unfortunately, these new bilateral agreements also have created opportunities for some Mid-East governments to reintroduce the state-sponsored rivalries that the parties to the Chicago Convention sought to eliminate, by providing billions of dollars of subsidies to state-owned airlines to promote their own national economic development strategies.  Specifically, the Partnership for Open and Fair Skies has documented over $42 billion in unfair government subsidies and benefits received by Emirates, Qatar Airways and Etihad Airways.

These practices deprive U.S. airlines of the “fair and equal” opportunity to compete that these agreements literally guarantee.  They threaten not only the goals of the Open Skies Agreements, but also the integrity of the air transport system established by the Chicago Convention.  Unfortunately, the U.S. government so far has been unable to take the steps necessary to nip the emergence of these subsidies in the bud.  The longer it waits, the more difficult it will be to address them.

Problems with bilateral aviation agreements are not new. The United States encountered a similar challenge in the 1980’s when it came to the realization that its agreements lacked adequate measures to address the threat of terrorism.  The United States rightly insisted that its aviation partners agree to those measures to protect the air transport system and the goals of the Chicago Convention; and ultimately they did.

The same kind of leadership and clarity is required of the U.S. government today.  The threat posed by public subsidies paid to airlines by wealthy states is serious. The international air transport system is far too important to allow states to ignore the rules established in 1944 and recreate the state-sponsored rivalries the founders of the aviation system wisely sought to avoid.

Originally Published on The Hill.

americans4fairskies2015Mid-East subsidies threaten the integrity of civil air transport