In most U.S. trade agreements, it is understood that language is required to protect against unfair competition. As such, language is included in these agreements that establishes expectations around competition practices and provides avenues of recourse if these expectations are not met by the parties to the agreement. This is the case for the trade agreements used to govern international aviation with the United States, called Open Skies agreements. Within the Open Skies agreement framework, specific language exists outlining expectations around fair competition and providing avenues for enforcement action should the agreement be violated by either party.
These provisions exist in every Open Skies agreement the U.S. holds with a foreign country.
Historically, Open Skies agreements have worked well for the U.S. and its trade partners. For the first time, however, a need to utilize the methods of redress set forth in the Open Skies agreements needs to be applied and acted upon to correct gross violations by two nations who are deliberately exploiting the benefits of the Open Skies agreements they enjoy with the United States to undermine competition and unfairly position the market in favor of their state-owned airlines.
President Trump has made trade enforcement a priority of his administration and has already taken initial steps on enforcement to address the market-distorting subsidies by the UAE and State of Qatar to their three airlines. We are confident that further progress on Open Skies enforcement will be made soon, which will safeguard U.S. jobs, help restore market balance and fairness, and protect the integrity of the 100+ Open Skies agreements with other nations that are not being violated.
The case for further enforcement action by President Trump is clear:
Two Gulf nations, the United Arab Emirates and State of Qatar, have been illegally subsidizing their three state-owned airlines, Emirates, Etihad and Qatar Airways (ME3), for more than a decade. With more than $52 billion combined in subsidies from their governments, the three airlines have engaged in predatory expansion, unchecked by market demands. Their subsidized growth has upended the international aviation marketplace, depriving U.S. airlines and their employees of their right to “fair and equal opportunity” as demanded by the U.S. Open Skies trade agreements with both the UAE and Qatar.
The “Fair Competition” clause was included in the Open Skies agreements with all nations who enjoy their benefits, including the UAE and Qatar, with the understanding that one day, if the framework stopped working because competition might be found to be unfair by one party or the other, there was a clear path towards finding a resolution. Specifically, this “Fair Competition” clause (Article 11) demands that frequency and capacity be determined “based upon commercial considerations in the marketplace.” As noted, airlines are to be allowed “fair and equal opportunity” to compete. This is no longer the case for U.S. airlines, which are being forced off of international routes, or are forgoing expansion opportunities, due to the seat dumping by the ME3. With each daily international route lost or forgone by a U.S. carrier as a result of these predatory practices, there is a net loss of 1,500 U.S. jobs.
The most recent “Air Passenger Market Analysis” from the International Air Transportation Association confirms the disturbing predatory behavior of the Middle Eastern airlines continuing to add capacity (more planes and more seats into markets), while at the same time flying airplanes with more empty seats (30% unsold – which without subsidies is not possible) than anywhere else in the world. With no regard for actually earning a profit, the ME3 are engaged in unfair competition, distorting the marketplace, and depriving U.S. airlines and their employees of their right to fair competition set forth in the Open Skies agreements held with the UAE and Qatar. The case for enforcement action by President Trump is therefore simple: Fair competition is no longer possible; therefore Article 11 of the Open Skies agreements is being violated by both the UAE and Qatar.
Furthermore, Article 12 of both Open Skies agreements contains a provision allowing parties to intervene in the Open Skies agreements to allow for “protection of airlines from prices that are artificially low due to direct or indirect government subsidy or support.” As demonstrated by the facts of the case, it is clear that these three Gulf airlines – Emirates, Etihad and Qatar Airways – continue to artificially lower their prices and dump seats into markets without regard to demand or earning a profit. The billions in subsidies all three airlines have each received allows this predatory behavior to occur in violation of Open Skies. This unfair competition – possible only “due to direct or indirect government subsidy or support” is a violation of Article 12 of the Open Skies agreements by both the UAE and Qatar. This too is another clear reason President Trump can and will take enforcement action with the UAE and Qatar.
The language on unfair competition and subsidies in the Open Skies agreements for both the United Arab Emirates and State of Qatar is clear. The violations by the UAE and Qatar are obvious. President Trump has made trade enforcement a priority and the American aviation workers are counting on him to take further action to safeguard U.S. jobs and restore market fairness in international aviation by enforcing the Open Skies agreements with the UAE and Qatar.