Open Skies agreement with Qatar foretells strong U.S. enforcement to protect airline industry

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The Trump administration’s recently announced agreement with the State of Qatar promises marketplace protections for the 1.2 million American jobs that depend on a strong and stable U.S. aviation industry and indicates that the White House is serious about enforcing its Open Skies agreements.

“The Trump administration has demonstrated its commitment to enforcing our trade agreements and protecting American jobs from unfair competition through its recent agreement with Qatar,” James H. Burnley IV, one of the nation’s foremost authorities on transportation law and policy, told Transportation Today.

The agreement, announced Jan. 30 during a U.S. State Department event featuring Secretary of State Rex Tillerson and Secretary of Defense James Mattis as part of the U.S.-Qatar Strategic Dialogue, is “a set of understandings on civil aviation” aimed at ensuring healthy competition exists in the global aviation sector while maintaining the U.S. Open Skies framework, according to the State Department.

Since 1992, the United States has entered bilateral Open Skies trade agreements with 121 countries to foster airline industry growth and enable passengers to fly from the United States to almost anywhere around the globe, explained Burnley, who is chairman of the Eno Center for Transportation and a partner at the Washington, D.C., law offices of Venable LLP.

“The bilateral treaties were put in place to create an open marketplace where airlines could freely and fairly compete for travelers’ business on their products’ merits, free of market distortions,” wrote Burnley, who served as the U.S. Secretary of Transportation from 1987 to 1989, the Deputy Secretary of Transportation during 1983-1987, and as general counsel of the department in 1983, in a recent article for the Eno Center.

But two of the 121 agreements — which get negotiated by the State Department and the U.S. Department of Transportation — haven’t been working as intended, namely those with the United Arab Emirates (UAE) and Qatar.

The Partnership for Open & Fair Skies has documented more than $25 billion in subsidies that the government of Qatar has provided to its state-owned airline in violation of its Open Skies agreement with the United States. The partnership said it has been working with the U.S. government for almost three years to address the more than $50 billion in rule-breaking subsidies it says the Gulf carriers – the state-owned airlines Emirates, Etihad Airways and Qatar Airways – have received since 2004 from the UAE and Qatar.

Such government subsidies create an uneven playing field that U.S. carriers cannot fairly compete on, according to the airlines and industry stakeholders, and they threaten U.S. jobs supported by the aviation industry. If left unchecked, the Gulf carriers will continue to expand into the United States, putting at risk service to small and medium-sized communities around the country, stakeholders say.

“Fair and free trade is a cornerstone of our great country and essential to ensuring American economic strength and growth,” wrote Burnley, who is also a consultant for American Airlines, a member of the Partnership for Open & Fair Skies.

In fact, for every international route where a U.S. carrier cannot compete and is forced to cede the route to a subsidized Gulf carrier, over 1,500 American jobs are lost, according to the partnership, a coalition that along with American Airlines also includes Delta Air Lines and United Airlines, the Air Line Pilots Association, the Allied Pilots Association, the Southwest Airlines Pilots’ Association, the Association of Professional Flight Attendants, the Association of Flight Attendants-CWA, the Communications Workers of America, and the Airline Division of the International Brotherhood of Teamsters.

As part of the recent agreement between the U.S. and Qatar, the partnership said Qatar has committed to operate in a transparent manner by using internationally agreed upon accounting and auditing standards and applying commercial terms to all transactions.

“Qatar and the UAE have both engaged in dishonest accounting methods to distort and conceal the truth about the extent to which the governments have kept the three state-owned airlines afloat,” according to Jenny Beth Martin, president and co-founder of the Tea Party Patriots and the chairman of the Tea Party Patriots Citizens Fund, in an opinion piece published Feb. 9 in The Washington Times. “Thanks to President Trump’s persistence, Qatar is now committing for the first time to provide more transparency in its record-keeping.”

Martin also thinks the U.S.-Qatar agreement will benefit American workers, who have seen “their slipping importance and relevance in Washington as politicians have routinely prioritized Silicon Valley, Wall Street and other crony capitalist interests” over them, she wrote.

And in general, the agreement with Qatar is a win for free market supporters who think “winners and losers in the market should be determined through fair competition — not through heavy-handed government programs or massive government subsidies,” Martin wrote.

Additionally, under the U.S.-Qatar agreement, Qatar has promised not to introduce any “fifth freedom” passenger flights to the United States, which are flights coming from outside Doha carrying passengers to the United States, according to the Partnership for Open & Fair Skies.

This pact will balance competition for all U.S. carriers, said American Airlines Chairman and CEO Doug Parker in a statement, adding that the Trump administration’s actions “thoughtfully address the illegal subsidies received by Qatar Airways, … support American workers and closer to home, American Airlines’ 120,000 team members.”

Now the focus turns to enforcement of the U.S. Open Skies agreement with the UAE.

When Secretary of State Tillerson announced the U.S.-Qatar agreement last month, he said President Donald Trump “has made this matter a priority, and the outcome we achieved will ensure a level playing field in the global aviation market.”

Martin thinks “the UAE should view this announcement as a new era in treaty enforcement — one in which the United States takes seriously trade violations that disrupt the market and unfairly disadvantage U.S. workers.”

Moving forward, the Partnership for Open & Fair Skies said it intends to work with the Trump administration to ensure Qatar upholds its commitments. The coalition also said it looks forward to working with the Trump administration as it negotiates with the UAE to end its government subsidies to Emirates and Etihad Airways.

Burnley remains confident and told Transportation Today, “I am optimistic that the State Department will push hard to persuade the UAE to end its subsidies for Emirates and Etihad Airways in order to restore fair competition in the global airline industry.”

Published on Transportation Today.

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