Qatar Accused of Violating Agreements in Bid to Undercut U.S. Air Carriers

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U.S. air carriers are calling foul on Qatar for violating an international agreement aimed at leveling the playing field for international airlines, a backdoor move that has seen the small oil rich nation inject tens of millions of dollars into a once-defunct Italian airline.

Qatar in 2018 signed on to an agreement known as the Open Skies Act that was meant to prevent the nation from using its massive cash reserves to subsidize its international air carrier, Qatar Airways. Soon after the agreement, Qatar devised a backdoor scheme to purchased a stake in the failing Italian airline Meridiana and use it to violate the terms of the agreement.

The original agreement was meant to stop Qatar’s expansion into the United States and focused on national security issues, such as Doha’s continued support for extremist terror groups across the Middle East. In purchasing a major stake in Meridiana, now branded as Air Italy, Qatar was able to sidestep the agreement.

U.S. air carriers and some in Congress are now calling on the Trump administration to hold Qatar accountable for its violation of the Open Skies Act, arguing that the purchase of Air Italy has enabled Qatar to offer bargain rates for flights into the United States.ADVERTISING

U.S.-based airlines are now feeling the pressure and jointly sponsored a full page New York Timesadvertisement urging the Trump administration to hold Qatar accountable for its backdoor dealings.

“Qatar Airways is ignoring the 2018 agreement that your administration signed by using massive government subsidies to launch new routes to the United States through its stake in Air Italy,” states the advertisement, which was signed by American Airlines, Delta, and United. “Air Italy was a struggling regional carrier until Qatar Airways injected tens of millions of dollars into the company to circumvent the agreement and expand its U.S. presence.”

“In the last few days, Qatar Airways has used its Italian proxy to launch routes to Los Angeles and San Francisco, and added flights to Miami—a further effort to undermine U.S. airlines. Simply put, Qatar Airways represents a grave threat to American jobs and the health of the airline industry,” the carriers wrote. “No rule-abiding business can compete with a massively subsidized airline that ignores economic realities and can wipe away losses with one infusion of government cash after another.”

Secretary of State Mike Pompeo, in recent comments before concerned members of Congress, assured lawmakers he is working on the issue and is in discussions with Qatar to ensure it upholds its commitments under the Open Skies Act.

Sen. Robert Menendez (D., N.J.), during a hearing with Pompeo, chastised Qatar for breaching the agreement.

“At the same time as the agreement was being negotiated, Qatar Airways acquired a 49% stake in Air Italy, a formerly struggling regional Italian carrier, and rebranded it as an international carrier with flights to five U.S. destinations from Milan. That runs directly counter to the one-year agreement,” Menendez said.

“I have personally engaged in this issue and we are working to make sure every party to those agreements complies with every element of those agreements,” Pompeo responded. “The U.S. government sees what’s going on, and we’re working to put this agreement—we think it was a good agreement and we’re trying to ensure it’s enforced.”

A State Department official, speaking to the Washington Free Beacon on background, said that U.S. officials are working to address the concerns raised by lawmakers and U.S. air carriers.

“The Department of State is committed to leveling the playing field and ensuring American companies have the opportunity to succeed globally,” the official said. “Some U.S. airlines have raised concerns about subsidized competition. Since 2017, the Department of State has led serious negotiations with Qatar—and the United Arab Emirates—to address those concerns.”

“We have sought to do so while maintaining the Open Skies framework of U.S. international aviation policy,” the official said. “Our goal is to provide beneficial results for as many U.S. stakeholders as possible.”

Lawmakers have petitioned the White House in recent months to exert greater pressure on Qatar, arguing that American jobs are at stake.

“Not only does Qatar’s cheating undermine competition and threaten American workers—over 1,500 American jobs are lost for every route launched into the U.S. by a subsidized Middle Eastern carrier—but it directly and deliberately threats our ‘American First’ policies,” Rep. Matt Gaetz (R., Fla.) wrote in a recent letter to the White House. “Mr. President, I urge you to continue standing up to Qatar and demanding enforcement of the deal they are violating or we must withdraw from the agreement altogether.”

Qatar has defended its acquisition of Air Italy in public comments, maintaining that U.S. air carriers are being unfairly “hostile” to the country.

“Qatar Airways’ investment in Air Italy was a matter of public knowledge (as were Qatar Airways’ investments in other airlines) at the time of the U.S.-Qatar discussions; airline investments were not raised as a point of concern during those talks,” Qatar Airways said in a statement. “The Understandings do not mention or prohibit cross-border investments of any type.”

“Furthermore, Qatar Airways does not codeshare on any of Air Italy’s flights to the United States, and has no plans to do so,” the carrier said. “Qatar Airways is not operating any Fifth Freedom scheduled air services to the U.S.”

Originally published on The Washington Free Beacon.

americans4fairskies2015Qatar Accused of Violating Agreements in Bid to Undercut U.S. Air Carriers
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Largest U.S. airlines urge Trump to enforce Qatar deal barring subsidized flights

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A group representing the three largest U.S. airlines and aviation unions said Wednesday that Qatar’s state-owned airline is playing President Trump for a fool by flouting a deal with the administration not to add new flights to the U.S. market.

Qatar’s behavior on this issue has been outright insulting to both the president, the Secretary of State and the American people,” said Scott Reed, campaign manager for the Partnership for Open & Fair Skies, which represents Delta Airlines, United Airlines and American Airlines and the unions.

The group took out full-page newspaper ads this week calling on Mr. Trump to enforce an agreement the U.S. negotiated in 2018 with Qatar Airways not to add new flights to the U.S. The airline purchased a 49-percent stake in Air Italy, which has been flying to U.S. destinations since last June and is adding flights to Miami this month.

Secretary of State Mike Pompeo told the Senate Foreign Relations Committee last week that the administration is “looking very closely” at the acquisition. Mr. Reed said in an interview Wednesday that’s not enough, and the administration needs to enforce its agreement.

“We’re working our way into Obama territory,” Mr. Reed said. “The Obama State Department did nothing. For the sake of fair competition and American jobs, we’re counting on President Trump to prove that our country won’t accept this raw deal from our trade partners.”

The White House had no immediate reaction.  TOP ARTICLES1/5READ MOREElijah Cummings accuses Jim Jordan oftrying to ‘actively obstruct’ drug company investigation

The group said Qatar’s subsidies to its airline create unfair competition with the U.S. carriers and threaten about 1.2 million U.S. jobs.

But some other U.S. aviation firms are urging the administration against an enforcement action.

In a letter to Mr. Pompeo and Secretary of Transportation Elaine Chao last week, JetBlue Airways Corp, FedEx Corp and Atlas Air Worldwide Holdings Inc. said taking action against Qatar Airways and Air Italy could prompt retaliation against U.S. carriers.

“For JetBlue, who just announced its intention to begin service to London from New York City and Boston starting in 2021, the possibility of retaliation could have a devastating impact on the ability to obtain authority to operate in the EU under the U.S.-EU Open Skies agreement,” the airlines said.

Originally published on The Washington Times.

americans4fairskies2015Largest U.S. airlines urge Trump to enforce Qatar deal barring subsidized flights
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U.S. looking ‘very closely’ at Qatar-Air Italy deal: Pompeo

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The United States is scrutinizing state-owned Qatar Airways’ acquisition of a 49 percent stake in Air Italy, which has been flying to U.S. destinations since June in a move seen by U.S. lawmakers as flouting a deal not to add new flights to the domestic market.

Questioned repeatedly about the acquisition during a U.S. Senate hearing, Secretary of State Mike Pompeo said on Wednesday, “We’re looking very closely at this recent decision by Qatar to take on 49 percent of this airline.”

Both Republicans and Democrats at the Senate Foreign Relations Committee hearing said they were concerned that the deal with the Italian carrier violated an agreement Qatar Airways reached with the United States in early 2018.

“There are lots of consultations taking place,” Pompeo said. In January, U.S. and Qatari officials met to discuss civil aviation matters, the State Department said earlier this year.

Since 2015 the largest U.S carriers – Delta Air Lines, American Airlines Group and United Airlines – have argued their Gulf rivals are being unfairly subsidized by their governments, distorting competition.

Gulf airlines have always denied those accusations and last year the three major Middle Eastern carriers reached a voluntary agreement, saying they would not add new flights to the United States.

However, Air Italy has been flying to New York and Miami since June last year and was due to start serving San Francisco and Los Angeles from this month and Chicago in May.

Qatar Airways acquired 49 percent of Italian airline Meridiana in 2017, rebranded it Air Italy and transformed it into a carrier with five announced non-stop U.S. destinations from Milan.

Scott Reed, campaign manager for the Partnership for Open & Fair Skies, a group representing the three largest U.S. airlines and aviation unions, said “the future of this industry – and the jobs it supports – depend on the Trump administration holding Qatar accountable for its trade-cheating actions.”

In December, 11 Republican senators wrote a letter to Pompeo suggesting the flights from Milan “were consistent with Qatar Airways pattern of adding subsidized capacity in markets where demand is already well served.”

Reed said “there is bipartisan concern that Qatar Airways is violating last year’s agreement with the United States – making its finances more opaque instead of less and using Air Italy as a proxy to undermine the U.S. airline industry.”

An aide to Senator Bob Menendez, the ranking Democrat on the foreign relations committee, noted that January marked the one-year anniversary of agreements between the United States and Qatar on government subsidies to Qatar Airways.

In a side letter to the agreements, the Qatari government indicated there was no intention to launch additional flights from Qatar to U.S. destinations but said some passengers would board flights in Europe before flying to U.S. destinations.

Originally Published on Reuters.

americans4fairskies2015U.S. looking ‘very closely’ at Qatar-Air Italy deal: Pompeo
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Testing Time on Trade

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The distinguishing feature of the Trump Administration’s economic policy has been its approach to international trade. Its “fair and reciprocal” trade philosophy has embraced tariffs as a strategic tool to force trade talks, it has focused closely on issues of bilateral trade balance, and it has signaled a surprising comfort with non-tariff barriers to trade (e.g., quotas and regional content rules in the U.S.-Mexico-Canada Agreement). The debate over the desirability of these features will continue, but one thing is quite clear: Unless trade agreements are enforced, it does not matter what philosophy drives their negotiation.

From that perspective, the administration is facing a testing period on trade. The China talks continue to drag on, reportedly largely over disagreements on enforcing the negotiated provisions. Because the talks are private, it is difficult to assess the state of play. But there is a very visible test facing the White House as well: Qatar and the Open Skies agreements for international commercial aviation.

Air Italy — the thinly disguised front for Qatar Airways — launched its inaugural flight from Milan to Los Angeles, on top of last year’s Milan to New York-JFK and Milan to Miami flights. These so-called “fifth freedom” flights are fundamentally non-economic for Air Italy or Qatar Airways (which bought a 49 percent stake in Air Italy and launched the new routes). This reality raises the suspicion that Qatar continues to subsidize Qatar Airways to offset these losses. Any such subsidies are a violation of the U.S.-Qatar Open Skies agreement (there are 120 U.S. bilateral Open Skies agreements designed to prevent government intervention in commercial airline travel). The logic of this agreement was impeccable. If it was not possible to channel subsidies to the airlines, they would not be able to run unprofitable international routes, and pricing would be on a playing field level with international competitors. Any genuinely non-economic fifth freedom route would simply disappear. And over a year ago, Qatar Airways further committed to greater financial transparency. It appeared to be a big win for trade enforcement.

Experience suggests that the financial reporting is not transparent enough to stop the Qatar government from continuing to funnel billions in illegal subsidies to Qatar Airways. The issue has been highlighted by Senator Ted Cruz, who has indicated he plans to hold a Senate hearing on the matter. And it has been acknowledged by Secretary of State Mike Pompeo, who said, “Make no mistake about it. American jobs are impacted when other countries subsidize the airlines. It’s not fair. It’s not right.”

It is crunch time for adherence to Open Skies. How will the administration react?

Originally Published on American Action Forum.

americans4fairskies2015Testing Time on Trade
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