Feds to review Middle Eastern airline subsidy claims

Feds to review Middle Eastern airline subsidy claims
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The Obama administration is wading 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.

U.S.-based airlines have asked the White House to investigate the subsidies because they 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. 

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The departments of State, Commerce and Transportation said Friday afternoon they are launching a review of the claims because they “are asserted in a publicly available report, are of significant interest to stakeholders and all three federal agencies.” 

“The U.S. government takes seriously the concerns raised in the report and is interested in receiving insights and feedback from stakeholders before any decisions are made regarding what action, if any, should be taken,” the agencies said in a statement. “Accordingly, consistent with the Obama Administration’s Open Government Initiative and commitment to transparency, public participation, and collaboration, the three departments are announcing the establishment of an open forum by which any interested stakeholder may submit information regarding their views on this subject and have access to the information submitted by other interested stakeholders.” 

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

A coalition of unions that represent U.S. airlines workers formed a campaign to pressure Obama to discuss the subsidy allegations with the Middle Eastern governments, which would go even further than the informal review that was announced on Friday. The group, known as the Partnership for Open and Fair Skies, has said the foreign airline subsidies put U.S. carriers at a disadvantage when they compete for international passengers. 

“We are pleased that the U.S. government is taking the next step to further examine the issue of massive subsidies that Qatar Airways, Etihad Airways and Emirates receive from their governments,” said Jill Zuckman, a spokeswoman for the airline coalition.  

“This process is an opportunity for more transparency and we urge the Gulf carriers to adhere to the same standards of financial disclosure and accountability as the U.S. carriers,” Zuckman continued.  “Their $42 billion of state support, a clear violation of Open Skies policy, has been well-documented.  They should open their books if they have nothing to hide.”

Travel industry and consumer groups have accused the airlines of hypocrisy, arguing that they have also received subsidies from the U.S. government at various points in their histories. 

"The Big Three U.S. airlines have constructed themselves an enormous glass house, and their amnesia about their own subsidies has now cost them the credibility of their own core argument for breaking Open Skies agreements," U.S. Travel Association Executive Vice President for Public Affairs Jonathan Grella said on Wednesday. 

"This exposes the fiction that the U.S. airline cartel's furious and expensive assault on Open Skies is about subsidies," he continued. We hope this prompts policymakers and the public to ask: OK, what's really motivating the campaign to break these agreements? We hope there is something else to dissuade us from by far the most likely conclusion: the Big Three airlines hate competition, and rather than cope with it in the marketplace they will undertake extreme means to stamp it out politically." 

Grella cited a report from the Library of Congress's independent Congressional Research Service that said domestic airlines received $155 billion in subsidies from 1919 to 1998. 

The airline coalition has said the comparison between current foreign airline subsidies and older payments to U.S. carriers is unfair because the distributions to domestic carriers were made before the Open Skies agreements were signed.

"It is laughable that a two-decade-old unpublished paper examining U.S. aviation since 1918 is being trumpeted as ‘evidence’ that U.S. airlines are supported the way that the United Arab Emirates and Qatar routinely subsidize their airlines," Zuckman said when the CRS report became public. 

"Funding for air mail, Post Office support, and the National Weather Service is a far cry from the well-documented $42 billion dollars in direct subsidies and other unfair state support the Middle East carriers receive,” she continued. 

The Obama administration said Friday both sides would have their chance to weigh in on the dispute during its review. 

“Beginning today, any interested person or group may submit information, responses to existing materials, or any other analysis that they might wish to provide the U.S. government on this subject on the www.regulations.gov website,” the agencies said.