DOJ said to side with foreign airlines in flight subsidy fight

DOJ said to side with foreign airlines in flight subsidy fight
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The Justice Department is raising concerns about efforts by U.S. airlines to limit international air service to domestic airports by Middle Eastern carriers because of alleged flight subsidies, Reuters reports

Officials in the agency's antitrust division are concerned about increases in international flights if the foreign airlines are prohibited from competing with U.S. airlines on international routes, according to the report. 

The pronouncement from the Justice Department comes at time when U.S. airlines like Delta, United and American are engaged in a standoff with Middle Eastern carriers like Etihad Airways, Qatar Airways and Emirates that has roiled the aviation industry. 

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The major U.S. airlines, known as the Big Three, have alleged that Middle Eastern competitors, like Emirates, Qatar and Etihad airways, are receiving payments that 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 Persian Gulf airlines. 

They are pushing the Obama administration to launch a review of the claims with the Middle Eastern governments, which would involve a delicate set of negotiations that critics have said would upset other areas of foreign relations.

The request for intervention is pending before the Departments of State, Commerce and Transportation, but the agencies have asked the Justice Department to weigh in on the potential antitrust implications of the airline industry's request, according to the Reuters report. 

The Justice Department is separately investigating whether airlines are colluding to keep airfares high

The Middle Eastern carriers have denied violating the Open Skies agreements, and they have argued that U.S. airlines have historically received subsidies from the federal government at times of distress, such as the period after the Sept. 11, 2001 terrorist attacks. 

Unions that represent major U.S. airline workers — like the Air Line Pilots Association, International — meanwhile, have formed campaigns to pressure the Obama administration to question the Persian Gulf carrier subsidies.

Travel industry and consumer groups, meanwhile, have largely sided with the Persian Gulf carriers in the Open Skies agreement, accusing the airlines of trying to reduce competition for international flights

"We're encouraged by reports that the Justice Department shares the travel community's concern that reducing airline competition is detrimental to travel and travelers," U.S. Travel Association President Roger Dow said in a statement after the Reuters report was published. 

"It's a relief to hear that there are voices within the federal government speaking against the Big 3 airlines' scheme to freeze their competitors' air service, which we continue to believe would be a clear violation of Open Skies agreements that would inflict grave harm upon our country's economy and international relationships," Dow continued. 

One of the groups backed by airlines that is pushing the federal government to intervene in the flight subsidy fight, known as the Partnership for Open and Fair Skies, told Reuters it is undeterred by the report of the Justice Department's concern with its case.  

"Our government doesn't allow unfair trade to take away jobs from hard-working Americans in steel, textiles or any other industry. We shouldn't allow it in commercial aviation either," Partnership for Open and Fair Skies spokeswoman Jill Zuckman said in a statement.