Re-elect Dan Lipinski Congressman

Airlines Press Trump to Act Against Gulf Countries Accused of Violating Open Skies

07/24/2017

Washington Examiner

Three of America's largest airlines and some members of Congress are renewing a fight to urge the federal government to take action against Gulf countries accused of unfairly subsidizing their state-run airlines.

Delta, United, and American Airlines charge that the United Arab Emirates and Qatar violate international aviation pacts, known as Open Skies agreements, that allow airlines to operate internationally without government interference.

After failing to sway the Obama administration, the major domestic carriers hope the Trump administration, which has demonstrated a more restrictionist trade philosophy, is more sympathetic to their demands.

"From President Trump's very first day in office, he made it clear he would ensure trade deals are fair and enforced and benefit the American worker," said Scott Reed, campaign manager for the Partnership for Open and Fair Skies, a coalition led by Delta, American, United, and several unions representing airline workers. "This is something the Trump administration can take action on to deliver the president's campaign promises. It's right in his wheelhouse."

The U.S. has negotiated more than 100 Open Skies agreements since the early 1990s, and until recently, they attracted little notice and were credited with encouraging greater competition, lowering airfares, and providing more routes to foreign destinations.

But as Persian Gulf airlines Etihad Airways, Emirates, and Qatar Airways have expanded operations into the U.S. in recent years, some of the major American carriers took notice.

The Partnership for Open and Fair Skies spent $6.1 million in 2015 lobbying the Obama administration to enforce, or renegotiate, the Open Skies agreements with UAE and Qatar.

The coalition argues that by allegedly subsidizing their state-owned airlines, UAE and Qatar can keep their ticket prices low, discouraging U.S. domestic carriers from competing for the same routes.

This notion is backed by many members of Congress. In 2015, a bipartisan group of 262 House lawmakers wrote a letter asking the Obama administration to investigate Qatar and UAE for "using these subsidies and other unfair practices to distort the market in favor of their state-owned airlines."

This month, the House Appropriations Committee approved its annual Transportation, Housing, and Urban Development funding bill that urged the Trump administration to enforce Open Skies agreements with UAE and Qatar.

In the upper chamber, Sen. Ted Cruz, R-Texas, wrote a letter this month to Secretary of State Rex Tillerson, Commerce Secretary Wilbur Ross, and Transportation Secretary Elaine Chao, accusing the Gulf nations of "blatant disregard" of Open Skies agreements, and asking the Trump administration to investigate.

Rep. Dan Lipinski, D-Ill., who signed the 2015 letter, says he expects Trump may act where Obama didn't.

"President Trump certainly has suggested he will stand up for American business and workers, so that leads me to be hopeful he would take a more forceful position on this issue," Lipinski told the Washington Examiner. "I am hopeful the Trump administration will step up and do whatever it takes to prevent these Gulf carriers that are subsidized by their governments from coming in and giving an unfair competitive advantage against America's airlines."

Yet, the prospect of rethinking Open Skies agreements has divided the travel industry.

JetBlue, Atlas Air Worldwide, FedEx, and Hawaiian Airlines are among the funders of an alternative coalition, U.S. Airlines for Open Skies, that opposes taking action against Qatar and UAE. A nonprofit representing the travel industry, the U.S. Travel Association, also supports maintaining Open Skies agreements with the Gulf nations.

Opponents of renegotiating the Open Skies pacts worry that American action against UAE and Qatar could encourage other countries to retaliate against the U.S.

"The legacy carriers are very interested in protecting their market share and not interested in competition," said Andrea Christianson, spokeswoman for U.S. Airlines for Open Skies. "Asking the Trump administration to break these Open Skies agreements jeopardizes the entire network of agreements we have."

Rui Neiva, an aviation policy analyst at the nonpartisan Enos Center for Transportation, contends that Delta, United, and American are targeting the Gulf carriers because of their success. He says the airlines of UAE and Qatar have created new markets that domestic airlines were not serving, such as providing flights for Americans to Asia via Dubai, and contributed billions to the U.S. economy.

He notes that U.S. carriers have received government support, albeit in a different form. For example, Delta, United, and American have been granted antitrust immunity to establish joint relationships with rival carriers on some routes to Europe and Asia.

"When we talk about airlines receiving government subsidies, this is quite common," Neiva said. "This is not exclusive to the UAE and Qatar. It's select, carefully chosen enemies [the major U.S. carriers] complain about."

Clifford Winston, a senior fellow in economic studies at the Brookings Institution, says the major airlines are overstating the losses they take from subsidized foreign competition. He points out that foreign carriers under U.S. law cannot compete directly with domestic airlines for travel within America, meaning they cannot fly a route from New York to Los Angeles, for instance.

The coalition backed by Delta, United, and American claims it has already ceased routes to certain international destinations, and that on every route it cuts, 1,500 Americans lose their jobs.

"These are not big ticket routes," Winston said. "United and Delta's livelihood does not change depending on how much traffic they get flying to Dubai. It's one thing to talk about Europe, where there is more traffic. But c'mon, who cares, this is not big ticket stuff."

Winston authored a 2015 study that found Americans save $4 billion annually from the entire network of Open Skies agreements.

He says carriers supporting renegotiating or canceling these pacts with UAE and Qatar are preoccupied with their own profits at the expense of the U.S. traveler.

"There are enormous benefits the public has got from these agreements," Winston said. "Who is representing travelers in all of this? Travelers will be worse off if we close markets."

Lipinski counters that all Americans suffer when parties don't fulfill the terms of international agreements.

"The argument is often made that consumers are better off by lower prices, but we can't simply have a race to bottom and allow for situations where there is a clear violation of international agreements," Lipinski said. "We can't have these countries subsidizing their airlines. It winds up in the end hurting all Americans because you are cutting American jobs, and you eventually will have a situation where you have less competition."


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