The House Appropriations Committee approved the annual Transportation, Housing, and Urban Development (THUD) funding bill and report Monday, which included non-binding language that urged President Donald Trump’s Department of Transportation (DOT) to review a dispute pitting America’s top three airlines, Delta Air Lines, United Airlines and American Airlines against the top three Middle Eastern-based airlines, Etihad Airways, Qatar Airways and Emirates.
The U.S. legacy carriers and their unions, through the Partnership for Open and Fair Skies, have been appealing to Trump to enforce what are known as Open Skies agreements — bilateral aviation agreements, which are meant to expand international passenger and cargo flights to and from the U.S.
The partnership has long argued that the three Gulf carriers operate with an unfair advantage that violates the spirit of open skies by receiving large government subsidies from the UAE and Qatar. They argue that while Delta, United and American must react to supply and demand when deciding its routes, the Middle Eastern carriers are not beholden to market forces and can simply dip into an unlimited pool of government subsidies when determining where to set routes.
The language Monday addressed the issue of government subsidies. DOT began a process to investigate whether, “foreign government subsidies received by some international carriers were resulting in market distortions.”
The non-binding status of the language, combined with the vague nature of its description of potential violators, suggests that while the partnership was able to sway members of the committee to recognize its concerns, it was unable to include actual language into the bill.
“The Committee strongly urges the Department to continue discussions to ensure that U.S. airline carriers and their workers have a fair and equal opportunity to compete in accordance with open skies agreements,” the reporting language that accompanied the legislation read. “The Committee directs the Department to provide regular updates to the Committee.”
“If they’re hailing this as a major victory, than I’d ask them why they didn’t get language in the bill,” an industry insider told The Daily Caller News Foundation Tuesday. “Instead of bill language, they got report language.”
The U.S. Travel Association, which strongly opposes the efforts by Delta, United and American, says that the benefits of Open Skies agreements, as they are now, far outweigh any perceived downsides.
Jonathan Grella, executive vice president of public affairs for the U.S. Travel Association referred to the non-binding language as another example of what he characterized as “manufactured momentum.”
“Whether it’s cookie-cutter letters, or some of these symbolic efforts the bottom line is that policy makers have been loathe to touch this because of its benefits to the economy and its complexity,” Grella told TheDCNF Tuesday.
“We’re hoping that as all the stakeholders are heard from, and not just a few, that there is a full awareness and understanding that the travel and tourism industry and airlines like JetBlue, Alaska Hawaii, Fedex and Atlas, are all aligned on the need for Open Skies,” Grella said. “There is also a full awareness that tugging at the thread of Open Skies threatens to unravel these treaties around the world.”
The U.S. Airlines for Open Skies Coalition (not to be confused with the Partnership) is made up of four U.S.-based passenger and cargo airlines who disagree with the big three legacy carriers that the UAE and Qatar are violating Open Skies.
“Multiple passenger and cargo airlines, including Atlas Worldwide, FedEx, Hawaiian Airlines and JetBlue Airways disagree with the claims and demands of the legacy carriers,” the coalition explains on its website.
The Partnership claims that the Coalition is nothing more than a front for Emirates and Etihad Airways. Atlas flies cargo for Etihad, and JetBlue is a codeshare to Emirates, meaning that the two airlines share the same routes and market the flights under their own brand on a set number of international routes.
“When the U.S. government asked the legacy carriers to name a specific breach of Open Skies, they failed to identify a single provision,” the Coalition says. “The only part of the Open Skies agreement that provides any remedy against subsidies is one that allows a government to intervene if a foreign airline is charging artificially low fares,” the Coalition adds, saying that the Partnership for Fair and Open Skies ignores this in its appeal to the White House.
The Coalition argues that the American carriers have a way to address their concerns. They point to the International Air Transportation Fair Competitive Practices Act (IATFCPA) of 1974, which authorizes the Department of Transportation (DOT) to take action in response to anti-competitive, discriminatory, predatory or unjustifiable activities by a foreign government or foreign airlines against a U.S. airline.
An industry insider speaking on the condition on anonymity surmised that U.S. airlines didn’t take that route because they know they don’t have a case. “For over 40 decades when U.S. carriers, including American, Delta and United, had concerns about foreign competitive practices, they filed a formal IATFCPA complaint with the Department of Transportation,” the person said. “Why is this any different now?”
The Partnership asserts that a specific breach exists, and points to article 11 of the Open Skies bilateral agreement between the U.S. and the UAE, which states that, “each Party shall allow a fair and equal opportunity to compete.”
“The pricing provision is not relevant,” according to an industry insider who spoke on the condition of anonymity. “The United States government has long recognized that a fair competition provision is relevant for subsidies.”
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