Qatar and the UAE aren’t playing by the rules

Qatar and the United Arab Emirates think Open Skies rules don’t apply to them.  New details have surfaced over the last month that showcase the harm that is being caused to the U.S. aviation industry, and the tens of thousands of pilots we represent, by the subsidization of the Gulf carriers. Now that the government’s comment period is complete, it is time for the administration to stand up for American businesses and workers and enforce the Open Skies agreements with Qatar and the UAE.

These Gulf nations have subsidized their three carriers – Qatar Airways, Emirates Airline, and Etihad Airways – with more than $42 billion over the past ten years. Not only are those subsidies inconsistent with the obligations of the Open Skies agreements, they also threaten the economic security of our U.S. airline industry and the 11 million jobs that it supports.  

{mosads}That’s why, in a rare move, three major domestic passenger airlines and employee unions came together to call on the U.S. government to address this growing threat. Over the last few months, the Gulf carriers have sought to dissuade the U.S. government from acting. Experts, however, have identified many inaccuracies in the Gulf carriers’ arguments and have demonstrated unequivocally the substantial harm that will be caused to the U.S. economy if nothing is done.  

Some of the Gulf carriers have relied on accounting gimmicks to portray themselves as profitable and even beneficial to U.S. markets.  For example in May, Etihad issued a press release claiming to have posted a net profit of $73 million in fiscal year 2014, “its strongest financial results to date.”   The airline, however, declined to release any financial statements.  Meanwhile, forensic accountants have uncovered Etihad’s financial statements in Hong Kong which showed a cash infusion from the UAE of $2.6 billion with other indirect forms of support totaling as much as $5 billion. Without persistent subsidies like this, Etihad could not continue to operate. 

Financial independence and success aren’t the only unsubstantiated claims these carriers have made. The Gulf carriers continually state that passenger traffic has “massively” increased since they entered U.S. markets.  However, new research confirms that not only are the subsidized Gulf airlines failing to stimulate any meaningful new demand, they’re actually diverting passengers away from U.S. airlines. 

For example, following Emirates’ entry into four of the key U.S. markets, bookings on U.S. carriers and their joint venture partners dropped an average of 10.8 percent in Boston, 7.6 percent in Dallas-Fort Worth, 21.4 percent in Seattle and 14.3 percent in Washington, D.C.  Should the drop in bookings result in cancellation of routes, it is estimated that 800 jobs would be lost per route ceded to a Gulf carrier.   

The truth is the Gulf carriers are being kept afloat by their governments. They don’t have to be profitable or answer to market forces. And the massive subsides they receive allow them to enter even more U.S. markets – despite a lack of demand.  

Make no mistake – we fully support Open Skies agreements. Of the 117 Open Skies agreements the U.S. has signed, 115 are working as intended.  Qatar and the UAE are the only nations breaking the rules with massive, market-distorting, and unprecedented subsidization. 

Elected officials and leaders from across the country have weighed in calling for action, including more than 260 House members and 22 senators. In addition, the U.S. Conference of Mayors, representing more than 1,400 mayors, and dozens of business and economic groups around the country has also called on the U.S. secretaries of State, Commerce, and Transportation to open consultations with Qatar and the UAE to address the subsidies.   

If Qatar and the UAE are to benefit from Open Skies agreements with the U.S., they must play by the rules established in those agreements. U.S. carriers and their employees are willing and able to compete with any airline, but should not be forced to compete against foreign governments.  

The U.S. government must ask for consultations under the UAE and Qatar Open Skies agreements, to address these unfair and market distorting government subsidies. It’s time for all parties to remember that a deal is a deal. 

Canoll is president of the Air Line Pilots Association.