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Gulf Airline Blasts US For Aviation Subsidies

American airline companies complain that Gulf carriers benefit from unfair government subsidies, but one of the accused firms is now claiming that the U.S. is guilty of similar behavior.

Etihad Airways, from the United Arab Emirates, released a scathing report Thursday claiming that American Airlines, Delta Airlines, and United Airlines have received a combined total of $71.48 billion in government benefits over the last 15 years, according to Air Transport World.

“We do not question the legitimacy of benefits provided to US carriers by the US government and the bankruptcy courts,” Etihad general counsel Jim Callaghan told ATW. “We simply wish to highlight the fact that US carriers have been benefitting and continue to benefit from a highly favorable legal regime, such as bankruptcy protection and pension guarantees, exemptions from certain taxes, and various other benefits.”

American, United, and Delta are the three largest airlines in the U.S., and have been at the forefront of a lobbying campaign urging the State Department to file grievances with the governments of Qatar and the UAE over subsidies they have allegedly given to the “big three” Gulf carriers. Earlier this year, the coalition released a report claiming that Emirates Airline, Etihad Airways, and Qatar Airways have collectively received $42 billion in subsidies over the last 10 years.

The U.S. carriers contend that the subsidies distort competition, and therefore should constitute a violation of inter-governmental Open Skies Agreements that the U.S. has signed with both countries. (RELATED: Domestic Airlines Accuse Middle Eastern Rivals of Cheating to Undermine Their Business)

According to the State Department, Open Skies Agreements are designed to “expand international passenger and cargo flights by eliminating government interference in commercial airline decisions about routes, capacity, and pricing.”

There is some dispute over whether the agreements actually prohibit government subsidies, and the U.S. carriers are hoping that the State Department will negotiate such an explicit provision with its Arabian counterparts. Pending a resolution of their complaint, the airlines are also urging the government to prevent the Gulf carriers from adding new routes in the U.S.

The Etihad report is a clear attempt to undermine the logic of that argument by demonstrating that U.S. airlines benefit from government support just as the Gulf carriers do. (RELATED: Bangladeshi Airline Set to Receive Loan Guaranteed by US Government)

“Governments everywhere in the world have an interest in economic development and job creation, and will provide subsidies in one way or another to airlines,” Ernest Arvai, partner at US-based aviation consultancy AirInsight, told Gulf News after examining the report.

Etihad identifies a range of benefits that the federal government and the states provide exclusively to U.S. carriers, including tax incentives, fuel subsidies, and pension bailouts. The majority of the alleged assistance, though, relates to Chapter 11 bankruptcy protections.

The Partnership for Open & Fair Skies, which represents the U.S. carriers, counters that there is no legitimate basis for comparing bankruptcy protections with direct cash subsidies. (RELATED: Group Releases List of Unfair Government Competition)

“The Chapter 11 process is not a ‘subsidy’, as established by international trade law, and many other countries have similar procedures in place,” said Jill Zuckman, chief spokesperson for the group, in an email to Gulf News. “In addition, US taxpayers are not liable for any restructuring of airline pension plans in bankruptcy.”

Officials from the U.S. Departments of State, Transportation, and Commerce are currently investigating the subsidy complaints, but have not indicated whether they intend to take any action.

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