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Subsidies and Other Unfair Benefits Received by Gulf Carriers

Threaten U.S. Aviation Jobs, the Industry and our Economy

The Background

Beginning in 1992 with the negotiation of the very first Open Skies agreement, the United States has explicitly and rigorously insisted that in exchange for granting foreign airlines the freedom to fly to and from the United States, Open Skies partners ensure a level, competitive playing field. Anticipating that circumstances could change, the United States and its Open Skies partners also agreed that every Open Skies agreement has a provision for consultations to address problems relating to the agreements and to agree in good faith on measures to resolve them.

The Current Situation

Evidence gathered during a global, two-year long investigation reveals that two countries with Open Skies agreements, Qatar and the UAE, have caused a substantial distortion of international markets by providing massive subsidies and other extraordinary benefits to their state-owned airlines, Qatar Airways, Etihad Airways and Emirates Airline. If unchecked, these practices could threaten the airline industry, aviation jobs, and communities throughout the United States.

Because these carriers are highly subsidized, they have grown at an astounding rate, expanding their global presence without concern for financial returns.

• Over the past decade, the governments of Qatar and the UAE have granted $42 billion in subsidies and other unfair benefits to their state-owned carriers.
• These state-owned Gulf carriers aren’t subject to corporate income taxes or fuel taxes and are exempt from costly requirements imposed on their foreign competitors, allowing the carriers to avoid paying their own way.
• The governments of Qatar and the UAE have banned unions and suppressed the rights of employees, propping up the airlines with below-market labor costs.

The Impact

The massive subsides to these state-owned Gulf carriers undermine fair competition, provide a substantial cost advantage over U.S. competitors, and violate Open Skies. Even a small cost advantage can create a significant shift in market share to the Gulf carriers’ advantage and cause substantial losses for unsubsidized competitors. Ultimately, the distortion caused by unfair competition is not in the best interests of the aviation industry or consumers.

 

Every roundtrip route lost or forgone by a U.S. carrier because of subsidized

Gulf carrier competition results in a net loss of more than 800 U.S. jobs.

 

The Solution

We strongly support Open Skies policy and urge the U.S. government to request consultations about Gulf carrier subsidization, through the existing Open Skies agreements, to ensure fair and equal competition. The U.S. government should also seek a freeze on the introduction of new passenger service by the Gulf carriers during these consultations.