CEOs warn of protectionism in foreign airline subsidy fight

A group of business leaders in the hotel and travel industries is urging the Obama administration to ignore complaints from U.S. airlines about alleged foreign flight subsidies. 

Unions that represent employees of the largest U.S. airlines, known collectively as the Big Three, have alleged Middle Eastern airlines like Qatar Airways, Etihad Airways and Emirates Airlines received more than $42 billion in subsidies since 2004.

The major U.S. airlines — Delta, United and American — say the payments to their Middle Eastern competitors violate the spirit of the Open Skies agreements between the U.S. and the governments of Qatar and the United Arab Emirates, which own the airlines. 

{mosads}A coalition of business leaders organized by the U.S. Travel Association said in a letter to the departments of Transportation, Commerce and State on Thursday that the Big Three U.S. airlines are seeking to limit the amount of competition they face from their Gulf rivals. 

“The foundation of the explosive growth in international aviation and travel has been the negotiation of Open Skies agreements with 114 countries around the world, including our most important aviation partners in Europe, East Asia and the Middle East,” the CEOs wrote to Secretaries Anthony Foxx, Penny Pritzker and John Kerry. 

“We support this policy of Open Skies that has brought tremendous increases in international air service, reductions in fares and millions of new international visitors to our shores,” the business leaders continued. “Despite these impressive economic gains, some U.S. legacy carriers are now calling on the Administration to fundamentally reorder our aviation relationship with Qatar and the UAE by restricting competition, undermining the fundamental purpose of Open Skies.” 

The fight over the Open Skies agreements has exposed a rift between airlines and travel and consumer groups that argue U.S. carriers are trying to prevent competition for international flights.

Unions that represent the employees of the largest U.S. airlines have formed campaigns to pressure the Obama administration to question the Gulf carrier subsidies. 

Travel industry and consumer groups have, meanwhile, accused the airlines of trying to reduce competition for international flights. 

“Government ownership of aviation, airports and other transportation sectors is quite common around the world, including with many of our closest allies,” the business leaders wrote. “Thus, seeking to undermine the agreements we have with Qatar and the UAE needlessly jeopardizes Open Skies agreements with other countries and could deter the signing of future Open Skies agreements with important bilateral transportation partners, such as Mexico and South Africa.” 

The Partnership for Open and Fair Skies said Thursday in response to the Travel Association’s letter that the U.S. airlines are in favor of most Open Skies agreements, but they are vehemently opposed to alleged violations of the deals. 

“We agree with the U.S. Travel Association that Open Skies agreements have benefited the United States and we stand behind these valuable policies,”  Open Skies Partnership spokeswoman Jill Zuckman said in a statement. “But when other countries aren’t abiding by their end of the deal, the U.S. needs to stand up for its aviation industry and enforce the rules.”  

Zuckerman dismissed the letter as part of the Travel Association’s effort to do the bidding of the U.S. hotel industry.  

“It’s not surprising that U.S. Travel is rushing to defend the state-owned Gulf carriers since the U.S. hotel industry relies on Gulf state money for future growth and expansion in the Middle East,” she said. 

The Big Three domestic airlines have called for the Obama administration to launch a review of allegations against the Gulf carriers with the Middle Eastern governments that own them. The administration has thus far only launched a domestic review, which falls far short of the full-scale international negotiation the U.S. airline industry has called for. 

The Travel Association’s letter on Thursday was signed by the CEOs of Alaska Airlines; Atlas Air Worldwide Holdings Inc.; Caesars Entertainment Corp.; Cargo Airline Association; Choice Hotels International; Convention Industry Council; FedEx Express; Hawaiian Airlines Inc.; Hilton Worldwide; Host Hotels & Resorts Inc.; Hyatt Hotels Corp.; InterContinental Hotels;  International Association of Exhibitions & Events; International Franchise Association; Interstate Hotels & Resorts; JetBlue Airways; Las Vegas Sands; Loews Hotels & Resorts; Marriott International; MGM Resorts International; Professional Convention Management; Receptive Services Association of America; and Wyndham Worldwide. 

The full letter can be read here.