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Thu 19 Mar 2015 10:00 AM

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White House to chart new territory in Gulf airline subsidy review

Delta Air Lines, United Airlines & American Airlines called on the Obama administration to request a freeze on additional Gulf-airline flight departures to the US

White House to chart new territory in Gulf airline subsidy review
US President Barack Obama (AFP/Getty Images)

The Obama administration said Wednesday that it is in the early stages of studying claims that Gulf airlines have received market-distorting subsidies, a review involving uncharted territory for the US government.

No international trade rules or precedent by the United States exists for addressing airline subsidy claims, presenting a challenge for the administration as it determines how to proceed, a person familiar with the matter said.

US airlines contend that Gulf carriers can lower prices and offer more amenities on newer planes because of state subsidies.

These issues do not fall under World Trade Organization rules but rather under bilateral "Open Skies" agreements that authorise commercial flying between countries.

The agreements are silent on how to handle most subsidy claims, the source said. Yet alleged subsidies of more than $40 billion to Gulf airlines make the claim the largest that the administration has encountered and must be taken seriously, the source added.

Last week, the administration asked US airlines some 20 questions about the allegations.

"The (US government) interagency team did in fact ask the US airlines and their consultants several technical and clarifying questions about the data and information contained in their report," US Department of Transportation Press Secretary Ryan Daniels said in a statement, confirming a Reuters report.

"However, we are in the early stages of thoroughly reviewing this matter in close coordination with our interagency partners," he said.

The Obama administration has filed trade complaints on issues ranging from China's imposition of extra duties on American cars to India's ban on certain US agricultural goods to allegedly protect against avian influenza.

Aviation also has been at the centre of a decade-old dispute in which the World Trade Organization found that planemakers from the United States and the European Union had received illegal subsidies.

But Geneva-based watchdog's rules do not apply to air traffic rights or airline services, although it keeps these under review broadly.

Meanwhile, the dispute between US and Gulf airlines has escalated.

On Tuesday, Emirates airline President Tim Clark promised to rebut the allegations, while Etihad Airways chief executive officer James Hogan said the company received loans, not subsidies, from its government shareholder. Both had arranged meetings with Obama administration officials.

Delta Air Lines, United Airlines, American Airlines and their unions on Wednesday called on the administration to request a freeze on additional Gulf-airline flight departures to the United States.

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Mary Morgan 5 years ago

These American carriers CAN'T bully consumers to fly their run-down carriers. The core of this issue is that people choose to fly Emirates, Ethiad and Qatar Airways because of it's high customer service standards. But instead of upgrading their carriers, they pull out the attack dogs - really desperation. I wish all the best for Gulf carriers in their upcoming meetings in the USA - many consumers are on your side and will continue to vote with our pocketbooks when choosing an airline.

Bharat Jashanmal 5 years ago

Puzzling that the unions have joined this jingoistic attack by the three US carriers on the three carriers from the GCC, given that the first duty of any union is to protect the jobs of its members.
There now exists a virtual cartel within the US domestic market as a result of the mergers that these very same US carriers have been a part of, with domestic airfares at their highest in years, resulting in their combined profits for 2014 reaching US$8.9 billion (no complaints there), jobs are fairly secure one would think!
At the same time, the GCC carriers have between them orders for approximately 369 Boeing aircraft, orders that will secure jobs for many years to come, and in turn the GCC carriers have opened the US market to hundreds of thousands of new visitors, which has undoubtedly created additional jobs.
In comparison, the three US carriers, have orders for only 482 Boeing aircraft, but also orders for 306 aircraft from Airbus, orders that will not create any jobs in the US

procan 5 years ago

Americans will vote for themselves when push comes to shove this should not be forgotten. Do not make Americans choose between Middle East Carries and God Bless America, you will lose. Middle East Airlines operate at the United States of Americas pleasure, never forget that. You all have a good day....here.