National Press Club

Airline executives charge Qatar, UAE with trade violations, urge U.S. government action

May 16, 2015 | By Lorna Aldrich | lorna2@verizon.net

United Airlines chairman, president and chief executive Jeff Smisek (second from left), American Airlines Group chairman and chief executive W. Douglas Parker (middle) and Delta Air Lines chief executive Richard Anderson (far right) charged the governments of Qatar and the United Arab Emirates with illegally subsidizing their domestic airlines at a May 15 National Press Club luncheon. Club President John Hughes (far left) moderated the one-hour Q&A.

United Airlines chairman, president and chief executive Jeff Smisek (second from left), American Airlines Group chairman and chief executive W. Douglas Parker (middle) and Delta Air Lines chief executive Richard Anderson (far right) charged the governments of Qatar and the United Arab Emirates with illegally subsidizing their domestic airlines at a May 15 National Press Club luncheon. Club President John Hughes (far left) moderated the one-hour Q&A.

Photo/Image: Al Teich

Leaders of American, Delta and United Airlines charged the governments of Qatar and the United Arab Emirates with violating trade agreements by subsidizing their national airlines and urged the U.S. government to open consultations on the agreements at a May 15 National Press Club luncheon.

"Of 114 open skies agreements, two are being heavily abused," said Jeff Smisek, chairman, president and chief executive of United Airlines.

Open skies pacts are intergovernmental agreements that set rules for flying in other countries' airspace.

They are supposed to prevent market distortions, Smisek said.

Just as the United States would object to the dumping of subsidized steel or agricultural commodities on domestic markets, the government should oppose "dumping airline seats," Smisek said.

Club President John Hughes, who moderated a one-hour Q&A with the executives, called the airlines' request for a freeze on new routes for Qatar and UAE airlines into the United States while consultations take place a "strange step."

W. Douglas Parker, chairman and chief executive of American Airlines Group, responded that Qatar and UAE airlines have expanded capacity by 25 percent since the U.S. airlines started complaining about subsidies in January. He said the countries are "well aware that they are violating trade agreements."

The two countries have subsidized their airlines by upwards of $40 billion, according to Parker.

"We have never seen anything like this," he said.

Delta Air Lines chief executive Richard Anderson said the U.S. airlines had compiled financial statements that the Qatar and UAE airlines filed in countries around the world.

"We've proved subsidies beyond a reasonable doubt," he said.

American carriers would serve India because of the large number of Americans of Indian origin and the economic interaction between the countries, but they had essentially exited the Indian market under pressure from subsidized Gulf airlines, according to Anderson.

Hughes introduced the Gulf countries' contention that U..S bankruptcy laws provided a subsidy to domestic airlines.

Those laws are not subsidies under World Trade Organization rules, Smisek responded.

Employees and creditors suffered under the bankruptcy reorganizations, said Anderson, who also maintained that they do not represent a subsidy.

All three airline leaders expressed confidence that the U.S. government would take action.

They have visited the Departments of Commerce, Transportation and State as well as the U.S. Trade Representative and the White House.

They found "serious interest from serious people about a serious issue," Smisek said.

Parker expected the U.S. government to respond because, "the evidence can't be ignored."

"We're not going to let them get away with not acting," he added.