Back in February of 2017, just after Rex Tillerson was confirmed as Secretary of State, a partnership of U.S. airline companies — including Delta, United and American — wrote the incoming diplomat a letter effectively charging some ME countries with artificially lowering the airfare of major airlines to increase their customer base and make gains in the American market. And, they said, the modifications were in violation of Open Skies agreements the U.S. had struck with those countries.
At issue were three ME-based carriers — Qatar Airways, Etihad Airways and Emirates — that the Partnership for Open & Fair Skies (which, along with seven major airline labor unions, is eventually what the U.S. based alliance would be called) alleged had received $50 billion in documented subsidies since 2004 that allowed them to lower their rates to become more competitive. This was a move, the Partnership says, that violated the Open Skies agreement between the two countries.
At issue are Open Skies agreements in which Qatar and the United Arab Emirates agreed with the U.S. that they won’t allow their governments to artificially lower fares as a result of government subsidies.
Texas Republican Sen. Ted Cruz said in a statement last summer that the subsidies were a “blatant disregard” of the agreements between the nations and were designed to manipulate the market and undercut American-based carriers.
“For well over a decade, several countries that claim to operate within Open Skies agreements have been in open violation of these agreements. The Gulf carriers have received an unprecedented level of subsidization in the amount of $50 billion documented since 2004. This blatant disregard for our Open Skies agreements has allowed these airlines to undercut U.S. carriers, financially damaging the U.S. airline industry, jeopardizing service to small-and medium-sized communities, and threatening American jobs.”
The Obama administration apparently was aware of the subsidy violations, but the Partnership says they were dragging their feet making the letter to Tillerson a necessity. The Trump administration has already, they say, begun to right the ship, however.
“We applaud the Trump administration,” said Peter Carter, Delta’s chief legal officer and executive vice president. “It has moved mountains in understanding that these subsidies are contrary to Open Skies agreements and need to be addressed.”
Carter noted that the Qatari government, in early February, had agreed to provide audited financial information for Qatar Airways. This, said Carter, was “a major milestone from our perspective.”