Pallone and Colleagues Lead Letter In Opposition to Abuse of Open Skies Agreement

Apr 30, 2015 Issues: Economy and Jobs
Pallone and Colleagues Lead Letter In Opposition to Abuse of Open Skies Agreement

WASHINGTON, DC – Today, Congressman Frank Pallone, Jr. (D-NJ), Ranking Member of the House Energy and Commerce Committee, with five of his colleagues sent a letter they led urging Secretary of State John Kerry and Transportation Secretary Anthony Foxx to ensure a level, competitive playing field for U.S. airlines and aviation workers by working to prevent the abuse of Open Skies agreements.

In addition to Pallone, the leaders of the letter are Reps. Daniel Lipinski (D-IL), Robert Dold (R-IL), Steve Israel (D-NY), Tom Emmer (R-MN) and Paul Cook (R-CA).  A bipartisan group of more than 250 Members of Congress signed on to the letter.

In the letter, the Congressmen wrote, “We are writing to urge you to seek consultations with the governments of Qatar and the United Arab Emirates (UAE) in an effort to stem the tide of subsidized capacity that their state-owned airlines are deploying on international routes to the United States, in direct contravention to the U.S. Open Skies policy… We are concerned that Qatar and the UAE are using these subsidies and other unfair practices to distort the market in favor of their state-owned airlines, contrary to U.S. Open Skies policy.  These actions artificially boost these state-owned carriers and undermine the principles of open competition essential to the airline industry.”

Beginning in 1992 with the negotiation of the first bilateral aviation liberalization – or Open Skies – agreement, the United States granted foreign airlines the freedom to fly to and from the U.S. in exchange for Open Skies partners ensuring a level, competitive playing field free from government distortion.  The leaders of the letter are strong supporters of the Open Skies policy.  However, over the past decade, the governments of Qatar and the United Arab Emirates have violated the letter and spirit of Open Skies by granting over $40 billion in concealed subsidies and other unfair benefits to their state-owned carriers. These competition-distorting benefits undermine fair and free competition, and contravene the intent of the Open Skies agreements.

Reps. Pallone, Lipinski and Dold along with airline employees, held a press conference today to announce their efforts to stop government subsidized Middle Eastern airlines from violating Open Skies policy.

The full text of the letter follows.

April 30, 2015

Dear Secretary Kerry and Secretary Foxx:

We are writing to urge you to seek consultations with the governments of Qatar and the United Arab Emirates (UAE) in an effort to stem the tide of subsidized capacity that their state-owned airlines are deploying on international routes to the United States, in direct contravention to the U.S. Open Skies policy. 

Specifically, we have learned that over the past decade, the governments of Qatar and the UAE have granted over $40 billion in concealed subsidies and other unfair benefits to their state-owned carriers.  The subsidies, as defined by the World Trade Organization and U.S. trade law, have taken a wide variety of forms, such as direct cash injections, interest-free loans with no repayment obligations, shareholder advances, significant related party transactions not at arms-length, and subsidized infrastructure, as well as other unfair business practices, such as bans on unions.  The evidence is drawn almost entirely from financial statements, most of which have not been released in this country. 

We are concerned that Qatar and the UAE are using these subsidies and other unfair practices to distort the market in favor of their state-owned airlines, contrary to U.S. Open Skies policy.  These actions artificially boost these state-owned carriers and undermine the principles of open competition essential to the airline industry.  According to available research, each daily international roundtrip frequency lost/forgone by U.S. airlines because of subsidized Gulf carrier competition results in a loss of hundreds of U.S. jobs.   

Confronting massive subsidies and other competition-distorting practices by State-Owned Enterprises (SOEs) in other sectors of the U.S. economy has been a major policy priority of the U.S. government for many years.  The aviation industry should be no exception.  Foreign governments and their state-owned carriers that engage in practices that violate the spirit of liberalization and free competition should not be exempt from that policy.

The subsidies that Qatar and the UAE have provided to their state-owned carriers have led to market distortions and unfair competition in international aviation.   Failure to address these practices will lead to significant job losses in the United States and set a dangerous precedent that could lead to further harm to the U.S. airline industry and the broader U.S. economy. 

We strongly urge your respective Departments to request consultations with Qatar and the UAE, as provided for in the bilateral aviation agreements with those respective countries, to ensure that the agreements address the flow of subsidized capacity by these airlines to the United States.

Sincerely,