Last updated: 04:34 PM ET, Wed April 08 2015

U.S. Travel, BTC Fire Up Open Skies Debate With Subsidies Report

Airlines & Airports | American Airlines | Rich Thomaselli | April 08, 2015

U.S. Travel, BTC Fire Up Open Skies Debate With Subsidies Report

The Business Travel Coalition and the U.S. Travel Association, both at war with the three major U.S. airlines over the Open Skies Agreement, have trotted out a 16-year old report alleging domestic carriers have received the same government subsidies that they allege Middle East Gulf airlines have received.

And that resulted in a fiery response from Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies.

A little-known U.S. Congressional Research Service (CRS) report on government subsidies and financial aid says U.S. airlines received $155 billion in support from the government between 1918 and 1998. The report was released publicly by WikiLeaks in 2009.

American Airlines, Delta and United recently forwarded a 55-page report to the Obama Administration alleging that Emirates, Etihad and Qatar airlines have received $42 billion in subsidies from their respective governments between 2004 and 2014, creating an unfair advantage in international travel markets. The three domestic carriers are looking to have the Open Skies Agreement – which allows airlines to fly to any country without government interference – reviewed and amended.

“A central argument of some U.S. airlines seeking government protection from foreign competition is that the Persian Gulf States have been inappropriately and unfairly helping the Gulf carriers become established with financial aid,” Business Travel Coalition chairman Kevin Mitchell said in a statement. “What this report shines a bright light on is the simple fact that government assistance has long been provided on a very large scale to airlines around the world, including in the U.S. What’s more, the U.S. Government, fully cognizant of this reality, endorsed an Open Skies policy over two decades ago that, while it provides sufficient flexibility to deal with major market distortions, is not premised on the complete absence of government aid to aviation, much less on some subjectively-perfect level playing field.”

The full Congressional Research Service report can be accessed here, but, in a nutshell, it details early federal support for aviation growth, as well as the government’s aircraft loan program.

According to the CRS report, “During its lifetime, the program authorized federal guarantees of up to 90 percent of private loans for the purchase of equipment by local, short-haul, and feeder air carriers.”

In a statement, U.S. Travel Association Executive Vice President for Public Affairs Jonathan Grella said American, Delta and United has now lost its credibility in the argument thanks to this new report.

“I give all credit to our friends at the Business Travel Coalition for discovering this pivotal bit of evidence that completely alters the landscape of this debate,” Grella said. ““This exposes the fiction that the U.S. airline cartel’s furious and expensive assault on Open Skies is about subsidies. We hope this prompts policymakers and the public to ask: OK, what’s really motivating the campaign to break these agreements? We hope there is something else to dissuade us from by far the most likely conclusion: the Big Three airlines hate competition, and rather than cope with it in the marketplace they will undertake extreme means to stamp it out politically.”

Zuckerman shot back: “It is laughable that a two-decade-old unpublished paper examining U.S. aviation since 1918 is being trumpeted as ‘evidence’ that U.S. airlines are supported the way that the United Arab Emirates and Qatar routinely subsidize their airlines. This is a case of distract and dissemble. Funding for air mail, Post Office support, and the National Weather Service is a far cry from the well-documented $42 billion dollars in direct subsidies and other unfair state support the Middle East carriers receive. Even more preposterous, the vast majority of the so-called subsidy includes the entire annual budgets for the Federal Aviation Administration from 1958 to 1998 and the cost of building air traffic control towers decades ago. Calling FAA funding a subsidy for commercial airlines is akin to calling paved roads and traffic lights a subsidy for the taxi industry. In fact, U.S. airlines send billions of dollars to the federal government every year to cover the cost of aviation services. It is a shame that the U.S. Travel Association and the Business Travel Coalition are acting at the behest of funders friendly to the Middle East carriers and their governments, rather than in the best interests of American jobs, consumers and companies. It is time to ensure U.S. airlines and their workers are operating on a level playing field with their state-funded competitors in the Middle East. U.S. airlines shouldn’t have to compete with the treasuries of foreign governments who offer their state-owned carriers blank checks.”


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