US-Gulf tensions calmed
Qatar agrees to financial disclosures after illegal subsidy allegations
State-owned Qatar Airways has agreed to release detailed financial statements, the US government said on Tuesday, as part of a response to accusations by US airlines that the carrier had been illegally subsidized by its government.
US Secretary of State Rex Tillerson said that Qatar and the US had opened a “strategic dialogue” to address domestic airlines’ concerns that three major Gulf carriers had been unfairly propped up by their government, putting US carriers at a competitive disadvantage.
“The outcome we achieve will ensure a level playing field in the global aviation market,” Tillerson said at a briefing in Washington, alongside Qatari officials.
Qatar Airways was not immediately available for comment.
Qatar is expected to begin publishing annual financial statements, audited by an outside party, with the first one due over the next year, the US State Department said.
Within two years, Qatar is expected to also disclose significant new transactions with other state-owned enterprises and to “take steps to ensure that such transactions are based on commercial terms.”
Both sides of the debate hailed the move as a win, but Tuesday’s announcement does little to substantially change the state of play in the international flight industry.
The “Open Skies” flight agreement, which liberalizes commercial and cargo air travel, remains intact between the two countries. And US airlines’ goal to limit Gulf carriers from launching Fifth Freedom flights, which allow an airline to fly between foreign countries as part of services to and from its home country, did not apply in Qatar’s case because it does not currently operate any such flights and has no plans to.
Victory for coalition
A coalition representing the largest US carriers – American Airlines Group Inc, Delta Air Lines Inc and United Continental Holdings Inc – praised the State Department’s announcement as a victory for the domestic industry following years of lobbying the federal government to take a tougher stance against three Gulf carriers that they say were illegal state subsidies.
The three Middle Eastern carriers – Qatar Airways as well as Abu Dhabi-based Etihad Airways and Dubai-based Emirates – have denied those accusations.
“Today’s agreement by the State of Qatar is a strong first step in a process for commercial transparency and accountability, and we remain committed to working with the administration to address the harmful trade violations by the United Arab Emirates as well,” Delta Chief Executive Officer Ed Bastian said in a statement.
“We will watch closely to determine whether Qatar acts to end its current subsidy-focused practices and embrace a transparent business model,” USA Today reported, quoting Captain Tim Canoll, president of the Air Line Pilots Association.
The US carriers have been pushing the Trump administration to take the significant step of challenging the three Gulf carriers’ conduct under its bilateral Open Skies agreements, but the administration has said its goal is to maintain the framework of the flight pacts.
Industry responses
Other US Airlines of the Open Skies agreement, which also includes smaller airlines that campaign against protectionist policies in the industry and has sided with the Gulf carriers in the dispute, also hailed Tuesday’s announcement as a success.
“We appreciate the administration’s strong support for maintaining the global framework of US Open Skies Agreements, which will continue American aviation leadership and economic growth,” agreement members FedEx, Atlas Air, JetBlue Airways and Hawaiian Airlines said.
In a January 2015 paper, the Partnership for Open and Fair Skies, a lobbying group representing the three-party US airline coalition, said the three Middle Eastern carriers “have received more than $40 billion in government subsidies and other unfair advantages in the last decade alone,” CNBC reported.