Friday, February 6, 2015
First reported by the Wall Street Journal, today's big story is the revelation that the three major U.S. legacy carriers are actively seeking changes to U.S. air transport agreements with the United Arab Emirates and Qatar. The U.S. airlines share similar concerns to those that have been expressed by European and Canadian carriers in recent years, namely that the so-called "Gulf carriers" - Emirates, Etihad, and Qatar Airways - are benefiting from state subsidies that provide those carriers with an unfair competitive advantage.
It is not clear that the air transport agreements need to be amended to address these problems. For example, the air transport agreement between the U.S. and the United Arab Emirates includes the following language under Article 12(1)(c) "Intervention by the Parties shall be limited to...protection of airlines from prices that are artificially low due to direct or indirect governmental subsidy or support." However, provisions such as this are rarely invoked because of the difficultly in defining what constitutes an indirect governmental subsidy, and in monitoring states for violations.