Lawmakers to Suggest Path to Defuse U.S.-Gulf Airline Spat

(Bloomberg) -- U.S. airlines have spent three years pleading for federal action to curb fast-growing Persian Gulf carriers, claiming their rivals benefit from billions of dollars in unfair government aid.

But now, a group of lawmakers is offering a more modest solution: vetting those claims through a decades-old Department of Transportation process created to prevent foreign governments from meddling in airline competition. Sending the dispute to DOT would be a way to defuse the longstanding dispute and preserve ties with the growing tourist and commercial hubs, they say.

Under the 1974 law, U.S. transportation officials have six months to decide whether a claim merits federal action. That is the proper channel to evaluate claims against Emirates, Etihad Airways PJSC and Qatar Airways Ltd., the lawmakers say in a letter they are circulating that will be sent to Secretary of State Rex Tillerson, Transportation Secretary Elaine Chao and Commerce Secretary Wilbur Ross.

It's the latest development in a more than two-year quest by Delta Air Lines Inc., American Airlines Group Inc. and United Continental Holdings Inc., the three largest U.S.-based carriers, to combat what they say is tens of billions of dollars in subsidies that have flowed to the Gulf carriers from the governments of Qatar and the United Arab Emirates.

Previously: U.S. Allies of Gulf Airlines Press Tillerson to Keep Skies Open

A decision reached under the law would allow Congress and the White House "to develop a fact-based response" to the allegations, "rather than responding to the politically-charged rhetoric," said the letter, drafted by Tennessee Republican David Kustoff and so far signed by 13 other GOP lawmakers and two Democrats.

An advocacy group for biggest U.S. carriers sees it differently.

“This is nothing more than an effort to delay and distract from the real issue -- American jobs are on the chopping block because of trade cheating by the United Arab Emirates and Qatar,” said Jill Zuckman, spokeswoman for the Partnership for Open & Fair Skies, which represents Delta, United, American and several airline unions.

Zuckman says Open Skies treaties have provisions that allow for countries to address violations. Beginning a separate process through the Transportation Department would be redundant, she said. Open Skies agreements are designed to eliminate government involvement in airline decision-making about routes, capacity and pricing in international markets, according to the State Department.

The U.S. airlines have lobbied both the Obama and Trump administrations to intervene on their behalf. They've asked to block the Gulf carriers from gaining access to new routes and want the U.S. to revamp Open Skies treaties with Qatar and the U.A.E.

President Donald Trump in March said he would help U.S. airlines compete with overseas players getting government help, saying, "It's a very unfair situation."

But other airline companies, including JetBlue Airways Corp. and FedEx Corp., and U.S. hotel and gaming businesses have contested the legacy carriers arguments, the lawmakers say in their letter. The letter, signed mostly by Republicans from Southern states, asks the Trump officials to resist those requests for a more-aggressive response. 

The lawmakers cite concerns that meddling with the Gulf states' Open Skies agreements would endanger other agreements with more than 100 other nations, putting billions of dollars at risk for smaller airlines, the tourism industry and manufacturers such as the Boeing Co.

“We understand that there are great American businesses on both sides of this issue," Kustoff said in a statement. "That is why we are clarifying that there is a legal process in place to resolve this dispute, enacted by Congress in 1974, which has been used more than 75 times.”

--With assistance from Michael Sasso

To contact the reporter on this story: Ryan Beene in Washington at rbeene@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Mark Drajem

©2017 Bloomberg L.P.