The latest target of U.S. President Donald Trump’s anti-trade campaign may be the aviation industry. For the last several months, some administration officials have been reassessing Open Skies, a set of trade pacts that have governed the skies since the 1990s. Essentially a collection of bilateral and multilateral free trade deals, the agreements give foreign airlines unfettered access to the U.S. market. For over two years, however, American Airlines, Delta, and United have accused three state-owned Gulf airlines—Emirates, Etihad Airways, and Qatar Airways—of accepting billions in “unfair” government subsidies in violation of Open Skies.
The chief executives of all three U.S. carriers took the dispute a step further when they met with Secretary of State Rex Tillerson on August 30. They reiterated throughout the meeting the “threat that the massive Gulf carrier subsidies pose to 1.2 million American workers and the harm that will only continue if . . . Open Skies agreements aren't enforced.” Industry leaders had tried similar tactics with former President Barack Obama but had failed. They are now hoping for more success given Trump’s protectionist stance.
Before Open Skies, governments kept a tight grip on international air travel in an effort to give national carriers a financial advantage. The result was limited competition and high prices. In fact, studies show that prior to Open Skies, airfares for transporting passengers and cargo were between nine and 32 percent higher than after Open Skies was implemented. The goal of Open Skies was, and remains, an aviation market free from government intervention. U.S. legacy airlines interpret that to mean carriers from signatory countries—in this case, the United Arab Emirates and Qatar—cannot accept government handouts.
In response to these countries’ alleged breach, Trump can either freeze Gulf carrier access to new U.S. markets or renege on the Open Skies agreements with Gulf countries altogether. Either option, however, would not only have severe political and economic consequences but also make Open Skies less fair.
According to Open artificially low” prices that result from “direct or indirect governmental subsidy or support.” But subsidies aren’t prohibited outright. That’s because airlines have historically been government-backed ventures. American Airlines, for example, owes its very existence to U.S. government contracts and subsidies handed out during aviation’s early days, when it was primarily transporting mail across the United States. Banning subsidies completely would also prevent other foreign airlines—many of which partner with U.S. carriers—from accessing local markets. Singapore Airlines, for example, which partners with United Airlines, is majority controlled by the Singapore government.
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