US readying for airline subsidy talks With Qatar and UAE, says reports

The US will hold informal talks with Qatar and the United Arab Emirates over claims they wrongly subsidised three Persian Gulf airlines, stopping short of a request by US carriers for formal discussions on whether aviation treaties were violated, people familiar with the matter told Bloomberg.

State Department officials met with the US airlines and their backers on June 24 to discuss the decision and will meet with representatives of the Persian Gulf carriers today, said one of the people, who asked not to be identified because the meetings were private.

Official sessions with the governments of Qatar and the United Arab Emirates are set for July, the people said.

The decision caps more than a year of squabbling among the airlines that began when American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. complained that Emirates, Qatar Airways and Etihad Airways have received more than $40bn in government support, providing an unfair competitive advantage.

The three Persian Gulf carriers repeatedly denied receiving government support.

“What you’re seeing with this middle ground approach is they’re saying, ‘We’ll have informal talks and see how it goes,’” said Paul Mifsud, a former vice president of government and legal affairs for the KLM unit of Air France-KLM Group. “This is a way to split the baby.”

Politico reported earlier that the US was nearing a decision to seek talks. The decision doesn’t affect operations by the three Gulf carriers in the US.

The US airlines argued the subsidies and other benefits, outlined in a 55-page investigative report, allowed the three Gulf airlines to buy new fleets of international wide-body aircraft and fly routes regardless of their profitability.

The US industry has largely pulled out of certain areas such as the Middle East and India, saying it couldn’t compete. Delta blamed heavy competition from the Gulf airlines for its decision last fall to cancel a route from Atlanta to Dubai.

The Gulf airlines countered that the three largest US airlines are engaging in protectionism, and that they have received their own government subsidies, including debt forgiveness in the bankruptcy process.

The spat occasionally has turned nasty. Qatar Chief Executive Officer Akbar Al Baker said his airline’s new Doha-to-Atlanta route would “rub salt in the wounds” of Delta.

Courtesy: Bloomberg.com