Exclusive: U.S. airlines hit Justice Department hurdle in Gulf trade dispute

Mon Oct 12, 2015 3:58pm EDT
 
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By Jeffrey Dastin and Diane Bartz

WASHINGTON (Reuters) - The U.S. Justice Department has raised concern about demands by U.S. airlines that the government limit flights of three Middle Eastern rivals to the United States, three sources familiar with the matter have said.

Justice Department antitrust officials warned of higher fares and fewer choices for consumers if the Obama administration blocks new flights by Emirates [EMIRA.UL], Etihad Airways and Qatar Airways, the sources told Reuters on condition of anonymity.

The U.S. carriers, and their unions, say the Middle Eastern airlines have received $42 billion in subsidies from their home governments over the past decade. That, the U.S. airlines say, violates aviation agreements the United States has signed with Qatar and the United Arab Emirates. The Gulf carriers deny that they are subsidized.

This marks the first time a U.S. agency is known to have voiced reservations about the U.S. airlines' demands for the United States to cap the Gulf rivals' flights and initiate talks with the two Gulf countries.

The U.S. carriers, Delta Air Lines (DAL.N: Quote), United Airlines (UAL.N: Quote) and American Airlines (AAL.O: Quote), say the alleged subsidies allow the three Gulf airlines to expand rapidly and crowd out competition on key routes.

The U.S. departments of transportation, state and commerce have been reviewing the allegations. A list of policy options and their consequences is being prepared for the departments' senior officials, with no deadline for a decision, one of the sources said.

While the Justice Department does not have a seat at the table, it has volunteered analysis and answered questions from the other departments, the source said. The Justice Department's involvement in the matter was previously unreported.

In the department's view, U.S. officials must evaluate the broader public interest at stake, not merely the financial impact on U.S. aviation, the source said, noting Emirates airline has made the same argument.   Continued...

 
The logo of Emirates airline is seen on the wing of one of their airplanes after takeoff from Dubai airport April,16,2013. Picture taken April 16, 2013. REUTERS/Ahmed Jadallah