March 17, 2015 / 1:28 PM / 2 years ago

U.S. and Gulf airlines clash at aviation summit

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WASHINGTON (Reuters) - Top executives of U.S. airlines and their Middle East competitors clashed in Washington on Tuesday over whether "open skies" deals are fair, and each side ramped up efforts to sway U.S. regulators at a high-profile forum.

U.S. carriers charge the Gulf airlines are benefiting unfairly from government subsidies. A coalition of Delta Air Lines Inc (DAL.N), United Continental Holdings Inc (UAL.N), American Airlines Group Inc (AAL.O) and their labor unions accused Gulf rivals of receiving more than $40 billion in government subsidies.

U.S. carriers say the Gulf airlines benefit unfairly from more than $40 billion in government subsidies that have allowed them to drive down prices and begin pushing U.S. airlines out of key markets. Executives are expected to air their concerns at a conference sponsored by the U.S. Chamber of Commerce Foundation.

Emirates Airline [EMIRA.UL], Qatar Airways and Etihad Airways have denied receiving improper subsidies, saying U.S. airlines have lost market share in part because of inferior service.

Delta, United, and American have called on the Obama administration to address whether to renegotiate open skies agreements with Qatar and the United Arab Emirates

The Obama administration has said it takes competition concerns of the U.S. airlines seriously, but remains "committed to the open skies policy" which it says has helped travelers, the U.S. aviation industry and the U.S. economy.

On Tuesday, U.S. House Committee on Transportation and Infrastructure Chairman Bill Shuster told reporters the panel has asked the administration to look into the subsidy allegations, which he said appear valid.

    “They’re state-owned companies, and they’re getting what we believe are infusions of cash, which is not fair,” Shuster said.

According to prepared remarks reviewed by reporters, American Airlines Chief Executive Doug Parker plans to tell the conference that subsidies for the Gulf airlines "distort the competitive marketplace," and unless something is done, U.S. airlines, the U.S. economy, and U.S. jobs will pay a very expensive price."

Etihad CEO James Hogan delivered a spirited defense of his company, saying the government of Abu Dhabi did provide startup capital and loans, but did so as a rational shareholder, and is expecting and getting returns on its investments.

“I don’t apologize for anything,” Hogan told attendees at a conference sponsored by the U.S. Chamber of Commerce. “Shareholder loans and equity? That’s business.”

U.S. airlines complain that the Gulf airlines are taking away passengers and putting U.S. jobs at risk. Hogan said his airline has helped the United States by buying 787 Dreamliners from Chicago-based Boeing Co., delivering 180,000 passengers a year to the three U.S. airlines that have lodged complaints with the U.S. government and supporting travel to six U.S. cities.

As for whether the Gulf airlines are violating the open skies agreements, “that’s an issue for the two governments to discuss,” Hogan said.

Captain Rick Dominguez of the Air Line Pilots Association, which backs the U.S. carriers’ complaint, disputed Hogan’s contention that government aid to his company was a loan rather than a subsidy.

“When you have a loan that has no repayment schedule, and later years is actually forgiven, was it ever a loan?" Dominguez asked.

Last week, the European Commission said it will address French and German complaints about alleged subsidies later this year when it proposes a commercial aviation agreement with the Gulf region.

Lufthansa Group Chief Executive Officer Carsten Spohr said at the Chamber event that bilateral agreements with Qatar and the United Arab Emirates "must be reviewed and must be renegotiated."

Reporting By Jeffrey Dastin; Editing by Chizu Nomiyama, Joseph B. White and David Gregorio

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