Daily Management Review

US mulls review of airlines subsidy in Middle East


03/19/2015




The US government has announced that it is mulling over the claims that a large number of Airlines operating from the Middle East has received subsidies which affects the market.
 
Though the government is moving out with the review, it is unclear how they would substantiate this foray as there are no international trade rules present which allows a foreign government to look into airline subsidy claims. The airline carriers based in the US have put forward the matter to their government and urged it to look into the matter as they fear that the new subsidies for the Gulf Airlines will allow them to offer low prices and introduce new amenities in its fresh fleets.
 
Such a review will not fall under the World Trade Organization rules and will be part of the open skies agreement which authorizes commercial flying between countries. It is alleged that more than $40 billion has been pumped into Gulf Airlines in the form of subsidies and the sheer proportion of the subsidy must be enough to undertake a full review of the matter.
 
The US government meanwhile is also in talks with the aggrieved US airlines and has posed around 20 questions to them on this matter. The U.S. Department of Transportation Press Secretary Ryan Daniels said, "The (U.S. government) inter-agency team did in fact ask the U.S. airlines and their consultants several technical and clarifying questions about the data and information contained in their report."
 
US government had previously involved itself in trade complaints on issues including China's imposition of extra duties on American cars to India's ban on certain US agricultural goods to allegedly protect against avian influenza. Though the World Trade Organization also previously involved itself in the illegal subsidies taken in by commercial aircraft makers in the US and the European Union, the disputes that followed has ensured that the Geneva-based watchdog does not have any rules to apply on such issues.
 
Meanwhile, Emirates airline President Tim Clark has refuted the claim and Etihad Airways Chief Executive Officer James Hogan said the company received loans, not subsidies, from its government shareholder. Both the airlines are planning to talk it out with the US government.  Subsequently, Delta Air Lines, United Airlines, American Airlines and their unions have requested a freeze on additional Gulf-airline flight departures to the United States.
 
 






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