Qatar Accused of Violating Agreements in Bid to Undercut U.S. Air Carriers

Qatar purchased stake in air fleet in breach of contracts, critics say

Air Italy
Wikimedia Commons
April 18, 2019

U.S. air carriers are calling foul on Qatar for violating an international agreement aimed at leveling the playing field for international airlines, a backdoor move that has seen the small oil rich nation inject tens of millions of dollars into a once-defunct Italian airline.

Qatar in 2018 signed on to an agreement known as the Open Skies Act that was meant to prevent the nation from using its massive cash reserves to subsidize its international air carrier, Qatar Airways. Soon after the agreement, Qatar devised a backdoor scheme to purchased a stake in the failing Italian airline Meridiana and use it to violate the terms of the agreement.

The original agreement was meant to stop Qatar's expansion into the United States and focused on national security issues, such as Doha's continued support for extremist terror groups across the Middle East. In purchasing a major stake in Meridiana, now branded as Air Italy, Qatar was able to sidestep the agreement.

U.S. air carriers and some in Congress are now calling on the Trump administration to hold Qatar accountable for its violation of the Open Skies Act, arguing that the purchase of Air Italy has enabled Qatar to offer bargain rates for flights into the United States.

U.S.-based airlines are now feeling the pressure and jointly sponsored a full page New York Times advertisement urging the Trump administration to hold Qatar accountable for its backdoor dealings.

"Qatar Airways is ignoring the 2018 agreement that your administration signed by using massive government subsidies to launch new routes to the United States through its stake in Air Italy," states the advertisement, which was signed by American Airlines, Delta, and United. "Air Italy was a struggling regional carrier until Qatar Airways injected tens of millions of dollars into the company to circumvent the agreement and expand its U.S. presence."

"In the last few days, Qatar Airways has used its Italian proxy to launch routes to Los Angeles and San Francisco, and added flights to Miami—a further effort to undermine U.S. airlines. Simply put, Qatar Airways represents a grave threat to American jobs and the health of the airline industry," the carriers wrote. "No rule-abiding business can compete with a massively subsidized airline that ignores economic realities and can wipe away losses with one infusion of government cash after another."

Secretary of State Mike Pompeo, in recent comments before concerned members of Congress, assured lawmakers he is working on the issue and is in discussions with Qatar to ensure it upholds its commitments under the Open Skies Act.

Sen. Robert Menendez (D., N.J.), during a hearing with Pompeo, chastised Qatar for breaching the agreement.

"At the same time as the agreement was being negotiated, Qatar Airways acquired a 49% stake in Air Italy, a formerly struggling regional Italian carrier, and rebranded it as an international carrier with flights to five U.S. destinations from Milan. That runs directly counter to the one-year agreement," Menendez said.

"I have personally engaged in this issue and we are working to make sure every party to those agreements complies with every element of those agreements," Pompeo responded. "The U.S. government sees what's going on, and we're working to put this agreement—we think it was a good agreement and we're trying to ensure it's enforced."

A State Department official, speaking to the Washington Free Beacon on background, said that U.S. officials are working to address the concerns raised by lawmakers and U.S. air carriers.

"The Department of State is committed to leveling the playing field and ensuring American companies have the opportunity to succeed globally," the official said. "Some U.S. airlines have raised concerns about subsidized competition. Since 2017, the Department of State has led serious negotiations with Qatar—and the United Arab Emirates—to address those concerns."

"We have sought to do so while maintaining the Open Skies framework of U.S. international aviation policy," the official said. "Our goal is to provide beneficial results for as many U.S. stakeholders as possible."

Lawmakers have petitioned the White House in recent months to exert greater pressure on Qatar, arguing that American jobs are at stake.

"Not only does Qatar's cheating undermine competition and threaten American workers—over 1,500 American jobs are lost for every route launched into the U.S. by a subsidized Middle Eastern carrier—but it directly and deliberately threats our 'American First' policies," Rep. Matt Gaetz (R., Fla.) wrote in a recent letter to the White House. "Mr. President, I urge you to continue standing up to Qatar and demanding enforcement of the deal they are violating or we must withdraw from the agreement altogether."

Qatar has defended its acquisition of Air Italy in public comments, maintaining that U.S. air carriers are being unfairly "hostile" to the country.

"Qatar Airways' investment in Air Italy was a matter of public knowledge (as were Qatar Airways' investments in other airlines) at the time of the U.S.-Qatar discussions; airline investments were not raised as a point of concern during those talks," Qatar Airways said in a statement. "The Understandings do not mention or prohibit cross-border investments of any type."

"Furthermore, Qatar Airways does not codeshare on any of Air Italy's flights to the United States, and has no plans to do so," the carrier said. "Qatar Airways is not operating any Fifth Freedom scheduled air services to the U.S."

Published under: Qatar