State-Owned/Supported Enterprises

Per the U.S. Trade Representative, “SOEs [state-owned enterprises] are increasingly competing with U.S. businesses and workers . . . in some cases distorting global markets . . . and undercutting U.S. workers with subsidies . . . ” The U.S. airline business is no exception to this rule. Airlines and their workers face increasing competition from SOEs. The resulting loss of market share is costing the United States thousands of good airline jobs. The largest and most threatening of these SOE air carriers are located in China, Qatar, and the United Arab Emirates (UAE).

The Chinese government’s support for their national industries is well known. The Chinese government owns and financially backs Air China, China Southern, and China Eastern, all of which do business globally. Until Chinese carriers operate without any government support, we must not allow them access to the entire U.S. market via an Open Skies agreement.

The United States has signed bilateral Open Skies agreements with Qatar and the UAE. These two countries’ governments have given their three national airlines (i.e., Emirates Airline, Etihad Airways, and Qatar Airways) more than $50 billion in documented subsidies since 2004. Subsidies on this scale clearly violate the Open Skies agreements’ provisions regarding the fair and equal opportunity to compete.

The harm to the U.S. economy from these subsidies is evident, and it is increasing. Every widebody route lost or forgone because of this illegal competition costs the United States more than 800 jobs. Delta and United both had to cut their service to Dubai from the United States because of this subsidized competition. This competition has grown more troubling as these carriers have announced new Fifth Freedom routes between Europe and the United States.

To address these concerns, the Trump administration negotiated agreements with both Qatar and the UAE. Under the deals, carriers in these countries will have to transparently publish their internal financials (much as U.S. carriers do), including transactions with other state-owned entities. The carriers have also agreed to a freeze on all Fifth Freedom routes.


Action

  • The U.S. government should ensure that both the letter and spirit of the new agreements with Qatar and the UAE are enforced to ensure U.S. airlines and their employees have a fair opportunity to compete globally.
  • The U.S. government should not negotiate any Open Skies agreements with China until Chinese airlines are operating without government subsidies.