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U.S. and Middle East airlines trade accusations on subsidy claim

U.S. and Middle East airline chiefs traded accusations over a campaign by major U.S. carriers to restrict subsidies to Gulf counterparts

Published: Updated:

U.S. and Middle East airline chiefs traded accusations on Monday over a campaign by major U.S. carriers to restrict what they say is heavily subsidized competition from Gulf counterparts.

In the United States, airlines are trying to persuade the U.S. government to alter the "Open Skies" agreements with the United Arab Emirates and Qatar, accusing them of lavishing their airlines with more than $40 billion in subsidies and distorting competition. Emirates, Etihad Airways and Qatar Airways deny the subsidy claims.

The chief executive of Qatar Airways, Akbar Al Baker, said any change in the agreements could spark protectionism.

"Any rollback of liberal market access and Open Skies policies will reverberate across the whole world and will lead to retaliatory protectionism affecting all aspects of trade," Al Baker said at the International Air Transport Association (IATA) annual meeting in Miami.

Following Al Baker's comments, IATA Director General Tony Tyler said the body was in favor of liberalization. IATA has said it has no mandate to formally act on the issue.

"IATA and its members are fully in favor of growing liberalization, free and fair competition, that's the policy of members and policy of IATA," Tyler said in response to questions from journalists.

Doug Parker, the CEO of American Airlines Group Inc, acknowledged that the carrier has code-share alliances with Qatar and Etihad, but said the United States must enforce its trade policies.

"We've produced evidence to the U.S. government that indeed other countries are subsidizing carriers that are flying to the United States," Parker said at a news conference after Al Baker's remarks.

Parker said the U.S. government was working diligently on the issue and was in regular communication with the airlines. He said the U.S. government's timeline was not clear, but he hoped it would act soon.

While U.S. carriers like American and Delta Air Lines Inc have closed ranks on the issue, others, like global cargo carrier FedEx Corp and Emirates codeshare partner JetBlue Airways Corp have stood up for the Open Skies agreements, voicing concern that changes would set a bad precedent.

Germany's Lufthansa, whose business on routes to Asia have been hurt by competition from the Gulf carriers, echoed Delta and American's concerns on Sunday.

"There's various ways to how you can achieve balance of openness. It could be limitations of destinations, limitations of frequencies," Lufthansa CEO Carsten Spohr said in a media briefing.