State Department will hold discussions with UAE and Qatar over airline dispute

The State Department intends to hold “informal, technical discussions” with the United Arab Emirates and Qatar next month about a dispute over Persian Gulf airlines’ funding and access to the U.S. market, according to people familiar with the matter.

But the State Department isn’t planning to move to formally renegotiate its liberal, “open skies” air treaties or freeze new flights to the U.S. by Emirates Airline, Etihad Airways or Qatar Airways, these people said.

Those are steps American Airlines Group Inc., Delta Air Lines Inc., and United Continental Holdings Inc. have sought since early 2015 as a way to battle what they claim are multibillion-dollar subsidies the Persian Gulf carriers receive from their state owners.

Another group of U.S. carriers that opposes the position of those three airlines has been invited to meet State Department officials on Wednesday to discuss the government’s plans. That group, which includes FedEx Corp., Alaska Air Group Inc., JetBlue AirwaysCorp. and Hawaiian Holdings Inc., has expressed concerns that rolling back liberal air treaties could cause economic damage and possible retaliation.

The State Department on Monday said it takes seriously the competition claims raised by some U.S. airlines. But it also remains committed to its “open skies” aviation policy, under which liberal air treaties are struck to boost passenger choice and help the broader economy through increased travel, trade and job growth, a spokeswoman said.

The three Gulf airlines have been adamant that they don’t receive subsidies and say they serve parts of the world, including Africa and South Asia, where big U.S. airlines mostly don’t choose to fly. The Gulf carriers filed lengthy rebuttals on U.S. regulatory dockets and have given numerous speeches denying that they are distorting the global air market.

U.S. Travel Association, which also opposes the position of the largest U.S. carriers in this trade dispute, confirmed that it was invited to the Wednesday meeting.

“This was the result that we hoped and expected for a year,” said Jonathan Grella,executive vice president of public affairs for the trade group, which supports growth in flights to the U.S. and the attendant tourism and economic activity it brings.

Mr. Grella said it is hard to know if informal talks with the U.A.E. and Qatar will lead to anything. He said the State Department’s approach is “the least of the token gestures that could be tossed” at the big three U.S. carriers.

Those carriers, who are supported in their position by several airline labor unions, were heartened by the State Department’s disclosure last Friday in a meeting that it plans to talk to the Persian Gulf states, according to people familiar with their thinking. The Friday meeting was earlier reported by Politico.

Talks with the U.A.E. are planned for July 18 and 19 and with Qatar on July 25. “Our perspective is this is a good development,” said one person with knowledge of the thinking of the largest U.S. carriers. “We’re pleased. The government focused on this issue and they’re taking an action.”

On the other hand, this person added, the talks with the Gulf states seem “kind of open-ended.” But this isn’t a dispute that can be resolved in court, said another person. “We’ve always known this is a diplomatic process.”

The three big U.S. carriers and several labor unions have a lobbying group called Partnership for Open and Fair Skies. In a statement Monday, the group said it appreciates “how seriously the U.S. government has taken the issue of massive subsidization of the Gulf carriers. Discussions between our governments are an important step forward.”

The Friday meeting was hosted by Catherine Novelli, Under Secretary of State for Economic Growth, Energy and the Environment, and she is slated to lead the Wednesday meeting. Representatives from the Transportation and Commerce departments and the Office of the U.S. Trade Representative were also on hand at Friday’s meeting, said people familiar with the matter.


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