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US and Qatar agree to level playing field framework

The US and Qatari governments have signed an agreement aimed at creating a level playing field between Qatar Airways and US carriers.

The agreement requires the Doha-based carrier to use international accounting and auditing standards, disclose financial results and commit to not add flights to the USA from countries other than Qatar.

"These exchanges address concerns important to US aviation industry stakeholders and strengthen our economic cooperation," says US secretary of state Rex Tillerson at the US-Qatar strategic dialogue in Washington DC today. "The outcome we achieved will ensure a level playing field in the global aviation market."

The agreement follows nearly three years of pressure on the US government by American Airlines, Delta Air Lines and United Airlines, as well as their labour unions, to limit what they claim amounts to capacity dumping in the US under open skies. They claimed that Emirates Airline, Etihad Airways and Qatar Airways all benefitted from more than $42 billion in government subsidies that enabled their rapid growth.

The accord announced today operates within the existing open skies framework between Qatar and the USA, the US State Department says.

“Today’s landmark action will help create a level and fair playing field for American Airlines and other US carriers," says Doug Parker, chairman and chief executive of American, in a statement. "The administration’s actions today thoughtfully address the illegal subsidies received by Qatar Airways."

Oscar Munoz, chief executive of United, adds in his own statement: “We applaud this agreement and thank the administration for effectively representing the interests of the American aviation industry."

Not all US carriers have supported the mainline carriers' push. Hawaiian Airlines, JetBlue Airways and Southwest Airlines have spoken out repeatedly in support of open skies and the Gulf carriers.

Qatar Airways declines to comment on the agreement.

REBUILDING RELATIONSHIPS

"I think Qatar Airways will successfully be able to reopen the once strong working relationship it had with American and, potentially, securing feed between Qatar Airways and American at key airports," says Henry Harteveldt, president and travel industry analyst at the Atmosphere Research Group, on today's accord.

American and Qatar Airways had worked together prior to the current subsidies row. Then American chief executive Tom Horton joined Qatar Airways chief executive Akbar Al Baker to announce the latter's plans to join Oneworld in October 2012, and the airlines launched a codeshare early in 2013.

That relationship soured following the subsidy allegations in 2015, with American rebuffing an unsolicited investment attempt by Qatar Airways and announcing plans to end the codeshare in 2017.

American will drop Qatar Airways, as well as Etihad, as a codeshare partner on 24 March.

While Qatar Airways has not announced any network changes as a result of the move by American, Etihad cited the US carrier's decision when it announced that it will drop service to Dallas/Fort Worth on 25 March - the day after the codeshare ends.

American was not immediately available to comment on whether today's announcement changes its plans regarding the codeshare.

FIFTH-FREEDOM QUESTION

Fifth-freedom routes to the USA by Gulf carriers, or those originating in a country that is not Qatar or the United Arab Emirates, have been a central tenet of US mainline carriers push.

“Our biggest concern is flights from outside the Gulf region to the United States,” said Parker in September 2016, a view that he and Delta chief executive Ed Bastian have repeated since.

While Qatar Airways does not operate any fifth-freedom routes to the USA, Emirates serves New York from both Athens and Milan.

Harteveldt sees little harm to Qatar Airways in its willingness to not operate fifth-freedom routes to the USA. It does not need to end any service as Emirates would under a similar agreement and, under its joint business with British Airways, has commercial access to the Europe-USA market without operating its own metal.

Qatar Airways growth to the USA slowed dramatically in 2017. Capacity increased just 10.8% year-over-year compared to a nearly 52% increase in 2016 and 22% increase in 2015, FlightGlobal schedules show.

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