Gulf Airlines Targeted for U.S. Tax Hit as Old Spat Warms Up

(Bloomberg) -- A spat between U.S. airlines and politicians and leading Persian Gulf carriers Emirates, Qatar Airways and Etihad Airways PJSC may be about to heat up again.

Abu Dhabi-based Etihad said Thursday that a measure included in the Senate’s tax-reform bill contains “language that is inappropriate under U.S. law and runs contrary to several international agreements.”

The comments concern an addition to the bill that calls for foreign airlines from nations lacking income-tax treaties with the U.S. to pay corporate duties where American carriers operate fewer than two services a week to those countries, the Financial Times reported.

The move threatens to reignite a row over the breakneck growth of Gulf carriers, which U.S. rivals including Delta Air Lines Inc., American Airlines Group Inc. say has been made possible by illegal state aid. While operators from nations such as Suriname and Fiji would also be affected, the wording of the measure means it wouldn’t affect European companies, the FT said.

Etihad said it’s working with “a broad coalition of industry representatives” to lobby lawmakers on the issue, adding that it “appears to be the result of continued anticompetitive efforts by one or more of the ‘big three’ U.S. legacy carriers.”

Georgia Senator

Dubai-based Emirates, the No. 1 Mideast airline and the world’s biggest long-haul carrier, said in an email it is aware of the proposed provision, while declining to comment further.

The measure was introduced by Johnny Isakson, a Republican senator for Georgia, the home state of Atlanta-based Delta, according to the FT.

An earlier push for action against Gulf growth from U.S. carriers included a campaign for the suspension of the country’s bilateral air services treaties with Qatar and the United Arab Emirates. The administration of former president Barack Obama didn’t take the matter forward.

Etihad recorded a $1.87 billion loss last year as it grappled with a failed investment strategy, a slump in oil-related travel and pressures from the U.S., which sought to restrict travel to America by people from a number of Muslim-majority nations and later imposed restrictions on using electronic devices in U.S.-bound planes departing Mideast hubs. Emirates in May reported its first annual profit decline for five years, while Qatar Air, also hurt by a Saudi Arabian-led blockade, has forecast a full-year loss.

To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Benedikt Kammel

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