Qatar Agrees to Transparency to Resolve U.S. Airline Dispute

(Bloomberg) -- Qatar Airways will commit to greater financial transparency and will not run any indirect flights to the U.S. through other countries as part of an agreement with the Trump administration addressing U.S. carriers’ accusations that their Gulf competitors get unfair government help.

Airlines are hailing the agreement as a victory, if not a complete one, in one of the biggest trade disputes in U.S. history. They’ve estimated that Qatar gave $17 billion or more to Qatar Airways over a 10-year period.

“This would be a landmark milestone for the American airline industry that will protect our workers and ensure that our foreign competitors play by the rules and do not undermine our international agreements,” said Peter Carter, chief legal officer of Delta Air Lines. “We all support the administration as it holds their feet to the fire to ensure they live up to their commitments.”

Senior State Department officials said that within a year, Qatar Airways will adopt internationally recognized accounting standards, and issue annual reports and audited results, to the extent they’re not already doing so. Secretary of State Rex Tillerson will announce the arrangement on Jan. 30, following weeks of negotiation among the State Department, White House and Qatar.

No ‘Fifth Freedom’

Within two years, the airline will disclose any major financial transactions with state enterprises to ensure those are being done on commercial terms, said the officials, who declined to be identified ahead of the official announcement.

Qatar Airways also informed the U.S. that it has no intention, for now, of conducting “Fifth Freedom” flights to the U.S. Under commercial aviation protocols, those flights are ones which start in an airline’s home country and touch down in a different nation before continuing on to a third country -- in this case, the U.S.

Tillerson will announce the voluntary agreement when he meets his Qatari counterpart during a U.S.-Qatar Strategic Dialogue, said a senior State Department official who asked not to be identified discussing a deal that hasn’t been publicly announced.

Emirates, Etihad

A white paper issued by U.S. airlines in 2015 said Qatar had given more than $17 billion in subsidies to Qatar Airways, although airlines have since revised upward the estimates for the Gulf carriers -- possibly as high as $25 billion.

Emirates and Etihad Airways PJSC, which U.S. airlines claim may have gotten an additional $25 billion in unfair subsidies, aren’t part of the arrangement for now.

Any such cooperation between the United Arab Emirates and Qatar has been made far more unlikely after the UAE joined three other nations in a diplomatic and economic blockade of Qatar starting over the summer over accusations that it’s funding terrorist groups.

Qatar’s move on open skies may reflect an effort to curry favor with the Trump administration in the dispute with its Gulf neighbors.

While President Donald Trump initially embraced the assertion by the coalition led by Saudi Arabia that Qatar supported terrorists, Tillerson has steered the administration toward a more even-handed mediation of the dispute. Tillerson had dealings with Qatar when he headed Exxon Mobil Corp.

The administration rejected the chief demand of the U.S. airlines, that any expansion of flights by airlines flagged in Qatar and the UAE be frozen and that the U.S. hold consultations with those countries to discuss possible violations of open-skies agreements.

The government-to-government talks marked a renewed U.S. focus on the airline trade spat, which has been raging for years. Last year, Trump said the Persian Gulf carriers received major government subsidies, without specifying what action he might consider.

President Barack Obama’s administration had been unable to make any progress on the dispute, the officials said.

The Partnership for Open and Fair Skies, which represents Delta Air Lines Inc., United Continental Holdings Inc., American Airlines Group Inc. and airline unions, had earlier said the Gulf carriers are “harming American jobs and the U.S. aviation industry.”

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