US legacy carriers built their case on wrong legal standards, ask the US government to act against the law by imposing a unilateral freeze
Much of the Big 3’s case rests on the legal premise that the WTO’s anti-subsidy rules apply to international aviation or is implicitly incorporated in the US Open Skies Agreements. This is fundamentally wrong. The WTO Agreement on Subsidies and Countervailing Measures (SCM agreement) does not apply to services, which are covered by a separate WTO Agreement, the General Agreement on Trade in Services (GATS). GATS explicitly excludes air transport services, and does not include rules on unfair subsidies.
Sir Tim said: “It is ironic that the Big 3 are trying to argue their case based on WTO rules, when the USA, at the behest of these same legacy carriers, has always opposed efforts to bring air transport into GATS. Part of that reason would be because the US carriers themselves would be a prime target for restrictions, and would for the first time have to compete with foreign carriers in their protected US domestic market. Even if WTO rules applied – which they don’t – the legacy carriers would have to show that Emirates was subsidized and that competitive injury resulted, and they have failed to do this.”
The Big 3 also build their case for a unilateral freeze on Article 11 of the Open Skies Agreement, but this is the wrong article. Article 11 (“fair and equal opportunity”) deals with access. Subsidies are addressed in Article 12 which sets out specific procedures for dealing with artificially low prices “due to direct or indirect governmental subsidy or support”. In addition, both Articles 11 and 12 prohibit unilateral actions with very limited exceptions that do not include subsidies.
Sir Tim added: “By asking the US government to take unilateral action, the Big 3 are asking the US to breach its own negotiated international obligations. This would put in jeopardy America’s Open Skies relationships with 113 other countries, and all the significant public and competition benefits that the Open Skies program has generated.”
Wrong for the United States: restricting competition would hurt US consumers, communities and the national economy
The US legacy carriers have framed their complaint in terms of their own narrow interests. They assert fealty to the “foundational principles” of Open Skies but the reality is they favor Open Skies agreements only when such work to their financial advantage, and they seek to lock out airlines that offer consumers a competitive choice.
Emirates proudly contributes to the goals of Open Skies which are: greater competition, increased flight frequency, consumer choice, promotion of business travel and tourism, improved service, and customer-centric innovation. We do that by offering US consumers, communities and exporting companies direct flights to more than 50 cities not directly served by any American carrier. We transport tourists, business travelers and goods, connecting America to some of the fastest growing economies in the world, in Africa, Asia and the Middle East.
We operate all our flights on a fully commercial basis, with the high average seat load factors of over 80% on our USA services responding to consumer demand for our high-quality services.
