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Hudson Institute Releases New Study on State Subsidies and Unfair Competition in Global Commercial Aviation

Hudson Institute

WASHINGTON, October 26, 2018 – Hudson Institute released a new study, “Subsidies and Unfair Competition in Global Commercial Aviation: How to Respond,” authored by Hudson senior fellow Thomas Duesterberg. The report assesses the commercial airline industry’s “Open Skies” framework and the impact of violations and distortions by state-subsidized international carriers. The findings demonstrate that Emirates Airline, Etihad Airways, Qatar Airways, and other airlines are leveraging major government subsidies to rapidly expand their share of the global passenger aviation market. To address the violation of bilateral air transport agreements and the loss of market share from U.S. carriers, the report advises that the U.S. should enforce the transparency requirements of the 2018 supplemental agreements with Qatar and the UAE. Additionally, the U.S. should work with allies on ways to check new subsidized services from Gulf carriers and growing subsidized competition from China.

“Fair competition underpins the success of commercial aviation as an economic driver in the U.S. and abroad,” said Ken Weinstein, President and CEO of Hudson Institute. “This new report highlights important steps toward ensuring that airlines relying on subsidies from foreign governments do not undermine this key American industry.”

Key takeaways from the report include:

  • $48 billion in total cash or in-kind subsidies by the Gulf states have allowed the Gulf airlines to achieve a ten-fold increase in daily passenger seats since 2001 and capture significant market share in international travel from U.S., European, and Australian airlines.

  • Qatar Airlines is violating the spirit of the supplemental agreements by purchasing the small Italian carrier Meridiana (rebranded as “Air Italy”), enlarging its fleet size by 500%, and establishing U.S. routes from third-country stopover destinations.
  • Gulf airlines have exploited government subsidized service and government-funded upgrades to their hubs to grow their market share for U.S.-India passenger travel from 8 percent in 2008 to 46 percent in 2016.

  • China’s growing air transport market is benefitting from state subsidies, including tight capacity limits and direct subsidies from local Chinese government agencies. While operating largely outside the Open Skies framework, China should be considered a possible future partner in trade agreements covering commercial airline services.

The report was authored by Thomas Duesterberg, a senior fellow at Hudson Institute. He has previously served as the assistance secretary for international economic policy at the U.S. Department of Commerce. More recently, he was the President and CEO of the Manufacturers Alliance. He also served in senior staff positions in the U.S. Senate and U.S. House of Representatives. He is the co-author of “U.S. Manufacturing: The Engine of Growth in a Global Economy,” a comprehensive analysis of the U.S. manufacturing sector’s impact on the economy.

Please contact Hudson Institute Press Secretary Carolyn Stewart, [email protected] and (202) 974-6456 for media inquiries. The full report, “Subsidies and Unfair Competition in Global Commercial Aviation: How to Respond” can be accessed here: https://www.hudson.org/research/14641-subsidies-and-unfair-competition-in-global-commercial-aviation-how-to-respond.

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Hudson Institute is an independent research organization promoting new ideas for the advancement of global security, prosperity and freedom. For more information, please visit www.hudson.org.