### 1 

### BEFORE THE DEPARTMENTS OF TRANSPORTATION, STATE AND COMMERCE WASHINGTON, D.C.
Alleged Subsidies to Middle East Gulf State Air Carriers

DOT
- OST
- 2015
- 0082 DOS
- 2015
- 0016 DOC
- 2015
- 0001

COMMENTS OF THE CARGO AIRLINE ASSOCIATION

Introduction On April 10, 2015, the Departments of Transportation, State and Commerce opened the above

- referenced Dockets to receive information on allegations by several U.S. airlines and unions that Emirates Airlines, Etihad Airways, and Qatar Airways “have received and are bene fitting from subsidies from their respective governments of the United Arab Emirates (UAE) and Qatar that are distorting the global aviation market.” The Cargo Airline Association (hereinafter “CAA” or “the Association”) , and its member airlines , take ser iously any charges of unfair competitive practices and believe that all such allegations , inc l uding those highlighted above, should be thoroughly evaluated by the Government. At the same time, the examination of any such charges must take place within the framework of each applicable Open Skies agreement. The United States must not take any unilateral action (such as an immediate freeze of competitive opportunities or any limitation of Fifth Freedom rights) that is not within the scope of these agreements.

### 2 The Association is the nationwide organization representing the interests of the U.S. all

- cargo air carrier industry. Direct air carrier members of the Association are ABX Air, Inc., Atlas Air, Inc., FedEx Express, Kalitta Air , Inc. and United Parcel Service Co. Each of these carriers operate international networks designed to meet the needs of a worldwide customer base and are unwavering supporters of United States Open Skies policies. As such, Association members are extremely co ncerned with any actions that may result in a return to
unnecessary govern ment protectionism and that in turn will have a negative impact on all

cargo operations and the entire world economy. Any such protectionist actions will invariably lead to retaliat ion by the foreign government(s), retaliation that will adversely impact all

- cargo carriers. The Government must avoid such consequences in dealing with allegations about the Gulf carriers. Discussion The first Open Skies agreement was negotiated 23 year s ago. 1 To date, the United States has negotiated 115 Open Skies treaties with countries around the world that have
enabled all

- cargo carriers to establish around

- the

- world networks of air transportation services. The agreements, and the policy of Open S kies generally, have been embraced by both Democratic and Republican administrations. The distribution networks of Association
members are possible because of the provisions in these international treaties that provide for

so - called beyond rights allowing all

- cargo carriers to fly, not only between the parties to each agreement, but also beyond those countries to other trading partners. 2

1 U.S. Department of State

– Open Skies Partners http://www.state.gov/e/eb/rls/othr/ata/114805.htm With respect specifically to the Gulf Region at issue herein, beyond rights are crucial to effici ent air cargo service to Africa, the Indian Subcontinent and points in Asia.

2 These rights are referred to as Fifth and Seventh Freedom rights.

### 3 Unfortunately, the issues raised herein have the potential for seriously disrupting these necessary services. Put somewhat differently, the collateral damage that may be inflicted by any protectionist moves by the United States Government outside the scop e of the terms of the agreements in question will have significant negative consequences for the global supply chains and the world economy generally. And th ese consequences will fall disproportionately on the all

- cargo industry segment , a segment that, in 2014, transported 72.3% of international Revenue Ton Miles

-- - up from 50.3% in 2000

. 3 While the allegations referenced by the Departments of Transportation, State and Commerce are appropriately framed in terms of unfair competitive practices, the Association believes that a broader attack on F ifth and S eventh freedom rights may be intended. And that attack will disproportionately affect the all

- cargo carriers. In order to continue serving customers around the world, Open Skies agreements, and especially their beyond rights components, are vitally necessary. Unlike passenger carriers, memb ers of the all

- cargo industry do not have code share agreements or worldw ide alliances; they depend on the beyond rights inherent in Open Skies agreements to provide worldwide service. Indeed, it is not an overstatement that, absent Open Skies agreements, existing worldwide air cargo networks could not exist as we know them today and the ability to provide efficient, time

- definite, transportation of high

- value goods such as medical devices, pharmaceuticals, computers and computer parts, and health care pr oducts to a worldwide customer base would be severely diminished. Such actions would also put the jobs of many of our over 76 0,000 employees in jeopardy. 4 Attached hereto is a letter, dated February 20, 2015, from the CEOs of the
Association’s four B oard Member companies describing these concerns in more detail.

3 FAA Aerospace Forecast, 2015

- 2035 , March 2015, p.57. 4 These over 760,000 employees are three times as many employees of the three major U.S. legacy carriers combined

.

### 4 Conclusion In view of the facts described above, the Association urges the United States Government to move cautiously in evaluating the allegations made against the carriers of the Gulf Sta tes region. I n determining whether to request consultations under the terms of the applicable international agreements , the United States should not only determine whether subsidization has taken place, but also whether such subsidization is any different from assistance given by governments around the world, including the United States. Furthermore, the United States should determine whether any such foreign government assistance has actually damaged U.S. interests. Absent any such findings, no consulta tions are appropriate and the terms of each Open Skies agreement at issue should remain intact.

Respectfully submitted,

Stephen A. Alterman President Cargo Airline Association 1620 L Street, NW Suite 610 Washin gton, DC 20036 202

- 293

- 1030 salterman@cargoair.org May 29, 2015