BOB GOOOLATIE, Virginia CHAIRMAN

F

. JAMES SENSENBRENNER, JR, Wisconsin LAMAR S

. SMITH, Texas STEVE CHABOT, Oh;o DARRELLE ISSA. California J RANDY FORBES, Virginia ONE HUNDRED FOURTEENTH CONGRESS JOHN CONYERS, JR, Michigan RANKING MEMBER
JERROLD NADLER, New York ZOE LOFGREN, California SHEILA JACKSON LEE, Texas STEVE COHEN, Tennessee
STEVE KING, Iowa TRENT FRANKS, Arizona LOUIE GOHMERT, Texas JIM JORDAN, Oh;o TEO POE. Texas JASON CHAFFETZ, Utah TOM MARINO, Pennsylvania TREY GOWDY, South Carolina RAUL R

. LABRADOR, Idaho BLAKE FARENTHOLD, Texas DOUG COLLINS, Georgia 

# Q:ongrcss ofthe tinitcd**~tetcs** iR.ousc of 1\.cprcscntatiocs HENRY C HHANKH JOHNSON, JR , Georgia PEDRO A PIERLUISI, Puerto Rico JUDY CHU, California TED DEUTCH, Florida LUIS V GUTIERREZ, Illinois KAREN BASS, California CEDRIC l RICHMOND, Louisiana SUZAN K DELBENE, Washington HAKEEM S JEFFRIES, New York DAVID CICILLINE, Rhode Island SCOTT PETERS, California
RON DeSANTIS, Florida MIMI WALTERS, California KEN BUCK, Colorado JOHN RATCLIFFE, Texas DAVE TAOTI, Michigan MIKE BISHOP, Michigan

The Honorable John Kerry Secretary ofState U.S. Department ofState 2201 C Street, NW Washington, D.C. 20520 COMMITTEE ON THE JUDICIARY 2138 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, DC 20515-6216 (202) 225-3951 http:// www.house.gov /judiciary May 13,2015
The Honorable Anthony Foxx Secretary ofTransportation U.S. Department ofTransportation 1200 NewJersey Avenue SE Washington, D.C. 20590

Dear Secretary Kerry and Secretary Foxx:
The House Judiciary Committee recently received allegations that the state-sponsored airlines ofQatar Airways, Etihad Airways, and Emirates Airlines (collectively, the "Foreign Airlines") are receiving subsidies from Qatar and the United Arab Emirates ("UAE"). Ifthese allegations prove true, the state subsidies to Foreign Airlines likely are improper in light of existing "Open Skies Agreements" with Qatar and UAE

. Furthermore, the alleged foreign subsidies may be distorting market-based competition and placing domestic, privately-owned airlines at a competitive disadvantage.
When negotiating and implementing Open Skies Agreements, the State Department and the Department ofTransportation are required by law to "emphasiz[e] the greatest degree of competition," "strengthen[] the competitive position ofair carriers to ensure at least equality with foreign air carriers," and "eliminate[e] discrimination and unfair competitive practices faced by United States airlines in foreign air transportation." 1 These statutory requirements are further implemented in the Department ofTransportation's policy statement, which states in relevant part that the objectives ofour national aviation strategy include "[e]nsur[ing] that competition is fair and the playing field is level by eliminating marketplace distortions, such as government subsidies

.. .."2 As you know, Qatar and the UAE are counterparties to Open Skies Agreements with the United States. 3

To the extentthat the Foreign Airlines are in receipt ofinappropriate subsidies, these airlines likely are expanding at a rate that is inconsistent with market demand. Accordingly, the

1 49 U

.S

.C

. §40101(e)

. 2 60 Fed. Reg. at 21844 (emphasis added)

. 3 The U

.S.-Qatar Open Skies Agreement was signed on October 3, 2001. The U.S.-UAE Open Skies Agreement was signed on March 11, 2002.



# s 1 

### 0-150514-007expansion likely is at the expense ofprivately-owned airline carriers, which must rely on revenues derived from profits rather than sovereign funds to continue their operations. These market distortions may have a particularly problematic impact on airline routes to rural areas. Rural routes are economically viable, in part, due to a portion ofthe passengers on these routes ultimately traveling to international destinations.4 Accordingly, a non-market based diversion of international travel routes from privately-owned domestic carriers to the foreign-subsidized Foreign Airlines may endanger the viability ofdomestic, rural routes. Furthermore, foreign subsidies may distort the market in a fashion that could produce significant long-term harms to consumers. Although foreign subsidies may cause consumer prices to be discounted in the short-term, these artificially lowprices may cause rivals to exitthe relevant markets, thereby increasing the market's reliance onforeign carriers and their subsidies. This, in turn, creates a more volatile market. Should the foreign subsidies ever abate or disappear, prices may dramatically correct themselves and may be unchecked by rivals, who could have already exited the market. Accordingly, in the long-term, this could leave consumers with higher prices and fewer choices.
The Committee onthe Judiciary historically has exercised vigilant oversight ofissues related to competition, foreign and domestic. In that regard, the Committee takes very seriously allegations ofmarket distortion that may negatively impact American consumers.
In order for the Committee to better evaluate the allegations and the Administration's response to potential market distortions, please answer the following questions by May 20, 2015.
1. Are you aware ofany foreign subsidies to the Foreign Airlines? a. Ifnot, have you determined the absence ofany foreign subsidies, and how did you determine that? b. Ifso, what will be the response to these subsidies, consistent with the departments' relevant statutory authority and stated policies? Thankyou for your attention to this potentially serious issue facing competition in the aviation marketplace. We look forward to your response.

Bob Goodlatte Chairman House Committee onthe Judiciary

# - Sincerely,

John Conyers, Jr. Ranking Member 

## '

House Committee on the Judiciary

4 See RESTORING OPEN SKIES: THE NEED TO ADDRESS SUBSIDIZED COMPETITION FROM STATE-OWNED AIRLINES IN QATARAND THE UAE (Jan. 28, 20 15), available at http://skift.com/wp-content/uploads/2015/03/White.Paper-2.pdf.

2 

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