January 30, 2018 / 6:59 PM / 10 months ago

Qatar agrees to financial disclosures in spat with U.S. carriers

(Reuters) - State-owned Qatar Airways has agreed to release detailed financial statements, the U.S. government said on Tuesday, as part of a response to accusations by U.S. airlines that the carrier had been illegally subsidized by its government.

FILE PHOTO: Qatar Airways aircraft at Hamad International Airport in Doha, Qatar June 12, 2017. REUTERS/Naseem Zeitoon/File Photo

U.S. Secretary of State Rex Tillerson said that Qatar and the United States had opened a “strategic dialogue” to address domestic airlines’ concerns that the three major Gulf carriers had been unfairly propped up by their governments, putting U.S. carriers at a competitive disadvantage.

“The outcome we achieve will ensure a level playing field in the global aviation market,” Tillerson said at a briefing in Washington, alongside Qatari officials.

Qatar Airways was not immediately available for comment.

Qatar is expected to begin publishing annual financial statements, audited by an outside party, with the first one due over the next year, the U.S. State Department said. Within two years, Qatar is expected to also disclose significant new transactions with other state-owned enterprises and “take steps to ensure that such transactions are based on commercial terms.”

Both sides of the debate hailed the move as a win, but Tuesday’s announcement does little to substantially change the state of play in the international flight industry.

The “Open Skies” flight agreement, which liberalizes commercial and cargo air travel, remains intact between the two countries. And U.S. airlines’ goal to limit Gulf carriers from launching Fifth Freedom flights, which allow an airline to fly between foreign countries as part of services to and from its home country, did not apply in Qatar’s case because it does not currently operate any such flights and has no plans to.

A coalition representing the largest U.S. carriers - American Airlines Group Inc, Delta Air Lines Inc and United Continental Holdings Inc - praised the State Department announcement as a victory for the domestic industry, following years of lobbying the federal government to take a tougher stance against the three Gulf carriers for what they say were illegal state subsidies.

The three Middle Eastern carriers - Qatar Airways, plus United Arab Emirates-based Etihad Airways and Emirates [EMIRA.UL] - have denied those accusations.

“Today’s agreement by the State of Qatar is a strong first step in a process for commercial transparency and accountability, and we remain committed to working with the administration to address the harmful trade violations by the United Arab Emirates as well,” Delta Chief Executive Officer Ed Bastian said in a statement.

The U.S. carriers have been pushing the Trump administration to take the significant step of challenging the three Gulf carriers’ conduct under its bilateral Open Skies agreements, but the administration has said its goal is to maintain the framework of the flight pacts.

The U.S. Airlines for Open Skies Coalition, which includes smaller airlines that campaign against protectionist policies in the industry and has sided with the Gulf carriers in the dispute, also claimed Tuesday’s announcement as a success.

“We appreciate the administration’s strong support for maintaining the global framework of U.S. Open Skies Agreements, which will continue American aviation leadership and economic growth,” the coalition, which includes FedEx, Atlas Air [AAWWAT.UL], JetBlue Airways, and Hawaiian Airlines, said in a statement.

Reporting by Alana Wise in New York; Additional reporting by David Shepardson in Washington, Editing by Rosalba O'Brien and Matthew Lewis

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