COMMENTS OF QATAR AIRWAYS Q.C.S.C. · PDF fileI. INTRODUCTION AND EXECUTIVE SUMMARY ... 2 American also code shares with and is fed traffic by Etihad Airways, another carrier under

COMMENTS OF QATAR AIRWAYS Q.C.S.C.

Re: Information on Claims Raised about State-Owned Airlines in Qatar and the UAE

Submitted to Docket Nos.:

DOT-OST-2015-0082

DOC-2015-0001

DOS-2015-0016

Dated: July 30, 2015

Table of Contents

I. INTRODUCTION AND EXECUTIVE SUMMARY ................................................. 1

II. ABOUT QATAR AIRWAYS .................................................................................. 9

III. APPLICABLE LEGAL STANDARDS .................................................................. 12

A. QATAR AIRWAYS’ SERVICES ARE ENTIRELY CONSISTENT WITH THE

AGREEMENT .............................................................................................. 12

B. WTO/GATT RULES ARE INAPPLICABLE TO AIR TRANSPORT SERVICES .......... 17

IV. SUBSIDY CLAIMS ............................................................................................. 19

A. THE BIG THREE PROPOUND AN OVERLY BROAD DEFINITION OF SUBSIDY ....... 19

B. THE CAPITAL TRADE REPORT IS RIFE WITH FACTUAL AND METHODOLOGICAL

ERRORS .................................................................................................... 23

C. FINANCIAL HISTORY OF QATAR AIRWAYS ..................................................... 29

D. REBUTTAL OF SPECIFIC SUBSIDY CLAIMS ..................................................... 32

E. THE BIG THREE HAVE FAILED TO MAKE ANY SHOWING OF COMPETITIVE

HARM. ....................................................................................................... 37

1. Claims of harm are entirely unfounded ......................................... 37

2. Qatar Airways’ service growth is in line with regional trends. ........ 41

3. Qatar Airways does not compete against US carriers. .................. 43

4. Far from causing competitive harm, Qatar Airways has created important new service options in under-served markets. .............. 46

5. The Big Three are pursuing a competitive strategy that focuses on mature (and capacity constrained) markets. ............................ 48

6. Qatar Airways Does Not Threaten US Employment. ..................... 52

7. The Agreement has created significant benefits for US business and consumers. ............................................................. 53

V. THE US GOVERNMENT SHOULD NOT ROLL BACK THE AGREEMENT....... 57

VI. CONCLUSION .................................................................................................... 60

APPENDICES

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I. INTRODUCTION AND EXECUTIVE SUMMARY

A coalition of the largest US carriers (the “Partnership for Open & Fair Skies,”

comprised of Delta, American and United, and their labor unions) (the “Big Three”) has

issued a White Paper that urges the US Government to roll back its Open Skies

agreements with Qatar and the United Arab Emirates, claiming that Qatar Airways and

other Gulf carriers are subsidized, and therefore should not be permitted to fully

exercise the traffic rights created under those agreements, which were drafted and

propounded by the United States, and which have been in force (and used) for several

years.

The Departments of Transportation, State and Commerce should reject

calls to “freeze” the US-Qatar Open Skies Agreement, and recognize them for

what they are – a transparent (and concerted) attempt by the Big Three to block

the introduction of air service options that offer an alternative to their own. While

the Big Three attempt to cloak their claims in pro-competitive rhetoric, the reality is that

they object to the emergence of new competitors that are harnessing changes in aircraft

technology to efficiently carry traffic to Qatar, the Gulf Region and the Indian

subcontinent, markets that they have largely ignored over the years. While it is

understandable why the Big Three might wish to have 100% of this traffic move over the

inefficient and congested hubs of their European alliance partners, US aviation policy

has been expressly designed to encourage innovation and the introduction of new

service options. As Qatar Airways will show herein, its services have provided important

one-stop travel options to cities and parts of the world that never have been served by

US carriers, such as Cochin and Amritsar. In fact, many of the points that Qatar Airways

serves behind its hub at Doha are cities that are not even served by the European

partners of the Big Three.

The overblown nature of the claims being propounded by the Big Three should

not be permitted to obscure the facts. Although the Big Three and their supporters have

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asserted that Qatar Airways is somehow a threat to 11 million US aviation jobs,1 the

reality is that Qatar Airways does not compete against any US carrier on any nonstop

route. Qatar Airways is a member of oneworld, and actually code shares with (and

feeds traffic to) American Airlines,2 which also is a member of oneworld and a vocal

member of the Big Three. American claims to be under grave threat from Qatar Airways

and others, even though it does not serve a single point in the GCC region or India.

Compounding the irony of this is the fact that British Airways, American’s primary

European alliance partner, has deliberately chosen to distance itself from this campaign,

expressing concerns about initiatives that would serve to limit consumer choice.3 The

US Government should reject these false and disingenuous claims, and find that, on the

contrary, Qatar Airways contributes greatly to both direct and indirect US employment.4

It is against this backdrop that the claims of the White Paper should be

evaluated. The Big Three assert that the strong growth of Qatar Airways gives rise to

concerns about “overcapacity in the world market,” and “falling yields,”5 without

providing any substantiation of such concerns. Indeed, the Big Three have just

completed one of their best financial years on record, and serve markets that are

characterized by high load factors and yields. The truth underlying the claims of “excess

capacity” made by the Big Three in the White Paper is that the service alternatives

offered by Qatar Airways might loosen their ability to hold the line on competition, and

prices. Indeed, a statement by the CEO of Air France at the most recent IATA AGM

makes this clear:

It’s normal that capacity is deployed in an area that is profitable. Our joint venture with Delta Air Lines has a very

1 The Big Three include this claim on their website, without reference to a source. See http://www.openandfairskies.com/subsidies/.

2 American also code shares with and is fed traffic by Etihad Airways, another carrier under attack in this proceeding.

3 See, Comments of International Airlines Group, at 2.

4 To add further perspective, Qatar Airways notes that the Big Three collectively operate a fleet in excess of 2500 aircraft, compared to its own fleet of 158 aircraft (as at June 1, 2015). Given that Qatar Airway’s home base is located 8000 miles from the United States, in a city that is not served by any US carrier, one can only wonder how Qatar Airways is of any competitive concern to any US carrier.

5 See White Paper, at 44-45.

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strong position. We have about 25% of the market with 900 flights a week across the Atlantic, but we are very wise as regards to capacity. We would like everybody to be as wise.6

The comment above exposes two critical truths: (1) that the Big Three have deliberately

chosen to focus their competitive energies on the transatlantic routes because they

enjoy market power; and (2) they look askance at any player, large or small, that

threatens this position.

The Big Three have mischaracterized their claims of subsidy in the same manner

that they mischaracterize the “threat” posed by Qatar Airways. Setting aside the fact

that the US-Qatar Open Skies Agreement (“Agreement”) does not define the term

“subsidy,” the claims include items of support that US carriers have themselves

received for decades, and items that never have been viewed as a form of subsidy.

Indeed, as several parties (including US parties) have acknowledged in these dockets,

the Big Three have themselves been long-time beneficiaries of subsidies and favorable

US policies and support.

The Big Three claim that they have been harmed by Qatar Airways, yet

have not used the clear remedies available to them under the Agreement. Should

a Party believe that a fare being offered is “artificially low due to direct or indirect

governmental subsidy or support,”7 then that Party can object to the fare.8 The Big

Three have not raised specific concerns about ticket prices offered by Qatar Airways

(which is where the impact of subsidy would be felt) and this is in itself a clear indication

that Qatar Airways’ fares are not the issue here. Rather, they are instead urging the US

to abrogate its bilateral obligations by imposing a unilateral limit on Qatar Airways’

capacity. This step would be entirely unwarranted and would send a chilling message to

the rest of the world about how the United States does business.

6 “Air France-KLM Cautions for Overcapacity on Transatlantic,” Aviation Daily, June 16, 2015, at 4 (emphasis added).

7 Agreement, Article 12.1 (c).

8 Agreement, Article 12.3.

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Ignoring the fact that the US-Qatar services offered by Qatar Airways are entirely

permissible under the express terms of the Agreement, the Big Three try to argue that

investments made by the State of Qatar in the airline are somehow improper based on

the application of WTO trade principles, and US domestic trade laws that apply solely to

trade in goods. They do so even though the US Government for many years has

expressly opposed the inclusion of air transport services in the GATS, which is the

global trade regime that applies to trade in services. Qatar Airways rejects all efforts to

apply legal regimes that are completely inapplicable to its operations. It would be

especially egregious to apply “global trade rules” here, given that the Big Three derive

enormous financial benefits (such as enjoying a protected home market) as a result of

their exclusion from those rules.9

Setting aside the impropriety of applying trade rules that are inapplicable to

aviation, Qatar Airways must note that the “findings” made in the Capital Trade

Report are replete with factual and methodological errors, if not outright

deceptions. The claims of subsidy being advanced by the Big Three are predicated on

“findings” made by the Capital Trade Group that Qatar Airways was not “creditworthy”

between 2004 and 2010.10 Those findings were based, in part, on highly selective

comparisons across inconsistent years. For example, even though the findings made

covered 2004-2010, comparisons of Qatar Airways’ ROE to other carriers were confined

to the 2004-2007 time period,11 and were based on a comparison with only nine

carefully selected carriers12 (for example, one of these - TAM - reported a 289% ROE

for 2004, and Asiana reported 36%, which clearly skewed figures upward). The Cherry-

picked Nine had an average ROE of 9.2% for 2004-2007,13 but more globally

9 See Comments of Federal Express Corporation, Docket No. OST-2015-0082 at 8-9 (May 29, 2015).

10 Capital Trade Report, at 60.

11 Capital Trade removed 2008 from their ROE calculations, citing a financial crisis year, but of course did not take the situation into account when reviewing the finances of Qatar Airways.

12 See Appendix 1. Not surprisingly, the sample group did not include any of the Big Three carriers (two of which were bankrupt in 2005) or their European partners.

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representative IATA industry statistics placed the industry figure for the same time

period at just 4.17%.

While Capital Trade’s figures are plainly not representative of the industry, we

also note that when reviewing Qatar Airways’ performance, Capital Trade chose to

withhold figures that contradicted their desired findings. The financial data provided by

Capital Trade indicated that Qatar Airways had a 102.8% return on equity in 2005.14 If

comparative figures had been acknowledged and applied (i.e., providing an average

figure for Qatar Airways’ ROE for 2004-2007 to compare against that of the nine carriers

given, instead of merely saying that ROE was negative for most years), the report would

have concluded that Qatar Airways had an average annual ROE of about 25.7% for the

2004-2007 time frame, a figure which is far higher than that of the baseline group.15 Of

course, Capital Trade did not cite that figure, or provide any specific comparative ROE

figure for Qatar Airways for the 2004-2007 time period other than to note that the ROE

was not negative in 2005.16 The Capital Trade analysis betrays manipulation and

misrepresentation of data that warrants its complete rejection.

Unfortunately, the problems noted above are not isolated.

The methodological problems of the report are compounded by factual

errors that are so basic that the integrity of the entire analysis must be drawn into

question. For example, the Capital Trade Report at one point suggests that a “rational

investor” would not have made the decision to launch Qatar Airways, stating as follows:

In the first decade of the 21st century, private investors considering an investment into a start-up Middle Eastern

13 Capital Trade Report, Exhibit 3. In a footnote to a Capital Trade Exhibit, Qatar Airways found that many computations made excluded 2008 due the financial crisis of that year, but of course the events of that year were in no way factored into the assessments made of Qatar Airways.

14 Capital Trade Report, Exhibit 12.

15 See Appendix 2.

16 Capital Trade Report, at 49. In a similar vein, the Big Three fail to mention anywhere in their narrative that Qatar Airways had positive net income in three of the five most recent financial years.

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long haul carrier would have taken into account the fact that Qatar Airways was pursuing a niche business model (a Middle East-based international carrier focused on long haul routes using wide body aircraft) already being pursued by two other major state-backed entities – Emirates and Etihad. Emirates is based less than 400 kilometers from Qatari’s home airport while Etihad’s home base in less than 320 kilometers away.17

Qatar Airways was launched in 1994, not in the 2000’s, and Qatar Airways was

launched nine years prior to Etihad, not after Etihad. The Company initially focused on

regional routes, and not on “long haul routes using wide body aircraft.” Errors such as

these are fundamental and underscore the lengths to which the Big Three strained to

reach their conclusions. The findings of the White Paper and Capital Trade Report are

without support and must be rejected in their entirety.

Just as the claims of subsidy have fallen flat, so too has the proof of any

harm causally related to such subsidy. This is not surprising, given that Qatar

Airways does not compete with any member of the Big Three in any nonstop market.

Indeed, up until very recently, Delta itself has said that “they [the Gulf carriers] are

halfway around the world from us and we don’t really participate in a lot of flows that

they have the primary gateway for.”18 Although Delta changed its story for the White

Paper and for the press, it repeated much the same thing in an earnings call held just a

few days ago.

The only specific harm the Big Three attribute to Qatar Airways is a drop in the

overall US carrier share of the US-India/Indian Subcontinent/Southeast Asia market

over a multi-year period.19 Setting aside the fact that US carriers have been absent

from these markets for decades, these claims are unfounded as well. As Qatar Airways


18 Delta Airlines, Investor’s Day 2013, transcript found at http://ir.delta.com/files/doc_presentations/2013/DAL%20Investor%20Day%20Transcript%2020131211.pdf (Remarks of Glenn Hauenstein, at 39)(emphasis added).

19 White Paper, at 46. Qatar Airways does not currently offer fifth freedom passenger service to the United States.

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will demonstrate, while the Big Three’s market share may have declined, the number of

passengers they carry has increased in absolute terms.

Many of the market developments lamented by the Big Three are not the

product of “unfair competition” (or anything remotely related to subsidy), but are

instead the byproduct of important advances in aircraft technology and

significant demographic changes. With ultra-long range B777 and B787 aircraft,

Qatar Airways can offer convenient one-stop services from points in the United States

to secondary points in the Gulf Region (GCC), the Indian Subcontinent (ISC) and

Southeast Asia that neither the US carriers nor their European partners serve at all, or

only serve via longer, less efficient connections and routings. Qatar Airways’ catchment

area is a region that is home to sixty percent of the world’s population,20 and which has

a burgeoning middle class. The region is woefully short on road and rail transportation,

and is almost entirely reliant upon air transport. In fact, far from injuring the public

interest, Qatar Airways benefits the public interest by offering convenient one-stop

service to the United States from cities such as Amritsar, Ahmedabad, Dhaka, Lahore

and Kathmandu. As we show herein, by shaving hours off long and tedious journeys,

Qatar Airways has helped to foster tourism, and has brought families and businesses

closer together. While US carriers profess a newfound interest in these markets, they

have heretofore chosen to focus almost all of their competitive energies on the mature

European, Latin American and Asian markets.

Especially disingenuous is the claim of the Big Three that it is somehow “unfair”

for Qatar Airways to capitalize on its geographic advantages and extensive regional

network to support its US-Qatar services. US carriers have long benefited directly from

many of the practices that they decry here. For example, having for years touted the

“pro-competitive benefits” of their partners’ carriage of Sixth Freedom traffic and their

own carriage of Fifth Freedom traffic, they now declare these rights – which are

fundamental to open skies – to be unfair when exercised by Gulf carriers.

20 See http://www.geographynotes.com/asia/population-in-asia-growth-distribution-structure-and-other-details/368.

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The US Government must reject their transparent efforts to force US-

GCC/ISC/Southeast Asia traffic to flow over the hubs of their European partners,

routings that are far less convenient or attractive to consumers than those offered by

Qatar Airways. Qatar Airways and other Gulf carriers serve routes that US carriers in

the main do not serve, and provide valuable competitive alternatives in the few cases in

which there is route overlap.

The US Government should reject the specious claims made in the White

Paper, and recognize that its Open Skies agreements are working well, and

generating broad-based consumer, commercial and public benefits. Indeed, the

Agreement, which enabled Qatar Airways to provide scheduled air links between two

important strategic, military and commercial partners, has been a particular success.

Qatar Airways’ services to the United States have enabled American universities to

expand their campuses in Doha, have facilitated travel between the two countries by

governmental and commercial organizations, and have greatly expanded cooperation

between Americans and Qataris.

Although the Big Three have been relentless in their campaign to block the

future growth of Qatar Airways, the US Government should firmly resist demands

to reopen the Agreement and, instead, close this inquiry. This would be

appropriate because services offered by Qatar Airways are lawful, consistent with

existing bilateral arrangements and are well-received by the traveling public.

Although Qatar Airways has concerns about the events that led to this review,21

Qatar Airways is pleased to share its views, and is confident that the facts will prevail.

The Departments of Transportation, State and Commerce must reject the groundless

claims that Qatar Airways is competing unfairly, and recognize the simple truth, which is

that the Big Three are unhappy having to face competition from carriers such as Qatar 21 As is well known, the Big Three had circulated the White Paper and supporting documents amongst the press, Congress and Executive Branch for several months, but refused to provide Qatar Airways (or the other Gulf carriers) with these materials. While Qatar Airways has attempted to refute the main claims advanced in the White Paper and elsewhere, it should be noted that it has not received any response to the Freedom of Information Act requests filed with the above-captioned agencies, and thus cannot be sure it has seen all relevant claims being made. Accordingly, Qatar Airways emphasizes that its omission of any point from this document is by no means a concession as to its validity.

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Airways, which offers convenient and premium service, and which has invested several

years developing its own route network. The US Government should also be mindful

that other US aviation trading partners have, over the years, lamented the growth and

power of US carriers, and have sought (and sometimes obtained) limits on their growth.

By wavering from its policy supporting Open Skies, the US would strengthen the hands

of governments which oppose open trade in aviation, and jeopardize the broader public

interest.

II. ABOUT QATAR AIRWAYS

History, fleet and network. Qatar Airways, the national carrier of the State of

Qatar, began operations in 1994. When launched, the airline was a small regional

carrier serving a handful of routes with just 4 aircraft. The airline was re-launched in

1997. The Company, which has one of the industry’s youngest fleets, has been

instrumental in the development of Doha as an important passenger and cargo hub, and

is a catalyst for the diversification and expansion of Qatar’s economy. Doha is a

regional home to various US universities, and has emerged as a major developing

center of culture and tourism. Furthermore, Qatar serves as an important base for US

military operations.

Qatar Airways operates 158 aircraft,22 113 of which are wide-bodies, and 45 of

which are narrow-bodies, serving markets on all continents.23 The Company has 6724

Boeing aircraft in its fleet, with an estimated value of $19 billion.25 The average age of

Qatar Airways’ Boeing fleet (both passenger and cargo) is 3.1 years.26 The Company

22 As of June 1, 2015.

23 Despite claims of the “threat” created by Qatar Airways, it is dwarfed by the Big Three. For a comparison of the Big Three U.S. carriers versus Qatar Airways in key areas such as fleet size, operating revenue and destinations, see Appendix 3.

24 As of June 1, 2015.

25 These Boeing aircraft have engines manufactured by General Electric. Whenever possible, the company selects GE engines for its Airbus aircraft.

26 As of June 1, 2015.

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has a further 148 Boeing aircraft on order (including firm orders, options and purchase

right aircraft) with an estimated value of $50 billion27 in today’s prices.

From its hub at Doha, Qatar Airways serves 151 destinations28 spanning Europe,

the Middle East, Africa, South Asia, Asia Pacific, North America and South America.

The airline serves numerous markets that are either underserved or not served at

all by the big U.S. carriers, including many hubs and secondary cities in:

• The Indian subcontinent (India, Pakistan, Bangladesh, Sri Lanka) • The Middle East (Iran, Iraq, Jordan amongst others) • The Gulf region (all GCC countries) • East Africa (Ethiopia, Eritrea, Mozambique, Tanzania) • Southeast Asia (Cambodia, Indonesia, Thailand)

Service to the US, and partnership strategy. Qatar Airways initiated

passenger service to the United States in June 2007, offering flights initially from Doha

to Newark via Geneva and in July the same year, following the delivery of its first pair of

B777-300ER aircraft, nonstop service to Washington, DC, was added. In 2008, with an

enlarged B777 fleet, Qatar Airways launched its nonstop service to JFK, and ended its

one-stop Newark service. Following the arrival of its ultra-long range B777-200LR

aircraft in 2009, nonstop service to Houston was launched. Subsequently, nonstop

flights were added to Chicago in 2013, and Miami, Philadelphia and Dallas in 2014.

The Company recently announced the introduction of new nonstop passenger services

to Atlanta, Boston and Los Angeles in 2016. The Company also operates freighter

service to Atlanta, Chicago and Los Angeles.

Qatar Airways has always sought to partner with US carriers. When Qatar

Airways first initiated service to the United States, it established a codesharing

arrangement with United Airlines, and later with US Airways as well. As a result of

pressure from fellow Star Alliance partners, United terminated the codeshare agreement

in 2012.

27 Estimated value based on 2014 list prices.

28 Operated or announced as of June 1, 2015.

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Qatar Airways in 2013 entered into a wide-ranging two-way codesharing

arrangement with American Airlines. This arrangement covers behind-US and behind-

Doha gateway routings as well as US-Qatar nonstop and intermediate-hub routings.

The Company has also implemented a one-way codeshare arrangement with JetBlue,

pursuant to which JetBlue transports Qatar Airways passengers on certain domestic

routes beyond the Company’s US gateways.

Alliances. Qatar Airways is a member of the oneworld alliance, and has

extensive codesharing relationships with other oneworld members. As we will explain in

greater detail below, American Airlines, one of the Big Three, is in fact Qatar Airways’

primary US codeshare partner and a fellow member of the alliance.

Emphasis on customer service. In a few short years, Qatar Airways has

emerged as a carrier renowned for its customer service. Qatar Airways is one of only

seven airlines worldwide currently ranked Five Star for service excellence by Skytrax,

the independent global aviation industry monitoring agency. Moreover, at the latest

Skytrax award ceremony held in June, 2015, Qatar Airways was confirmed as the

Airline of the Year for the third time in five years, Best Airline in the Middle East for the

ninth year and its premium product was acknowledged with the award for world’s Best

Business Class Airline Seat. In 2014, Qatar Airways also won awards for the Best

Business Class in the World for the second consecutive year and World’s Best

Business Class Airline Lounge for the second year consecutively.

Differences from other Gulf carriers. The Big Three make repeated references

to the “Gulf Carriers,” as if all three companies were one and the same. While Qatar

Airways, Emirates and Etihad come from the same region, it is essential to bear in mind

that the carriers are of different sizes and maturity, and have very different histories and

competitive strategies. The carriers compete vigorously with each other for regional and

international traffic.29

29 Emirates is the oldest and largest of the Gulf carriers. Emirates has been in operation since 1985, and operates a fleet of 234 aircraft from its hub in Dubai. While Emirates is not a member of any of the global alliances, it maintains a codeshare arrangement with JetBlue. Unlike Qatar Airways, Emirates currently operates passenger fifth freedom service to the United States, serving the Milan-New York market.

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III. APPLICABLE LEGAL STANDARDS

A. Qatar Airways’ Services Are Entirely Consistent with the Agreement

Although the Agreement forms the legal basis for Qatar Airways’ service to the

United States, the White Paper addresses the Agreement only in passing. The template

for this Agreement, which was drafted by the United States, has been offered to (and

accepted by) more than 100 US trading partners. The version of the Agreement in

place between the US and Qatar was expressly designed to give US carriers the

freedom to fly from the United States to the foreign country (and beyond) over any

routing, and to operate seventh freedom all-cargo services from that country. Given

longstanding disputes involving US carrier services and capacity offerings,30 the

Agreement governing “fair competition” (Article 11) enshrines the right of the airlines of

each Party to determine the frequency and capacity they offer “based upon commercial

considerations in the marketplace.”

In essence, the Big Three are complaining that Qatar Airways offers “excessive”

capacity to the United States. Setting aside the fallacy of this statement (Qatar Airways

currently offers a single daily service from Doha to each of its US gateways),31 the

Agreement does not authorize parties to reject or block services proposed or operated

by carriers of the other Party.32 Indeed (and contrary to the demands of the Big

Three),33 the Agreement very clearly says that the Parties may not unilaterally limit the

Etihad is the youngest of the three Gulf carriers. Unlike Qatar Airways, Etihad is not a member of any of the three global alliances, but maintains a codesharing arrangement with American Airlines. Etihad has opted to expand its commercial presence through a series of equity investments in (and codeshare arrangements with) several other air carriers including Alitalia, Jet Airways, Air Berlin, Virgin Australia and Air Serbia. 30 Indeed, the US had disputes with both France and Germany in the 1990’s due to concerns about “excessive” US carrier capacity being offered under liberal air service agreements. At Air France’s behest, the Government of France in 1992 renounced the US-France Air Service Agreement because US carriers were gaining market share on Air France, and Germany in 1992-1993 imposed temporary limits on US carrier capacity in the US-Germany market.

31 Qatar Airways has enjoyed strong load factors. See Appendix 4.

32 Agreement, Art. 11(2).

33 The Big Three effectively have demanded that the US Government place a freeze on the Gulf carriers’ U.S. service and capacity, contrary to Article 11(2) of the Agreement. See Letter of American Airlines, Delta and United to Secretaries Kerry, Foxx, and Pritzker, Docket OST-2015-0082 (Apr. 17, 2015).

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volume of traffic, frequency or regularity of service, or aircraft type operated by airlines

of the other Party.34 The relevant language follows:

Each Party shall allow each designated airline to determine the frequency and capacity of the international air transportation it offers based upon commercial considerations in the marketplace. Consistent with this right, neither Party shall unilaterally limit the volume of traffic, frequency or regularity of service, or the aircraft type or types operated by the designated airlines of the other Party, except as may be required for customs, technical, operational, or environmental reasons under uniform conditions consistent with Article 15 of the Convention.

The Big Three have attempted to sidestep the clear language of the Agreement35 by

instead referring to WTO and more general trade principles that are not, by their terms,

applicable to air transport services, and asserting that Qatar Airways is only able to offer

its level of frequency because of its (alleged) receipt of subsidy. These contentions

should be rejected.

The Agreement does not define the term “subsidy,” let alone prohibit the receipt

of subsidy. Rather than giving foreign trading partners the means of objecting to US

carrier expansion, the US instead chose to create a more narrowly tailored remedy to

object to competitive harm that may arise if prices being offered in the market are

artificially low due to “direct or indirect governmental subsidy or support.”

34 Agreement, Art. 11(2).

35 In a March 15, 2015, questionnaire issued to the Big Three, the US Government asked the parties to identify “the specific provisions of our bilateral aviation agreements upon which the UAE and Qatari government actions infringe.” Questionnaire, Question 25. Not surprisingly, the Big Three in their response chose to skirt the issue: “The United States does not need to allege a violation of a specific provision of the bilateral agreement in order to seek redress against the subsidies that Qatar and the UAE have provided to their carriers…” Response at 76. This deliberate obfuscation should be read for what it is – a concession that the services complained of are entirely consistent with the applicable agreements.

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Article 12(1) of the Agreement provides:

Each Party shall allow prices for air transportation to be established by each designated airline based upon commercial considerations in the marketplace. Intervention by the Parties shall be limited to:

a. prevention of unreasonably discriminatory prices or practices;

b. protection of consumers from prices that are unreasonably high or restrictive due to the abuse of a dominant position; and

c. protection of airlines from prices that are artificially low due to direct or indirect governmental subsidy or support.

If a Party believes that prices in the market are “inconsistent with the considerations set

forth in paragraph (1) of this Article,” then the remedy for that unfair pricing is for the

complaining Party to seek consultations about such prices.36

To the best of Qatar Airways’ knowledge, the Big Three never have objected to a

fare offered by Qatar Airways under Article 12.37 In fact, aside from an unsupported Big

Three assertion in the White Paper that “basic economics suggest that prices will be

driven down”38 sometime in the future,39 the White Paper does not make any specific

claim that the government subsidies that Qatar Airways has allegedly received have led

to artificially low prices in any relevant market. Indeed, the White Paper does not

contain any specific claim that fares offered by Qatar Airways are unreasonably low at

all.

If US Government negotiators had intended to include in its Open Skies template

a mechanism to object to “excess” capacity or other factors believed to be affected by

the receipt of government subsidies, then such language would have been included in 36 Agreement, Art. 11(2) and Art. 12(1)

37 Agreement, Art. 12(1)(c).

38 White Paper, at 46.

39 Setting aside the fact that unspecified fears of future harm are not actionable, the assertions made here are especially speculative and weak.

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the Agreement. By referring to subsidies only with relation to price, the US clearly

intended to prevent foreign partners from unilaterally blocking the capacity offered by

US carriers. This point is underscored by Article 11.2 of the Agreement, which makes

this point expressly.

Despite this clear language, and despite the huge outcry that would be heard if

the tables were turned, the Big Three have urged the US Government to impose a

unilateral freeze on the introduction of new capacity by Gulf carriers while their

complaints are addressed.40 As FedEx and others have noted, such an action would

violate Article 11.2,41 and send a clear message to the rest of the world that the United

States supports Open Skies only when their counterparts fail to fully exercise those

rights.42

The Big Three have asserted that they might not have supported the US entering

into Open Skies agreements with the Gulf States had they understood the growth

trajectory of the state-owned carriers in the region.43 Those claims ring hollow.

Although Qatar Airways was young at the time the US-Qatar Agreement was negotiated

and signed, the US Government did not express concerns about Qatar Airways’ partial

State ownership,44 much less object to concluding an Agreement with a very small

nation.

What we see here is buyer’s remorse masquerading as a legal argument. The

fact that Qatar Airways has grown faster than the Big Three would like is not reason for

the US to abrogate the Agreement by imposing an illegal unilateral capacity freeze on

the services of Qatar Airways. Similarly, the fact that Qatar is a small country that it is

40 See Letter of American Airlines, Delta and United to Secretaries Kerry, Foxx, and Pritzker, Docket OST-2015-0082 (Apr. 17, 2015).

41 See Comments of Federal Express Corporation.

42 This point is especially clear with regard to Fifth Freedom services. Although US carriers have a long history of making (very) full use of their Fifth Freedom rights, and for fighting very aggressively to defend those rights, they are objecting very vigorously to Emirates’ operation of a single Fifth Freedom route (Milan-New York).


44 The US has concluded Open Skies agreements with many nations which own their flag carriers, such as Turkey and India.

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geographically well-positioned to be a transfer point for behind-gateway traffic should

not be a cause for concern. After all, the United States deliberately selected the

Netherlands and Singapore, countries which are home to powerful Sixth Freedom

carriers, as its pioneering European and Asian open skies partners in part because

arrangements with those countries might prod more recalcitrant trading partners to

come to the table.

Complaints about Qatar Airways offering “excessive” Sixth Freedom capacity45

should also be rejected on the grounds that they are at odds with the letter of the

Agreement, with US Government policy and with US carrier practice. Speaking at an

aviation function, Douglas Steenland, the then-CEO of Northwest Airlines (which has

since been merged into Delta) boasted that Northwest/KLM were offering high levels of

frequency in the Detroit-Amsterdam market, despite the (very) small size of the local

O&D market:

By linking Northwest’s domestic network to KLM’s Amsterdam beyond network and vice versa, each of Northwest and KLM has been able to introduce expanded transatlantic capacity. For example, look at Northwest’s largest U.S. hub, Detroit. The Detroit–Amsterdam city pair has approximately 85 passengers daily each way. Yet this summer, NW/KLM are operating 5 daily nonstop wide body flights. 82% of the total traffic on the NW/KLM Detroit-Amsterdam route connects behind Amsterdam. Even though Northwest’s U.S. hubs collectively account for slightly more than 4% of U.S.-Europe O&D bookings and KLM’s Amsterdam hub is smaller than Frankfurt, Paris, and London-Heathrow, the NW/KLM alliance has enabled Northwest and KLM to be an effective transatlantic competitive force, and our joint venture generates approximately $2 billion in annual revenues for the two companies.”46

The Big Three may be displeased to face competitors that have taken a page

from their own playbook by offering a comprehensive range of services between the

United States and GCC (and from points behind the GCC), but the US Government

45 See White Paper at 4-5.

46 Remarks of Douglas Steenland, International Aviation Club, at 3 (Jun. 5, 2005) (emphasis added).

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should not view the expression of this displeasure as any indication that the Agreement

has been violated. On the contrary (and as Northwest/Delta itself has observed), “[t]o

gauge the likely competitive impact of a proposal, competition authorities typically rely

on consumer views as opposed to views of competitors. Indeed, complaints by

competitors are routinely considered by such authorities to be strong evidence of the

pro-competitive nature of a transaction.”47 Passengers traveling to and from India have

weighed in strongly in support of Qatar Airways’ services,48 as have a plethora of other

consumer groups. These plaudits (and the support of US carriers other than the Big

Three) are clear evidence that the Agreement is working and producing the very

benefits that are supported by US aviation trade policy.49

B. WTO/GATT Rules Are Inapplicable to Air Transport Services

Having failed to substantiate any violation of the Agreement, the Big Three now

urge the US Government to apply the principles of an alternative (but inapplicable) legal

regime to address their claims. Despite the fact that the GATT Agreement on Subsidies

and Countervailing Measures (SCM) applies only to goods, the Big Three nevertheless

argue that that the government should apply the SCM and general WTO principles to

resolve their complaints. These efforts are both unlawful and entirely misplaced.

Air services between the United States and Qatar are governed solely by the

Agreement. As discussed above, Article 12 of the Agreement is quite clear that if a

Party believes that a price being offered in the market is “artificially low” due to direct or

indirect subsidy, then that Party can object to the price, and seek consultations. Given

47 Id. at 4.

48 See Appendix 5.

49 The Department of Transportation has long rejected the view that benefits under an open skies agreement must be precisely matched: “if we were to embark on negotiation initiatives only where we could anticipate precisely equal economic benefits we would have been deterred from some of the most successful agreements we have achieved in the last decade. See Defining Open Skies, DOT Order 92-8-13, at 2.

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this very clear language, efforts to refer to extraneous agreements are completely

improper. 50

Even if WTO rules were applicable here, the proper agreement to apply would be

the General Agreement on Trade in Services (GATS). But the GATS expressly

excludes air traffic rights from its coverage, and does not define, much less prohibit,

subsidy. Moreover, it bears emphasis that the US Government has affirmatively

opposed the inclusion of air transport services in the GATS framework.51 While the Big

Three and their unions argue here that the WTO “principles” should be applied to

achieve their desired result, it bears noting that they would likely object to the

application of these principles in other areas.52 As discussed further herein, the US

Government should be wary of these blatant efforts to cherry pick amongst facts,

statistics and legal regimes.53

Even if the WTO rules were applicable (and they are not), and even if the Big

Three could prove the existence of subsidy (which they cannot), the inquiry would not

end there. While the White Paper alleges that Gulf carriers have received subsidies, it

fails to acknowledge that in order for a subsidy to be prohibited or actionable under the

applicable rules,54 the complaining party must show more than the bare fact that a

50 In addition to being improper, the efforts being made to apply WTO principles here are also pointless. Even if these rules were applied and even if a subsidy (and harm related to subsidy) were to be found, the remedy would not be a denial of market access. Instead, the remedy would be the imposition of a duty to “countervail” the subsidized price. A variation of this remedy (the ability to object to a fare in the US-Qatar market) already is provided under the Open Skies Agreement. See also Comments of Federal Express, at 10.

51 In multilateral trade talks, the US Government has stood steadfastly behind its decision to decision to oppose the inclusion of air transport services in the GATS. See WTO Council for Trade in Services, Report Of The First Session Of The Review Mandated Under Paragraph 5 Of The Annex On Air Transport Services Held On 12 September 2006, at para. 27. “[The U.S.] delegation continued to believe that the almost total exclusion of air transport services from the scope of coverage under the GATS had been farsighted and had contributed to the ongoing liberalization of air transport agreements through air services-specific agreements and the facilitating activities of ICAO and numerous regional fora. This was equally true for traffic rights and ancillary air services in support of traffic rights.”

52 Indeed, the cabotage rules and restrictions on airline ownership and control are squarely at odds with GATS principles.

53 See section D, infra.

54 See Subsidies and Countervailing Measures Agreement, 1869 U.N.T.S. 14 (1994) (hereinafter, “SCM Agreement”), and US countervailing duties statute, 19 U.S.C. § 1671.

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subsidy exists. To be actionable, the parties must show injury,55 and a causal link

between the subsidized imports and the alleged injury.56 As will be shown below, the

Big Three have failed to make any showing on any of the prongs of the test.

IV. SUBSIDY CLAIMS

A. The Big Three Propound an Overly Broad Definition of Subsidy

The Big Three in the White Paper allege that Qatar Airways has received

improper “subsidies” from its government. Included in the allegations are not only items

that never have been viewed as subsidies, but also benefits that the Big Three have

themselves received. For example, they cite as a “benefit” differences between the

Qatari and US aviation regulatory regimes, as well as certain antitrust law exemptions

that apply to the air transport sector.57 Needless to say, the arguments being advanced

by the Big Three are highly disingenuous – they are propounding an overly broad

definition of “subsidy” for Qatar Airways, yet ignoring all subsidies that they themselves

have received.

If variations in national and local laws and practices can constitute a subsidy as

the Big Three suggest,58 it should be noted that the United States is amongst only a

handful of countries that allows insolvent companies to walk away from their debts and

continue in business. According to the consultancy Risk Advisory Group, US carriers

have received upwards of $30 billion in cost savings associated with their Chapter 11

restructurings,59 and respected publications such as the Economist also have

acknowledged the unique benefits that US carriers have enjoyed when they have been

permitted to walk away from their debts.60 Moreover, the Big Three have similarly

55 As defined by GATT 1994 Article VI and interpreted by the SCM Agreement.

56 SCM Agreement, § 11.2.

57 See White Paper at 39.

58 Id. at 36-39.

59 See Risk Advisory Group PLC, Financial & Other Governmental Benefits Provided to American Airlines, Delta Air Lines & United Airlines, at 5 (May 14, 2015), available in Docket OST-2015-0082 (hereinafter, “Risk Advisory Group Report”).

60 The Economist, Flights of Hypocrisy: The Airline Business Is Riddled with Protectionism. The Answer is Open Skies (Apr. 25, 2015).

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walked away from their defined-benefit pension obligations, leaving the US taxpayer to

foot the bill.61

It is particularly ironic that the White Paper cites the lack of applicability of certain

aspects of competition law to the air transport sector in Qatar as a disguised form of

subsidy,62 given that each member of the Big Three is a core member of an immunized

joint venture that has received antitrust immunity (ATI) from the US Department of

Transportation.63 ATI enables these carriers to jointly set fares with their direct

competitors, and to coordinate (and limit) capacity in key international markets. Whilst

Qatar Airways is a member of the oneworld alliance and may consider future

opportunities to enter into an ATI-immunized joint venture, it must take strong exception

to any assertion that operating under its national laws is somehow “unfair” when its

detractors have benefitted from ATI, and have been active participants in mergers that

have sharply increased the level of concentration in the US air transport market.64

The Big Three also assert that Qatar Airways is not subject to independent

regulatory oversight, and that this confers an unfair benefit upon the Company.65 These

assertions are false. As the Department is aware, only carriers from countries that are

placed in Category 1 under the FAA’s International Aviation Safety Assessment (IASA)

program may launch scheduled passenger service to the United States. The Qatar Civil

Aviation Authority (QCAA) underwent an exhaustive FAA audit of its aviation oversight

and enforcement capabilities prior to Qatar Airways launching its US services, and has

been subject to periodic re-evaluations since then. The FAA would not have approved

Qatar Airways to operate direct air service to the United States if it had found that

oversight of Qatar Airways by the QCAA was neither independent nor robust. Moreover,

61 Risk Advisory Group Report, at 7.


63 See DOT Order 2010-7-8 (Jul. 20, 2010) (Oneworld), DOT Order 2008-5-32 (May 22, 2008) (SkyTeam); DOT Order 2009-7-10 (Jul. 10, 2009) (Star).

64 Setting aside the irony of these claims, it also should be noted that they are not true. As a global carrier, Qatar Airways’ commercial activities fall under the jurisdiction of many national competition authorities.


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Qatar is not unique and many national aviation authorities, including the Civil Aviation

Administration of China, have legal ties to their national carriers.

Over the years, US carriers have enjoyed many structural and government-

financed benefits that have not been matched by other countries. These include:

• Exclusive access to government-financed traffic under the Fly America program.

• Exercising their ability to eliminate or freeze their defined-benefit pension plans.

• Subsidies through the Essential Air Services Program for providing service to specific small communities.

• State-granted fuel tax exemptions and rebates (indeed, Delta is currently complaining about the loss of a $23 million annual fuel tax break from the State of Georgia).66

• Free land to construct aircraft maintenance facilities.

While the list of benefits bestowed upon US carriers is far longer than this, the

fundamental point to be made here is that US carriers have themselves been very

significant beneficiaries of governmental largesse.67 Whilst Qatar Airways makes no

complaint about US carrier receipt of such benefits, it is essential to understand the

fundamental inconsistency of the position being advanced by the Big Three, which is to

have the US Government challenge as a “subsidy” policies that might benefit a carrier

from a Gulf State whilst having the US Government turn a blind eye to any and all

benefits enjoyed by US carriers.

As indicated above, the Big Three are seeking to have the US tear up its

agreements with its critical Gulf trading partners because Gulf carriers have emerged

and now (to some extent) compete with their European partners for Europe-Asia traffic

66 Indeed, Delta is currently complaining about a $23 million fuel tax break that it has received each year from the State of Georgia. New York Times, “Lawmakers May End Tax Break on Jet Fuel, to Delta's Dismay” (Mar. 1, 2015), available at http://www.nytimes.com/aponline/2015/02/28/business/ap-us-jet-fuel-taxes.html?_r=0.

67 The US cabotage rules, which reserve access to the US domestic market to US carriers, can be viewed as perhaps the biggest subsidy of all. Indeed, several commenters have noted the value of this benefit. See, e,g., Comments of Federal Express at 9, and Comments of Hawaiian Airlines at 4, Docket DOT-OST-2015-0082. Other carriers note that the Big Three hold “grandfathered” slots at constrained airports now worth billions of dollars. See Response of Emirates, June 30, 2015, at 149-151.

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flows. While US carriers are free to make this request, it is critical to note that the very

European carriers that the US Government would insulate from competition from Gulf

carriers are airlines that themselves have received massive subsidies in their lifetimes.

These subsidies have been taken the form of both direct state aid and the forgiveness

and governmental assumption of significant financial obligations when these carriers

were privatized.68

Figure 1: Subsidies Received by European Airlines

Year Airline Amount (US $ million)

1991 Sabena 1,800 1991 Air France 338 1992 Iberia 830 1992 Finnair 175 1993 Aer Lingus 240 1993 British Airways 690 1994 TAP 1,965 1994 Air France 3,300 1994 Olympic 2,245 1994 Lufthansa 710 1994 KLM 620 1996/1999 Iberia 613 1995 Sabena 267 1995 AOM 49 1995 Lufthansa 400 1997 Alitalia 1,708

Qatar Airways’ State ownership is not unique, and should not be viewed as

problematic. Indeed, many of the alliance partners of the Big Three currently are State-

owned, and have been reported to receive financial support from their governments.69

For example, Star Alliance members Air India and Turkish Airlines are each State-

68 Source: Doganis, R (2001), The Airline Business in the 21st Century, London Routledge & Raj S. Chari (2004), State Aids In The Airline Sector: A comparative analysis of Iberia and Aer Lingus, Studies in Public Policy 13, The Policy Institute at Trinity College Dublin.

69 Indeed, Delta just announced an investment in and expansion of its relationship with China Eastern, a carrier which has been heavily subsidized by its government. See, e.g., “CAAC doubles subsidies to Chinese domestic carriers in 2014, “ http://www.ch-aviation.com/portal/news/24427-caac-doubles-subsidies-to-chinese-domestic-carriers-in-2014

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owned, but US carriers are not rushing to have the US Government abrogate their Open

Skies agreements with those countries.

B. The Capital Trade Report Is Rife with Factual and Methodological Errors

The Big Three allege that Qatar Airways has received $16 billion in “subsidy”

since 2004, with the largest amounts being characterized as loans ($8.4 billion) and

loan guarantees ($6.8 billion) from its shareholder,70 and other amounts including items

such as route incentives and favorable airport tax schemes that are replicated

throughout the world. There are yet more claimed subsidies that are not quantified. The

Big Three have taken a “kitchen sink” strategy with regard to their claims – they toss

everything in, regardless of its truth (or lack thereof) or relevance.71

The Big Three have attempted to “prove” their claims of subsidy by

commissioning a study that applies WTO principles and the Department of Commerce

“subsidy valuation methodology” to Qatar Airways and the other Gulf carriers. As stated

above, the WTO/GATT agreement applies only to the trade of goods. Moreover, the

United States has affirmatively resisted the inclusion of air transport services in the

GATS, determining that US interests are better served by subjecting airline traffic rights

to rules that are specific to the sector. The US Government should reject the efforts of

the Big Three to cherry pick their desired legal regime.72

Scrounging for a “smoking gun” which does not exist, the Big Three reviewed

company materials that date back to 1995, when the carrier was in its infancy. Qatar

Airways questions the relevance of any materials that so dramatically predate its entry

into the US market, especially since the Company was privately held until 1999. It also

bears noting that the Company stepped onto the competitive stage at a time when


71 Given this approach, Qatar Airways notes that it categorically denies the claims made by the Big Three, even if it does not address in detail each and every claim that has been made.

72 While Qatar Airways opposes all efforts to apply extraneous legal agreements to services that are clearly subject to the US-Qatar Air service agreement, it will offer commentary on the numerous factual and methodological flaws contained in the in the Capital Trade Study. As will be shown below, there is a pattern to these errors – data and facts are consistently misstated or manipulated in order to achieve a desired result.

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alliances were already being formed, and the Big Three (and their constituent carriers)

were already mega-carriers with well-developed frequent flyer programs and route

networks. The shareholders of Qatar Airways knew and understood at the time that the

carrier needed to have a meaningful scope and scale in order to be relevant to

consumers, and to be commercially viable. It also is worth noting that the Big Three

came of age in a highly regulated (and protected) environment, and enjoyed massive

government supports of their own. 73

While the Big Three attempt to characterize these investments as “subsidies”

using their strained application of (inapplicable) trade law principles, the fact is that

there is nothing improper about a State owning an airline, or investing in that airline.

Moreover, and as the Big Three’s own exhibits show, the Company’s revenues, and

value have grown steadily over time (see Section IV.C., below).74

About $15.2 billion of Capital Trade’s subsidy findings are based on their

“determinations” that Qatar Airways was “uncreditworthy” between 2004 and 2010,

using “Department of Commerce subsidy valuation methodology.”75 Qatar Airways

rejects entirely the application of this methodology. Although the Capital Trade Group

concedes in passing that “air transport services are not subject to conventional

international trade law conventions,”76 they nevertheless go to enormous lengths to

force their very large square peg into a very small round hole, regardless of the vast

differences between manufacturers of goods and airlines, the latter which have a long

and unchallenged history of being owned by States.

Capital Trade bases its creditworthiness “findings” in part by looking at financial

metrics, and in part by comparing the financial returns of Qatar Airways against the

returns of other businesses located within Qatar, and against other airlines, with the

theory being that a private investor would not have made a decision to invest in a

73 US carriers received very significant government aid throughout their early years. See http://wikileaks.org/wiki/CRS-RL30050.

74 Capital Trade Report, Exh. 12



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business that produced returns lower than its peers. For example, Capital Trade noted

that for 2004-2007, Qatari businesses had an average return on equity of 12.6%, and

cited a “Negative Return on Equity” for Qatar Airways in support of its assertion that the

carrier was not “creditworthy.”77

In addition to being untrue (more about this below), the comparison of returns

between airline investments and investments in other sectors is entirely irrelevant to a

discussion of subsidies. As is well known, the airline business for many decades has

been at the bottom of almost all other industries in terms of Return on Invested Capital

(ROIC). In fact, a recent IATA study has reviewed the performance of the commercial

airline industry vis-à-vis other industries from 1965-2007, and placed the airline industry

dead last.78

The statistics above underscore the inappropriateness of applying a standard

that applies to producers of goods to providers of air transport services. By this

standard, no party (private or public) would invest in any airline.79 Of course, States

invest in airlines in order to meet the needs of their citizens and businesses, and also

take into account other development, strategic, and defense concerns (and benefits)

that defy precise quantification.

But even if comparisons to non-transport related business are inappropriate,

more troubling is the “cherry-picking” that was done to create an airline “control group”

against which to compare the financial performance of the Gulf carriers. Despite the

77 Id., at 50.

78 See International Air Transport Association, “Profitability and the Air Transport Value Chain,” June 2013, Chart 6, at 12 (showing airlines having the lowest ROIC of all industries surveyed between 1965-2007, available at https://www.iata.org/whatwedo/Documents/economics/profitability-and-the-air-transport-value%20chain.pdf.

79 Indeed, famed investor Warren Buffet has lamented the returns offered by airlines relative to other investments: “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money. But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You’ve got huge fixed costs, you’ve got strong labor unions and you’ve got commodity pricing. That is not a great recipe for success…” Forbes.com, May 13, 2013, available at http://www.forbes.com/sites/tedreed/2013/05/13/buffett-decries-airline-investing-even-though-at-worst-he-broke-even/.

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widespread availability of industry-wide financial matrices, the findings about Qatar

Airways’ relative “creditworthiness” were based on comparison with just nine carriers.

This group includes Asiana, Air China, China Eastern, China Southern, EVA, Jet

Airways, JetBlue, TAM and US Airways.80 While the small size of the group is itself

problematic, its composition is especially questionable. Whilst the select group includes

China’s three largest carriers, and two other Asian carriers, the Big Three and their

European JV partners are very conspicuously absent from the mix.81

Based on the carefully curated metrics of the control group, Capital Trade “found”

that “the average return on equity for similarly placed airlines was approximately 9.2%

between 2004-2007.”82 The ROE figure given for 2004 was itself a whopping 32.6%,

with TAM reporting a 289% return for that year.83 An industry-wide snapshot of that time

period tells an entirely different (and far more accurate) story. According to IATA’s

figures, industry-wide ROE for both 2004 and 2005 was 3%, for 2006 was 4.8% and

only reached 5.9% in 2007.84 The actual average ROE for the entire 2004-2007 time

period was 4.17%, which is less than half the quoted figure.

80 See Capital Trade Report, Exhibit 3.

81 By point of reference, United, Northwest and Delta all were in bankruptcy in 2005, which suggests that their inclusion in the ROE statistics might have altered the findings.


83 Capital Trade Report, Exhibit 3. (Appendix 1) (highlights added). Asiana showed ROE of 36%, and Jet Airways 30%.

84 International Air Transport Association, “Profitability and the Air Transport Value Chain,” June 2013, Appendix E, and IATA, 2014 Annual Review, at 15.

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Figure 2: Airline Industry ROE

Year IATA 2004 3.00% 2005 3.00% 2006 4.80% 2007 5.90% 2008 1.50% 2009 2.10% 2010 6.70% 2011 5.00% 2012 4.50% 2013 3.60%

It also is critical to note that US carriers also were just beginning to recover from a very

severe downturn during that time frame, as shown by figures provided in IATA’s Annual

Report for 2008.85

Figure 3: Regional Operating Profit Margins

While the figures above (a 289% 2004 ROE for TAM, and a 36% return for

Asiana) are plainly not representative of the industry, we also note that when reviewing

Qatar Airways’ performance, Capital Trade excluded figures that contradicted their

desired findings. The financial data provided in Capital Trade’s own exhibits indicated

that Qatar Airways had a 102.8% ROE for 2005.86 If the same methodology were

applied to Qatar Airways over the same 2004-2007 time frame (i.e., that figure averaged

over four years), the carrier would have had an average annual ROE of about 25.7%, a

figure that is far higher than that of the comparison group. Of course, Capital Trade did

85 IATA Annual Report, 2008, at 13.

86 Capital Trade Report, Exhibit 12 (Appendix 2) (highlights added).

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not cite that figure, or provide any specific comparative ROE figure for Qatar Airways for

2004-2007 other than to note that the ROE was not negative in 2005.87 The

determination that Qatar Airways was not creditworthy is based on bogus comparisons

and highly manipulated data, and should not be permitted to stand.

Unfortunately, these errors are not isolated. The methodological problems of the

report are compounded by factual errors that are so basic that the entire analysis must

be drawn into question. For example, the Capital Trade Report at one point suggests

that a “rational investor” would not have made the decision to launch Qatar Airways,

stating as follows:

In the first decade of the 21st century, private investors considering an investment into a start-up Middle Eastern long haul carrier would have taken into account the fact that Qatar Airways was pursuing a niche business model (a Middle East-based international carrier focused on long haul routes using wide body aircraft) already being pursued by two other major state-backed entities – Emirates and Etihad. Emirates is based less than 400 kilometers from Qatari’s (sic) home airport while Etihad’s home base is less than 320 kilometers away.88

Qatar Airways was launched in 1994, not in the “first decade of the 21st century,” and

was in fact launched nine years prior to Etihad, not after Etihad. Moreover, as the flag

carrier of the State of Qatar, Qatar Airways was not pursuing a “niche business.” The

Company initially focused on regional routes, and not “long haul routes using wide body

aircraft.” Errors such as these underscore the lengths to which the Big Three strained to

reach their conclusions, and why the “findings” of the White Paper and Capital Trade

Report should be rejected in their entirety.

This outcome-based approach by Capital Trade is displayed elsewhere in the

report. For the 2004-2013 time period, Capital Trade states that the mean ROE for the

87 Capital Trade Report, at 49. In a similar vein, the Big Three fail to mention anywhere in their narrative that Qatar Airways had positive net income in three of the five most recent financial years.


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control group was 10.3%,89 even though the industry-wide figures shown above get

nowhere near the double digits. Significantly, and disclosed only in a footnote was the

statement that data for 2008 “was excluded from ROE averages due to financial crisis

year.”90 Of course, that extraordinary year (which was actually Qatar Airways’ first full

year of operations to the United States) was not excluded or even accounted for in

Capital Trade’s discussions of Qatar Airways’ financials.

The picture painted in the narrative of the White Paper and in the Capital Trade

Report is inconsistent with the underlying financial data.91 According to Capital Trade’s

own analysis and exhibits, Qatar Airways had positive net income for three of the last

five financial years (2010, 2011, and 2013).92 Instead of acknowledging that reality,

Capital Trade dismisses the information, noting only that “financial ratios show some

improvement in the later years under consideration.”93 The US Government should give

no weight to this report, which is blatantly biased towards achieving a particular result

and riddled with factual and methodological errors.

C. Financial History of Qatar Airways

As mentioned above, Qatar Airways, founded in 1994 and re-launched in 1997,

is wholly owned by the State of Qatar. When the airline was first launched, it was

privately owned. The State took a 50% share of the Company in 1999 and the airline

became wholly owned by the State in 2013.

As noted earlier, Qatar Airways launched its first service to the United States in

mid-2007, with services to New York and Washington. These services were a critical

89 Capital Trade Report, Exhibit 3.

90 The time frame for “financial ratios” that appear on pages 49-50 of the Capital Trade report vary considerably, with some figures such as income and working capital covering 2009, and some spanning to 2008. Only the ROE figure ends at 2007, which is understandable, as inclusion of later years would have undercut the artificially high results.

91 See Capital Trade Report, Exhibit 12.

92 Qatar Airways also turned a profit in 2014, but those figures have not yet been officially released.

93 Capital Trade Report, at 50. It should be noted, however, that all the “findings” of subsidy made by Capital Trade end at 2010.

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part of the Company’s network development, and part of its long-term strategic plan. As

part of that plan, the Company took delivery of ultra-long range B777 aircraft.

Between 2009 and 2014, Qatar Airways undertook a planned expansion,

financing its growth through a mixture of shareholder equity and debt. During this time,

the size of Qatar Airways’ fleet doubled, from 68 aircraft to 136 aircraft. To maintain the

Company’s debt-to-equity ratios within a consistent range, Qatar Airways’ parent

increased its equity stake during this time. Just as the Company’s fleet and network

expanded during this time, so did the value of the Company. As of March 2008, the total

assets of the Company were $6.7 billion. By March of 2014, that figure had grown to

$13.3 billion. The growth in the Company’s revenues tracked the expansion of the fleet,

growing from $3.99 billion in 2009, to $8.4 billion in 2014.94 The Company has had

positive net income in five of the past eight years.95 Qatar Airways has relied on global

markets to finance its aircraft purchases. As the State of Qatar is not a signatory of the

Cape Town Convention, many commercial lenders require guarantees of some sort to

secure the financed assets. This would be the case regardless of whether Qatar

Airways was State-owned or not. Qatar Airways has never defaulted on any loan.

Despite the well-documented challenges facing the global aviation industry in the

early 2000’s, and despite the sensationalized claims set forth in the White Paper,96

Qatar Airways’ financial future has never been in doubt. Under the laws of Qatar (which,

unlike the United States, does not permit insolvency), and the Company’s bylaws, Qatar

Airways is required to monitor its capital ratios, and maintain continuous assurances

that shareholders are prepared to stand behind the financial obligations of the

corporation.97 When the Company was first formed, its declared share capital (excluding

shareholders’ advances) was just $6.8 million, with this amount increasing to $39.5

94 Capital Trade Report, at Exhibit 12.

95 2008, 2010-2011, 2013, 2015. See Capital Trade Report, Exhibit 12. Qatar Airways reported net income of $103 million last year. “Qatar Airways Reveals $103 Million Annual Profit, Wall Street Journal, June 15, 2015, available at http://www.wsj.com/articles/qatar-airways-reveals-103-million-annual-profit-1434384433.

96 Capital Trade Report at Exhibit 12.

97 Qatar Commercial Companies Law (Law No. 5 of 2002), Article 287.

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million in 2009. Given this financial structure, and the requirements of the law (which

has affirmation thresholds which fall well short of insolvency), the provision of these

assurances has been expected and entirely pro forma.

Given the applicable law and company financial structure, the reported events of

2009 are anything but sensational. Having taken delivery of several new aircraft, the

Company in 2009 hit the thresholds for providing such assurances. To that end, the

Company’s shareholders held the required Extra-Ordinary General Assembly, and

affirmed their ongoing commitment and their obligations to the Company as a matter of

course.

The Company was far from insolvency at this time. As of March 31, 2009, the

Company had total assets amounting to $8.8 billion (including bank balances and cash

of $1.1 billion), and liabilities of $6.3 billion. With an asset to liability ratio of 1.39, there

was never any doubt concerning the financial stability of the Company. The meetings

that were held were not the result of any crisis, but were required by operation of law in

order to comply with both national law and the Company’s bylaws. Following is a

snapshot of the Company’s financial performance over the past five years:

Figure 4: Qatar Airways Group

FY 2009 - 10 to FY 2013-14 (USD 000)

2009 - 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14

Revenue 3,913,455 5,380,875 6,824,532 7,630,539 8,414,312EBITDA for the year 782,214 861,412 573,433 924,346 786,365EBITDA Margin (EBITDA /Revenue) 20.2% 16.2% 8.5% 12.2% 9.4%

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D. Rebuttal of Specific Subsidy Claims

Shareholder Loans. The Big Three assert certain loans that Qatar Airways

received from its shareholder should be viewed as a subsidy, even though these loans

have since been converted to equity, and are accounted for in the increased value of

the Company. Apparently, the Big Three view any financial contribution to a State-

owned carrier by its home government as a “subsidy,” even though shareholders in

private companies make loans and periodic capital contributions to their companies as

well.

Qatar Airways questions the relevance of these figures. Qatar Airways notes

that during its early years, it was acquiring a fleet and developing a network. The State

of Qatar, which takes a long-term view of its investments,98 provided loans to finance

the required equipment. These loans have since been converted to equity, with the

value of the equity reflecting the increased value of the business.99

Loan Guarantees.

The Big Three also assert that loan guarantees provided by the State of Qatar to

Qatar Airways between 1998 and 2010 should be viewed as a subsidy,100&101 even

though Qatar Airways has never defaulted on a loan or had a lender exercise its

guarantee. The sole basis for including these guarantees is a “finding” made by Capital

Trade that the Company was somehow not “creditworthy” during this time period.

Qatar Airways notes that guarantees it has received have nothing to do with its

creditworthiness. Qatar Airways further notes that its aircraft are secured as collateral

for the loans it has received and that because the State of Qatar has not ratified or

acceded the Cape Town Convention, certain lenders have required the provision of 98 While publicly traded US carriers live and die by quarterly earnings, privately held companies and companies with other ownership structures are not so encumbered. We would submit that many airline startup companies in the US and elsewhere went through years of thin (or no) profits because their owners had a long term belief in their viability and importance. Virgin America, which had a long road to certification and profitability, is a case in point.

99 It also is worth noting that the Big Three (and their predecessor carriers) have been through at least 8 bankruptcies, and they have discharged their loans and debts through the Chapter 11 process. As noted above, the laws of Qatar do not permit insolvency.

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such guarantees because of the legal difficulties associated with repossessing the

aircraft in the event of a default. Moreover, Qatar Airways does not have any publicly

traded or rated debt, which makes it more difficult for its liabilities to be rated or hedged

against a tradable Credit Default Swap.

As noted in section B above, the factual assertions upon which Capital Trade

bases its findings that the Company was not “creditworthy” are faulty, and rely on

metrics that were manipulated to reach the desired result.

Miscellaneous Claims of Subsidy.

Airport Fees. Despite the fact that they do not serve Doha at all, the Big Three

complain that airport charges at the facility are too low, and that this somehow

constitutes a subsidy.102 Qatar Airways notes that all carriers that serve the airport

benefit from these reduced charges.

The Big Three also claim that because Doha airport applies a lower fee for

transiting passengers than it does for arriving/departing passengers, this is a subsidy.

This is not true and similar charging structures are widespread globally and applied at

major hubs such as London’s Heathrow Airport, Bangkok and Kuala Lumpur. This type

of fee structure is permissible so long as it applies without discrimination to all other

carriers that are accommodating transit traffic at the Airport. Airports throughout the

world strive to reduce their charges to carriers in order to attract new business. As

International Airlines Group has observed: “State investment in airports infrastructure is

not, and never has been, regarded as a “subsidy” anywhere in the world.”103

The thrust of the complaint being made is, in effect, that airport charges at Doha

are too low. Article 10.2 of the Agreement, which governs airport charges, provides as

follows: 100 White Paper, at 23-24.

101 As a point of fact, no loan guarantees were provided by the State of Qatar prior to it becoming a shareholder in 1999 and once again the report demonstrates its reliance on unproven and incorrect assumptions.


103 Comments of International Airlines Group, at 3.

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User charges imposed on the airlines of the other Party may reflect, but shall not exceed, the full cost to the competent charging authorities or bodies of providing the appropriate airport, airport environmental, air navigation, and aviation security facilities and services at the airport or within the airport system. Such charges may include a reasonable return on assets, after depreciation. Facilities and services for which charges are made shall be provided on an efficient and economic basis.

This language says nothing about requiring airport operators to cover their costs.

It says only that airport user fees shall not exceed the cost of providing the services,

and does not require airports to cover their costs. The user charges at Hamad

International Airport are consistent with Article 10.2 of the Agreement.

It also should be noted that hub incentives are not unique to foreign airports. In

fact, certain US states have gone so far as to create special tax exemptions for airlines

that operate “hubs” in their state.104

Airport revenues. Qatar Airways has long been the operator of Doha Airport,

and the Company has received revenues associated with those operations. The White

Paper asserts without any substantiation a claim that the entire amount of revenue

assigned represents a subsidy.105 To provide these services, the Company hires staff

and operates equipment, and performs a host of other functions. The assertion that this

amount represents a subsidy is entirely false.

Route subsidies of $23 million. Qatar Airways notes that this item in its

accounts refers to incentives paid by airports other than Doha for new or expanded

service. Such incentives are commonplace globally including in the USA. US carriers

receive financial incentives to launch new routes as a matter of course.106 The inclusion

of this item in this report is disingenuous and misleading.

104 The State of Wisconsin created a tax exemption scheme for airlines that operated hubs in the state. Northwest/Delta, quick to attack subsidies given to others but not its own, filed suit to challenge this exemption, since they were deemed at the time not to have a “hub” in Wisconsin. See Northwest Airlines, Inc. v. Wisconsin Department of Revenue, 2006 WI 88 (2006) (upholding Wisconsin’s statutory scheme), available at https://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=25816.


106 The practice of airports offering commercial incentives for new routes and new capacity, in the form of marketing support and or airport fees/waivers, is commonplace around the world, and in the US as well.

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Lease rentals. Lease rentals being charged to Qatar Airways by Qatar Aviation

Leasing Company (QALC) are at commercial rates. QALC’s lease rental calculation

methodology to Qatar Airways is based on a market rate and includes the entire cost of

debt, cost of equity and overhead, as well as a profit margin to the lessor. QALC has

been profitable since 2011. Had QALC’s profit been consolidated into Qatar Airways,

Qatar Airways would have been profitable in each of the years since 2010.

“Free” land. In 2011, the State provided Qatar Airways with parcels of land to

ensure that the carrier had enough real estate for office and residential space. The

State deeded Qatar Airways three parcels of land. In 2013, the State appropriated the

land for the public interest at its then market value.107

Organized labor. The Big Three assert that the lack of labor unions in Qatar

somehow constitutes an “unfair” advantage. This claim is groundless, and the assertion

that favorable labor conditions are subsidies is not supported by the Agreement, or even

under the inapplicable trade agreements cited by the Big Three. The US has open

skies aviation agreements with many other nations that lack organized labor

movements, and never before has raised this novel and baseless claim.108 As noted

above, if differences in domestic laws are to be treated as “subsidies,” then Qatar

Airways urges that Chapter 11 and the ability of US carriers to walk away from their

pension obligations be placed on the US side of the ledger.

Required GSAs. The Big Three contend that it is obligatory for foreign airlines

wishing to sell tickets in the Qatar market to do so only through a GSA. Contrary to this

claim, any IATA-accredited airline has the ability to sell its tickets through the BSP Gulf

See, e.g., Fort Wayne International Airport (FWA) Experiences Record Growth in 2014 (city offers $2 million to US carriers launching new service), http://www.neindiana.com/news-media/rp-news/2014/12/15/fort-wayne-international-airport-%28fwa%29-experiences-record-growth-in-2014, and Delta Air Lines and Norwegian commit to St. Croix, by Aldeth Lewin (Daily News Staff) (Apr. 24, 2015), http://virginislandsdailynews.com/news/delta-air-lines-and-norwegian-commit-to-st-croix-1.1869599.

107 Many US state and local governments have provided carriers with land, cash and other benefits. For example, the State of Minnesota during the early 1990’s gave Northwest (later merged into Delta) enormous amounts of aid in exchange for agreeing to operate a maintenance facility and to maintain employment in the State. See http://archive.leg.state.mn.us/docs/2005/other/050657.pdf for a useful chronology and description of this assistance. 108 Delta’s labor force is largely non-unionized.

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Area without any necessity to appoint an agent under a General Sales Agreement

(GSA). Moreover, any company (airline or non-airline) regardless of its domicile status

(i.e., national or foreign) which desires to invest in Qatar may open an office and employ

its own staff so long as they obtain the required Commercial Registration from the

Government.109 While some companies choose to avoid these formalities by appointing

a GSA, there is no requirement that they do so.

Fuel. Far from enjoying favorable treatment for its fuel purchases in Doha as

has been alleged,110 Qatar Airways, which is not tied to the Qatar Jet Fuel Company (Q-

Jet), has a history of challenging fuel prices at Doha.

As a general rule, jet fuel suppliers utilize the IATA Standard Jet Fuel contract

when charging airlines. This standardized contract stipulates that the supplier should

apply a differential over an established and publicly referable benchmark for jet fuel.

The benchmark for the Arabian Gulf countries is MOPAG (Mean of Platt’s Arab Gulf).

Qatar Airways and other carriers uplifting fuel at Doha several years ago raised

concerns about the pricing methodologies applied by Q-Jet, the monopoly supplier at

Doha. After attempts to negotiate with Q-Jet directly and through IATA failed, Qatar

Airways persuaded its Government to obtain expert advice concerning the use of an

industry-based formula instead of the less-transparent mechanisms that had been

applied. Under the auspices of the Government of Qatar (the owner of the airport), an

internationally recognized management consultant was commissioned to perform a

detailed study to address these concerns. This consultant recommended that Q-Jet

comply with internationally accepted standards by adopting MOPAG as a benchmark to

which a differential would be added, and the Government required Q-Jet to adhere to

those standards. At present, all carriers that purchase fuel at Doha are charged on the

same basis, which is the MOPAG price plus a differential charge.

109 Article 8.2 of the Agreement expressly provides that hiring of such staff shall be “in accordance with the laws and regulations of the other Party...”

110 Answers of The Big Three to March 15, 2015 Questions Raised by the US Government (undated) at Question 4, pages 7-8.

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The way in which the Big Three handled this issue is typical – they make broad

allegations based on speculation rather than fact. Qatar Airways pays market prices for

fuel at Doha (and actually pays higher prices at Doha than at other airports in the region

even though its volumes at Doha are substantially higher). To the extent that the

Government of Qatar has compensated Q-Jet for any reductions in fuel revenues, this

compensation has flowed to Q-Jet, and not to Qatar Airways.

As shown above, the Big Three have attempted to label anything they consider

as a benefit to Qatar Airways (including the right to sell and dispense alcohol in Qatar)

as a subsidy, while ignoring entirely their own privileges and structural benefits. Several

US carriers have acknowledged in this proceeding that US carriers enjoy structural and

legal advantages that are of immense value, including the exclusive rights to cabotage

operations,111 exclusivity that would not be permissible or applied if the global trade

laws which US carriers urge to be applied here ever were applied to the airline sector.

E. The Big Three Have Failed To Make Any Showing of Competitive Harm.

1. Claims of harm are entirely unfounded

Under any trade law regime, subsidies are not actionable unless it can be shown

that the complaining party has sustained competitive harm, and that such harm is

causally related to the subsidy. The White Paper offers no evidence of injury or material

harm suffered by US carriers, let alone any harm tied to any actions by Qatar Airways.

Instead, the Big Three raise claims that are both vague and overblown. For example,

the White Paper asserts that Gulf carrier services are “causing serious overcapacity in

the world market,” and that this overcapacity “will drive down yields for all carriers,

including US carriers.”112 The “evidence” provided is a map. This map, which doesn’t

show capacity figures of any type, states only percentages of Gulf carrier shares of

long-haul bookings in various world regions.113

111 See Comments of Federal Express Corporation, at 9.

112 White Paper, at 44-45.

113 White Paper, at 44, Figure 21.

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This map is coded by color – red and green – with red showing high Gulf carrier

presence and green showing the opposite. It shows significant variations in the Gulf

carrier presence in various regions.114 The chart aggregates the long-haul booking

shares of all three Gulf carriers, even though the carriers are of different sizes and have

varying levels of competitive strength in different countries. Setting aside the obvious

problems with this map, the chart does not even support what the Big Three says it

does. Far from showing a high level of penetration of the US market or any sort of

threat to US carriers, it actually shows a very modest 5.2% “Gulf Share” of international

long-haul bookings in the United States.115 In terms of falling yield, the “evidence”

proffered is a bare claim that this overcapacity “will drive down yields for all carriers,

including US carriers,”116 without reference to an amount, a specific market or a specific

time period.

These claims of anticipated harm are speculative at best. Under the WTO

Agreement on Subsidies and Countervailing Measures (SCM Agreement), a

“determination of a threat of material injury shall be based on facts and not merely on

allegation, conjecture or remote possibility. The change in circumstances which would

create a situation in which the subsidy would cause injury must be clearly foreseen and

imminent.”117 Even if the SCM Agreement were applicable (which it is not), statements

by the Big Three make it clear that the alleged threat is not imminent and that their

concerns are indeed speculative. The CEO of American Airlines, Douglas Parker, when

pressed to elaborate on the harm that his company faced (which would be hard to

show, given that American does not serve the GCC or India at all), said as follows: “We

think the situation in the Middle East is serious and needs to be addressed and if it’s not

addressed it could have material consequences to our industry over time.”118 Similarly,

Delta has expressed concern about possible future harm from Gulf carrier competition.

114 This cuts directly against any claim of the existence of a “world market.”



117 SCM Agreement § 15.7, 1869 U.N.T.S. 14 (1994).

118 American Airlines Group, Inc. Earnings Conference Call, First Quarter 2015, available at http://edge.mediaserver.com/m/p/akdcucv6/lan/en (emphasis added).

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The thing about their location is they are about halfway around the world from us, and that’s kind of the good news and the bad news. The good news is they are halfway around the world from us and we don’t really participate in a lot of the flows that they have the primary gateway for. The second piece is, if you look at their order books it’s hard for us to imagine that those aircraft could all be delivered in the same time frame to the same region without imploding all of them.”

And I think that really -- it's several years down the pipe.119

Moreover, and as will be shown herein, prevailing conditions for US carriers

suggest that they face few, if any, competitive threats. US carriers have high load

factors in the markets they serve, and are enjoying record profits. Indeed, the Big Three

in the second quarter of 2015 alone had combined profits of about $4 billion.120 Quite

simply, these carriers, well insulated from competition, are light years away from

financial peril. The Big Three have failed to show any harm from services operated by

Qatar Airways, let alone harm caused by any of the purported subsidies.

Claims of threatened US carrier loss of US-India/Subcontinent traffic are similarly

illusory. US carriers have entered and exited the US-India market many times and for

many reasons. In its lawsuit against the Ex-Im Bank, Delta alleged that subsidized

aircraft lease rates enjoyed by Air India rendered it unable to compete in the US-India

market (Delta’s claims were rejected by the courts).121 Unsurprisingly, and as shown in

Appendix 8, Delta’s story has since changed.122 American also has asserted that it

withdrew from the Chicago-Delhi market due to “Gulf competition,” but this too is false.

American exited the market in January 2012, not long after it sought bankruptcy


120 See Appendices 6 and 7.

121 See generally Air Transport Association of America, et. al. v. Export-Import Bank of the U.S., 878 F. Supp. 2d 42 (D.D.C. 2012). See also Delta Air Lines Inc., et.al. v. Export-Import Bank of the U.S., Memorandum Opinion (Mar. 30, 2015) (granting Ex-Im Motion for summary judgement). See also Appendix 8 for an overview of how Delta’s explanation of its absence in the US-India market has been explained over time.

122 See Appendix 8 for evidence of Delta’s evolving views of competition in the US-India market.

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protection. Qatar Airways started its Doha-Chicago service in 2013, a fact that

demonstrates the falsehood of any claim that Qatar Airways’ one-stop service somehow

affected American’s nonstop service.

The Big Three now assert that one-stop Gulf carrier service to India and the ISC

is somehow “foreclosing” their own introduction of nonstop service to those points. The

reality is that US carriers have long ignored the India/ISC market, as exemplified by this

statement made a by senior Delta executive on an earnings call. Responding to a

question about the impact of Gulf carriers on Delta’s operation, Glenn Hauenstein, EVP

and Chief Revenue Officer, said as follows:

I think there are two components to your question. One is the third and fourth freedoms, which would be the traffic from the United States and from Europe into the Indian subcontinent and Asia. Delta has never been a big player in that market. Our partners, Air France and KLM, were probably not as heavily invested as Lufthansa or British Airways for that matter. So they probably have a little less impact although it’s significant, because those are traffic pools that they were relevant players in.123

Given the size and strength of the Big Three, the large (and growing) size of the market,

and the well-documented weaknesses of Indian carriers, claims that US carriers are

somehow being “precluded” from offering nonstop service to these markets simply

strain credulity. US carriers for years have largely ignored the US-ISC market, and are

crying foul now that customers have responded well to the services offered by Qatar

Airways.

While the US carrier share of these markets may have declined, albeit slightly, in

recent years, this is entirely to be expected since US carriers have maintained a very

low level of service during a time frame in which the market as a whole was expanding.

Indeed, US-Indian Subcontinent O&D traffic grew by 83% between 2004 and 2014,


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growing from 3 million to 5.5 million passengers.124 Moreover, there is clear and

compelling evidence that the US-India traffic carried by US carriers and their European

counterparts has increased in absolute terms even though they have chosen not to

align their services to accommodate this growth in market demand.125

2. Qatar Airways’ service growth is in line with regional trends.

The Big Three assert that the “Gulf Carriers” are growing too quickly, and that

their growth should generally track that of global GDP, which they report to be three

percent.126 That claim is entirely false.

As a factual matter, while there is a general correlation between air transport

demand and GDP, there are significant regional and economic variations in demand.127

In fact, the global figure being advanced by the Big Three is entirely misleading, as it

ignores the fact that Qatar Airways is based in a part of the world that is home to 60% of

the world’s population and has a rapidly emerging middle class, and where air service

has grown significantly.128 Indeed, as shown by the chart below,129 the economies of

the key regions served by Qatar Airways (South Asia, Southeast Asia, China and the

Middle East) are growing far faster than the global average, and demand for air

transport is especially high because road and rail infrastructure in these regions is

limited. By contrast, the markets that are dominated by the Big Three (Northeast Asia,

Europe, North America) are mature and are growing far more slowly than the global

average.

124 See Appendix 9, which shows the growth of US-Indian Subcontinent and US-Middle East O&D traffic. Traffic between the US and Middle East/GCC region grew by 127% during that time.

125 See Edgeworth Economics, “Empirical Investigation and Analysis of Economic Issues Raised In “Restoring Open Skies: The Need to Address Subsidized Competition from State Owned Airlines In Qatar and the UAE,” May 21, 2015, Exhibit B1. See also section E4, infra.


127 See, IATA, “Air Travel Demand: Measuring the responsiveness of air travel demand to changes in prices and incomes,” (“IATA Travel Demand Report”), at 9, Table 2, available at https://www.iata.org/whatwedo/Documents/economics/air_travel_demand.pdf.

128 See Appendix 9.

129 Boeing Current Market Outlook 2014-2033, at 15.

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Figure 5: GDP Growth

Setting aside the fallacies discussed above, the US Government has long since moved

beyond the view that growth in air service should be tied solely to economic indices or

findings of “need.” The growth in global GDP is not and should not be viewed as a cap

or barometer for an “appropriate” level of service growth in emerging markets. In fact,

demand for air transport service varies considerably by region, type of market, and

length of route served, with income elasticities being amongst their highest for very

long-haul services in developing economies.130 Indeed, IATA has indicated “economic

growth is now increasingly being driven by developing economies, where income

elasticities are higher.”131 Given the much higher level of GDP growth in the regions

that Qatar Airways serves (which have an income elasticity of 2.7), the claims that Qatar

Airways and other Gulf carriers are growing “excessively” fail completely.

Furthermore, the reliance on bare percentages to measure the level of

“appropriate” growth is both misleading and wrong. For a relatively small carrier such

as Qatar Airways, the baseline size from which its market growth is being calculated is

relatively low, which means that any growth above the baseline would appear to be

130 Typically, demand exceeds GDP growth by a multiplying factor which varies from market to market, depending on the maturity of the markets. See IATA Travel Demand Report, at 9, Table 2.

131 Id. at 10.

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robust. As noted above,132 Qatar Airways entered the global marketplace in 1997,

competing against megacarriers that already had well-developed global presence, well-

formed alliances, and deeply entrenched frequent flyer programs. The challenge for a

small competitor entering into a market populated by large, established players was

quite formidable. While Qatar Airways looked to codeshare partners such as Lufthansa

and United in its early years to establish a competitive footprint, the Company had to

develop its own presence in key markets, and to offer services of sufficient size and

scope to be relevant to consumers.133 Even today, Qatar Airways is dwarfed by the Big

Three US airlines – the Big Three have a combined fleet of 2400 aircraft versus the

mere 158 operated by Qatar Airways.134

3. Qatar Airways does not compete against US carriers.

Given the tenor of the claims of the Big Three, one might imagine that Qatar

Airways is their head-to-head competitor in dozens of nonstop markets. The reality is far

different. Qatar Airways’ home market, Doha, is located almost 8000 miles from the

United States. No US carrier offers nonstop service from the United States to Doha.

Indeed, no US airline competes with Qatar Airways in any nonstop market.

Aside from the fact that it has no nonstop route overlaps with any US carrier,

Qatar Airways also notes that it has almost no one-stop overlap with US carriers either.

Other than offering limited service to Mumbai and Delhi, US carriers provide almost no

nonstop service to the markets that Qatar Airways serves behind Doha. United offers

nonstop service from the United States to Mumbai, Delhi, Kuwait, Bahrain and Dubai,

whilst Delta offers service only to Dubai. American Airlines offers no service at all to the

Middle East/GCC/SE Asia region. Appendix 10 to this submission shows the points that

Qatar Airways serves behind Doha, together with an examination of which of these are

served nonstop by a US carrier or by their European partners from their European hubs.

The Appendix clearly demonstrates that US carriers offer nonstop service to only seven

132 See supra, at section II.

133 Of course, the discussion begs the question whether it is appropriate for a competitor airline (or even the US Government) to determine the “appropriate” level of service growth for a new entrant airline.

134 See Appendix 3.

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of the points that Qatar Airways serves behind Doha. Likewise their European alliance

partners only serve a little more than a third of these points on a nonstop basis from

their European hubs.

Given the US carriers’ lack of competitive exposure to Qatar Airways, their claims

of threatened harm fall flat.135 Indeed, Oxford Economics has analyzed the itineraries of

inbound passengers on the Big Three in 2014, and has concluded that just 0.7% of

these passengers also had an alternative on a Gulf carrier, a fact which demonstrates

the almost complete complementarity of US and Gulf carrier networks.136 Similarly,

Oxford Economics found only very limited overlap in O&D markets served by US and

Gulf carriers.137

Qatar Airways takes exception to any assertion that it “steals” traffic from US

carriers. As a practical matter, carriers do not own or have any entitlement to “their”

passengers, who are free to choose their service on the basis of price and

convenience.138 International Airlines Group, the parent company to British Airways, has

squarely (and persuasively) rejected any claim that US carriers have any claim to “their”

share of global traffic flows:139

135 The position of the Big Three has evolved over time. First, they said that Gulf carriers are “stealing” their traffic. Confronted with evidence that they really are not in these markets at all, they now are complaining that the presence of carriers such as Qatar Airways might prevent them from entering the market in the future. US carriers for many decades have chosen to ignore these markets entirely.

It is worth noting that Qatar serves as home to an Indian community of more than 600,000 people, and also is home to a large Bangladeshi and Pakistani community. Given these commonalities of interest, it should come as no surprise that Qatar serves both as an economic focal point and an important connecting hub for the region.

136 Oxford Economics: Gulf carrier traffic to the USA: An Analysis of the competitive landscape and economic impact, May 2015, at 8. (Oxford Study).

137 Id. at 13. Comments made by Delta executives are consistent with these findings. See pages 39 and 40, and footnotes 119 and 123.

138 This is the entire thrust of the Compass Lexecon Study, which tries to “prove” that Gulf carriers have not stimulated the markets they serve, and that they have instead “stolen” traffic from US carriers. There is no requirement anywhere that a new entrant in a market accommodate only new (or stimulated) demand. The reasoning of the White Paper and Compass Lexecon report harken back to pre-deregulation days and should be roundly rejected.

139 Comments of International Airlines Group, Docket OST-2015-0082, at 2 (posted May 14, 2015). Of course, the IAG/British Airways comment is diametrically opposed to the position being taken by its JV

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The White Paper makes much of the Gulf carrier impacts in relation to passengers travelling indirectly e.g. between India and the US, as if consumers should be denied this choice. Passengers travelling between two points on the globe do not “belong” to any particular airline or group of airlines. Airlines must compete to offer passengers what they want. The outdated concept of “ownership” of passenger traffic must be rejected by all governments.

The Big Three’s assertion also is false in absolute terms. The markets that feed Qatar

Airways’ Doha-US traffic are largely unserved by US carriers. Following is a breakdown

of the flow traffic carried on Qatar Airways’ New York-Doha service. This chart reveals

that Qatar Airways derives its feed from markets that US carriers do not serve, and from

which European carriers are largely absent.

Figure 6: Qatar Airways’ Top 15 Feeder Markets to/from New York

Doha Cochin Dhaka Delhi Chennai Lahore Bangalore Karachi Ahmadabad Islamabad Amritsar Mumbai Kuala Lumpur Hyderabad Kathmandu

While the Big Three complain about harm suffered by their European joint

venture partners, the fact is that the networks of Air France, KLM and Lufthansa cover

far fewer points in India, and the Indian subcontinent than does Qatar Airways. For

example, Air France offers service to only three points in India: Mumbai, Delhi and

Bangalore. Thus, for a Delta passenger traveling to destinations in India other than

these three, he/she is faced with a connection at Paris, and then another connection in

partner, American Airlines, which claims to be entitled to its “share” of the market even though it does not operate even a single daily flight to the GCC region or to the Indian subcontinent.

U.S. carriers provide nonstop service to only two of QR’s top feeder markets to New York: Delhi and Mumbai. See Appendix 11 for a comparison of additional feeder markets.

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India, an option that is far from convenient or attractive. Changes in the relative market

shares of European carriers are being driven by the fact that Qatar Airways offers one-

stop service to numerous secondary points in India, and in Sri Lanka, Bangladesh and

elsewhere, that are only served on a two (or more) stop basis from the United States by

US carriers together with their European partners.

Both Lufthansa and Air France/KLM have asserted that they have withdrawn

from certain markets as a result of the introduction of services by Gulf Carriers. Qatar

Airways has reviewed these claims, and has found them to be demonstrably false. For

example, Air France claims that it was “driven out” of Hanoi, but Qatar Airways only

entered that market in November 2010, a month after Air France had exited (October

2010) and similarly, Qatar Airways launched its service to Asmara more than 18 months

after Lufthansa exited the market. The US Government should reject the specious

claims of any causal connection between Qatar Airways’ launch of a new services and

Lufthansa and/or Air France’s exit from given markets.140 Qatar Airways offers service

to twelve cities in India, including six that are served neither by any of the US Big Three,

nor any of their European JV partners. A recent study on the value of Open Skies

confirms both the explosive growth of the US-India market, and especially the growth in

demand for service to/from airports supporting the secondary cities in India.141

4. Far from causing competitive harm, Qatar Airways has created important new service options in under-served markets.

As noted above, Qatar Airways serves 12 cities throughout India nonstop from

Doha. While these include Mumbai and Delhi (the only markets served by US carriers),

Qatar Airways offers service to points that are neither served by US carriers nor their

European joint venture partners, including Ahmedabad, Amritsar, Goa, Kochi, Kolkata

140 Similarly, there is a multi-year gap between Austrian’s exit from the Johannesburg and Nairobi markets, and Qatar Airways’ launch of service to those destinations. Given that the European partners of the Big Three have already raised these points with European authorities, Qatar Airways will not rehash these claims here.

141 Intervistas, The Economic Impacts of Air Service Liberalization, Updating the Landmark 2006 Study to Reflect the New Realities of Commercial Passenger Aviation,” June 11, 2015, at 58 (“Intervistas Study”). http://www.intervistas.com/wp-content/uploads/2015/06/The-Economic-Impacts-of-Air-Service-Liberalization-2015.pdf.

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and Trivendrum. These are large cities with significant populations – for example,

Ahmedabad has a population of 5.5 million, Kolkata, 4.4 million, and Amritsar, 1.1

million.142

Far from injuring US interests, the Gulf carriers have received accolades from the

Indian community in the United States143 for providing fast and convenient service to a

wide variety of points in India. Qatar Airways offers important one-stop service options

from its seven US gateways to twelve points in India, offering American travelers – and

Indian-Americans in particular – a wide range of one-stop options via its state-of-the-art

Doha hub.

Where shifts in US-India/ISC share have occurred, these are not due to pricing,

but rather as a result of the availability of superior and convenient one-stop services

offered by Qatar Airways (and the other Gulf carriers) relative to the multi-stop

connecting services offered by US carriers in conjunction with their European partners

via less convenient and more congested hubs.144 Qatar Airways’ one-stop services to

secondary cities in the Indian subcontinent have proven to be especially popular

because passengers destined to secondary points in India and the Indian subcontinent

previously had only two and even three-stop alternatives. The availability of Qatar

Airways’ service, paired with the ease and efficiency of connecting at Doha, have

enabled travelers to shave many hours off their journeys, a direct and tangible public

benefit. Attached as Appendix 12 is a market-by market comparison of the elapsed

times for Qatar Airways itineraries to the Middle East and Indian Subcontinent,

compared to the online offers of US carriers and their joint venture partners. As can be

seen in those materials, Qatar Airways offers the superior option in all but a handful of

instances.

142 See http://en.wikipedia.org/wiki/List_of_most_populous_cities_in_India. The catchment areas of these cities are far larger than the figures cited.

143 See Excerpts from comments submitted by members of the Indian-American community in the U.S. at Appendix 5.

144 See section E3, infra and Appendix 12.

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While the Appendix reflects schedules displayed in GDS, Qatar Airways also

checked sites such as Travelocity. To illustrate the convenience of Qatar Airways’ one-

stop service to the Indian subcontinent, we offer below a snapshot comparison of

journey times for flights to underserved points such as Kolkata, and Amritsar. As can be

seen, the Qatar Airways one-stop offering to Amritsar is 10 hours faster than a

competing offering operated via an intermediate point in Europe, which also entails

another stop at Delhi. Given the efficiency of these routings, it is no wonder that

passengers have chosen them over multi-stop services operated via points in Europe.

Figure 7: Sampling of US-ISC Itineraries145

City Pair Carriers (stops) Routing

Elapsed Time

Washington-Amritsar Qatar Airways (1) IAD-DOH-ATQ

19:20

British Airways/Air India (2) IAD-LHR-DEL-ATQ

29:20

Washington-Kolkata Qatar Airways (1) IAD-DOH-CCU

20:05

Air France/JetAirways (2) IAD-CGD-BOM-CCU

24:20

5. The Big Three are pursuing a competitive strategy that focuses on mature (and capacity constrained) markets.

US carriers raise concerns about “global overcapacity” caused by the growth of

order books of the Gulf carriers.146 While the Big Three seem to assert that the size of

the Gulf carriers’ aircraft orders is somehow problematic, they have not accounted for

the fact that fleet replacement/replenishment is a core part of the strategy. Moreover,

US carriers have their own substantial orders, with American Airlines alone having in

excess of 550 outstanding orders.147 Qatar Airways practices an active strategy to

maintain a young fleet with overall average age at approximately 5 years. In fact, as a

145 Source: www.travelocity.com.


147 See http://www.aa.com.

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result of this strategy, the average age of Qatar Airways’ Boeing fleet was just 3.1 years

as of June 1, 2015.

While the Big Three express concern about the possible expansion of Qatar

Airways (and other Gulf carriers), they make no allegations that the expansion will occur

on directly competitive routes, which would be fundamental to a showing of potential

harm. (This would be difficult, since, as discussed above, these competitive routes are

non-existent.) Moreover, if the planned growth of Qatar Airways is of so much concern

to the US Big Three, it is unclear why the fleet growth of the Chinese carriers and

Turkish Airlines has not triggered similar concerns. For the Chinese carriers alone,

Boeing has forecasted a tripling of their fleet between 2013 and 2033, growing from

2,310 aircraft to 6,930 aircraft during that time period.148

There are no signs of overcapacity in any of the markets served by US carriers.

In fact, load factors are extremely high in the highly consolidated domestic US market,

and in the antitrust-immunized North Atlantic.149 Qatar Airways has no presence in

those markets, or in the US-Latin America market. While Qatar Airways serves some

points in North Asia that US carriers also serve, there is little practical overlap, since US

carrier routings via the West Coast are faster and more convenient than routings over

the Middle East.

The Big Three’s complaints about “overcapacity” say more about their own

competitive strategies than they do about the actions of Qatar Airways. Having

successfully consolidated, US carriers are now trying to control the introduction of new

capacity, so that they can maximize their ticket prices and thus yields (and profits). For

example, Delta in its first quarter of 2015 reported profits of $1.2 billion, and indicated

that it would hold the line on capacity in order to maintain robust fares. As Richard

Anderson recently said:

148 Boeing Current Market Outlook 2014-2033, at 22.

149 See Edgeworth Study at 23, Exh. 11.

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We are not making any changes to our 2015 capacity plan in light of the lower fuel prices. In fact, we continue to trim capacity on the margin to maintain yields and our RASM premium. 150

The Big Three until now have never placed any competitive emphasis on Qatar

Airways’ home markets but still assert that Gulf carriers have impaired their ability to

serve countries such as Pakistan, Sri Lanka and Bangladesh.151 To add some

perspective, the Big Three and their European partners had only a negligible presence

in Sri Lanka and Bangladesh even before the Gulf carriers started to offer meaningful

levels of one-stop connections from these countries to the United States. For 2009, the

US carriers and their immunized partners on a combined basis had a total of 6,531

economy bookings to Sri Lanka, and 9,694 bookings to Bangladesh in 2009. This is

amounts to an average for each alliance of 6 passengers per day for Sri Lanka, and

9 passengers per day for Bangladesh.152

The relative importance (or lack thereof) that US carriers attach to markets

served by Qatar Airways is reflected in their capacity decisions. As shown below, US

carriers dedicate only an infinitesimal percentage of their international seat capacity to

the Middle East and South Asia, which is Qatar Airways’ primary base of operations.

150 Delta 1Q2015 earnings call, http://ir.delta.com/files/4Q/Earnings%20materials/0120-DAL-Transcript_v001_d0fla9.PDF.

151 See White Paper, at 46-47.

152 The actual number of passengers at issue here explains why the White Paper quotes “lost” traffic in terms of percentages, and not passengers. See Edgeworth Study, Table B1 (Appendix 13).

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Figure 8: International seat capacity from the US. 26-Apr-2015 to 02-May-2015153

The US carriers and their European JV partners have made their capacity decisions not

because the introduction of new services by Qatar Airways has driven them away from

ISC/GCC markets, but because they can earn higher (and perhaps even super-

competitive) profits on the North Atlantic and Asian markets in which they hold ATI – the

ability to align and manage fares and capacity in collaboration with their former largest

head-to-head competitors.154 A recent statement by the CEO of Air France, in which he

urged his competitors to hold the line on transatlantic capacity, makes this point quite

clearly:

It’s normal that capacity is deployed in an area that is profitable. Our joint venture with Delta Air Lines has a very strong position. We have about 25% of the market with 900 flights a week across the Atlantic, but we are very wise as regards to capacity. We would like everybody to be as wise.155

153 Source: Centre for Asia Pacific Aviation, http://centreforaviation.com/analysis/capa-americas-aviation-summit-las-vegas-a-high-level-gulf-us-airline-debate---video-221863. American, Delta and United (blue) measured against Gulf carrier capacity to the US (red).

154 Although Qatar Airways did not perform its own independent analysis of this point, it read with interest the study prepared by Edgeworth Economics, which demonstrated that the Big Three enjoy a great deal of pricing power on their immunized routes. See, e.g., Edgeworth, at Exhibit 10 and Appendix D. The Answers filed by JetBlue and Hawaiian tell a similar story.

155 “Air France-KLM Cautions for Overcapacity on Transatlantic,” Aviation Daily, June 16, 2015, at 4. (emphasis added).

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While the White Paper makes general claims about falling yields, conspicuously

absent from the report is any specific information or complaint about the pricing patterns

of Qatar Airways or any of the other Gulf carriers. At the same time, the current

financial results of the Big Three suggest that their yields are quite healthy. The US

Government must reject in their entirety all claims of threatened harm due to the prices

offered by Qatar Airways.

6. Qatar Airways does not threaten US employment.

The Big Three have claimed that US interests are harmed when a foreign carrier

such as Qatar Airways launches a new service to the United States, because a new US

carrier service would (allegedly) yield greater employment benefits than the introduction

of a new service by Qatar Airways.156 This argument appears to assume that Qatar

Airways’ service would somehow preclude the introduction of a new US carrier service,

a statement that is entirely false.157 The fact is that US carriers have chosen not to

serve the US-Doha market, and have only a de minimis presence in the Gulf.158

The Centre for Asia Pacific Aviation has examined in detail the contention that

the launch of a new service by a Gulf Carrier is somehow preclusive of a US carrier

introducing such a service, and has squarely rejected that contention:

“According to the White Paper, every daily widebody ‘lost or foregone’ by Gulf carrier competition costs ‘over 800 US jobs’. This is a difficult equation to address as it presumes that US airlines would add services over and above the levels they flew before the advent of the Gulf carriers. It also appears to assume there is no job creation where new foreign airline services are added.


157 The Big Three have contended that Sixth Freedom services operated by Gulf carriers between the United States and India might somehow preclude their own introduction of nonstop service in the market. These claims ring hollow. It is well documented that consumers prefer non-stop services over one-stop and multi-stop alternatives, and generally will make their buying decisions based on schedule. The case should be no different here.

158 The largest single driver of job-creation for an airline is the additional crews, technical and other operational staff required to support the operation of an incremental aircraft. Thus it is the very tightly managed capacity of the US Big Three that constrains US-airline job-creation rather than the competition represented by the Gulf carriers.

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The fact that in most cases US airlines have chosen not to add international service previously suggests there is hardly a rush to embark on riskier new long-haul routes in the now profitability-driven US market. On the North Atlantic for example, the approach has been to refine capacity discipline, working closely with European alliance partners in the ATI-protected JVs. It is these European partners – at least Lufthansa and Air France (British Airways and Iberia are not complaining) whose shared interests the White Paper looks to protect.159

7. The Agreement has created significant benefits for US business and consumers.

a. US carriers

Despite the claims of economic harm advanced by the Big Three, the fact is that

Qatar Airways contributes revenue to US carriers. For example, Qatar Airways has a

broad codeshare arrangement with American Airlines, and transfers its traffic arriving at

US gateways to onward services operated by American. Although the amount of

interline revenue that changes hands may vary from year to year, the total value of the

traffic transferred by Qatar Airways has been in the neighborhood of $60 million per

year. Of course, this feed traffic enhances, not reduces, the viability of American’s

domestic services.

Qatar Airways’ other US codeshare partner, JetBlue, has been quite forthcoming

about the fact that it derives direct financial benefit from feed generated by foreign

carriers. In a letter to Secretaries Foxx, Kerry and Pritzker, JetBlue Airways CEO Robin

Hayes emphasized the enormous benefits created by Open Skies and emphasized the

importance of this policy to maintaining the competitiveness of smaller US carriers:

Against the backdrop of America’s windfall of increased flights bringing overseas visitors and generating economic activity and US travel and tourism jobs, it is concerning that America’s three largest airlines have joined to urge a rush to judgment based upon their allegations while they seek an immediate extra-bilateral freeze on further Open

159 Centre for Aviation, Gulf airlines under fire - Aside from the rhetoric and dust, what’s the underlying agenda? (Apr. 15, 2015), http://centreforaviation.com/analysis/gulf-airlines-under-fire---aside-from-the-rhetoric-and-dust-whats-the-underlying-agenda-219319.

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Skies sanctioned growth. The views of the three complaining US carriers, one of which, Delta, ironically enjoys a tremendous fifth-freedom franchise of its own in Japan, do not represent the views of entire US aviation industry. JetBlue and several other passenger and cargo airlines have a different perspective on Open Skies and the competitive benefits they produce.

Each time one of our 35 international partners operates a flight to the United States, JetBlue benefits with new customers. For example, when Emirates, Turkish Airlines or Japan Airlines arrive at JetBlue’s focus city at JFK and customers connect onto our network, JetBlue increases traffic flow, has a need to add capacity and as a result, adds direct jobs just as others (taxi operators, hotels, restaurants etc…) add indirect jobs. At our focus city in Boston, many of our international partners have launched or announced new services including Turkish, Hainan, Japan Airlines, Cathay Pacific, El Al and Emirates. Each of these new international flights not only adds direct aviation sector jobs in Boston and indirect travel and tourism jobs in the region, but also strengthens JetBlue’s ability to launch new competitive domestic routes such as Boston- Detroit based on the large flow of arriving international connecting customers. In the year since JetBlue entered the former Delta monopoly route BOS-DTW, fares have fallen nearly 40 percent and daily passenger traffic has more than doubled. All of this activity increases job growth. Similarly, at our Orlando focus city, our domestic network has grown as we have added international connecting partners including Emirates, Icelandair and others.160

JetBlue is not the only US passenger carrier that opposes a rollback in the open

skies arrangements with Qatar and the UAE. Alaska Airlines noted that feed traffic it

receives from carriers such as Emirates strengthens its ability to compete with much

larger domestic competitors.161 Similarly, Hawaiian Airlines signed a joint letter that

highlighted the important competitive alternative offered by Qatar Airways and other Gulf

carriers, as well as the direct financial impact created by Gulf Carrier services.

160 Letter of Robin Hayes to Secretaries Foxx, Kerry and Pritzker, dated Apr. 29, 2015.

161 See Letter of Brad Tilden, CEO, Alaska Airlines to DOT Secretary Foxx and Secretary of State John Kerry, dated February 27, 2015, at 2.

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Oxford Economics has estimated that in 2014, Gulf carriers transported 1.1m

overseas visitors to the United States spending more than $4 billion,162 and generating

some $2.6 billion labor income and $1.1 billion in federal, state and local taxes.163

Oxford Economics goes on to estimate that the Big Three received approximately

350,000 arriving transfer passengers from Gulf carriers in 2014, and that other US

carriers similarly received approximately 270,000 transfer passengers. These 620,000

passengers in total generated a conservative amount of $140m transfer revenue for US

carriers.164

All-cargo carriers such as Federal Express are providing extensive service to the

Gulf region, and are exercising traffic rights made available to the United States solely

as a result of Open Skies. FedEx has warned of the risks to its business if the US-Qatar

and US-UAE Agreements are altered.

Recently, several U.S. passenger carriers have questioned Open Skies, specifically as it relates to Middle Eastern carriers. These U.S. passenger carriers do not fly extensively between foreign points like FedEx does. They believe they have little to risk by limiting foreign carrier access to U.S. markets. What they want is for the U.S. government to protect them from competition from able, attractive new entrants.

For FedEx, the Open Skies agreements with the Middle Eastern countries are very valuable. Under the agreement with the U.A.E., we have established a hub in Dubai, where FedEx flights from the U.S. crisscross with our flights from India and Asia in order to move U.S. products into local markets. This hub also acts as our gateway to Africa. Presently, FedEx alone operates almost two-thirds more flights to the Middle East than all the U.S. passenger carriers combined. Modifications to this agreement might spell the end of these opportunities, closing off those markets to our customers.165

162 Oxford Economics Study, at 17.

163 Oxford Economics Study, at 18.

164 Oxford Economics Study, at 14-16.

165 Letter of David Bronczek, President and CEO, FedEx Express to the Hon. John F. Kerry, Hon. Anthony Foxx and the Hon. Penny Pritzker (Feb. 18, 2015), at 2.

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Atlas Airways and the Cargo Airline Association have also voiced strong

concerns about the prospect of any change to the US’ bilateral arrangements with Qatar

and the UAE, and note that the route flexibility that they enjoy both in the Gulf region

and elsewhere in the world is directly attributable to open skies.166

b. Direct contribution to US employment

In addition to benefitting US carriers, Open Skies has enabled Qatar Airways to

establish a presence in the United States, opening offices at airports and at downtown

sales locations. Qatar Airways plans to have more than 250 direct employees in the

United States by the end of its current financial year. Furthermore, almost half of

passengers on Qatar Airways flights to USA are overseas visitors who spend in the

local economy on, for example, hotel accommodation, car-rental, and general spending

thereby contributing significantly to the national economy. Qatar Airways estimates that

its services help to sustain more than 27,000 jobs, and that the visitors it carries

contribute $900 million to the US economy.167

Moreover, as a significant purchaser of Boeing and Gulfstream aircraft, and of

engines manufactured by General Electric and Pratt & Whitney, Qatar Airways

contributes significantly to employment in the US aerospace industry, which supports

hundreds of thousands of US jobs.168

c. Direct benefits to airports, travel and consumer groups

Key aviation players, including airports and travel groups, also oppose the effort

to roll back or freeze Open Skies agreements. The United States Travel Association,

which represents airports, travel organizations and hotels, said: “This is one of many

efforts where the Big Three U.S. carriers are trying to set the rules of who can do

166 Comments of Atlas Air Worldwide Holdings, Docket No. OST-2015-0082, at 3 (May 29, 2015); Comment of the Cargo Airline Association, Docket No. OST-2015-0082, at 2 (May 29, 2015).

167 See Appendix 14.

168 The US Travel Association observed that the Boeing aircraft orders of just one of the Gulf Carriers “have supported over 200,000 jobs in the last decade.” USTA Letter, June 15, 2015, at 2.

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business here” . . . “This is about stamping out competition, not about levelling the

playing field.”169 Various airport directors have raised similar concerns.170

And perhaps most importantly, major consumer groups such as Consumer

Travel Alliance and the Business Travel Coalition have strongly opposed the efforts to

suspend the open skies agreements in force between the United States, Qatar, and the

United Arab Emirates, noting not only the value to consumers offered by Qatar Airways

and other Gulf carriers, but also the importance of creating important price and service

competition to the offerings of US carriers and their European alliance partners.171

Indeed, US consumer groups and passengers have lauded the high standards of

service provided by Gulf carriers, and have urged US carriers to compete on service

instead of seeking to block the services of Qatar Airways and other Gulf carriers.172

V. THE US GOVERNMENT SHOULD NOT ROLL BACK THE AGREEMENT

The US has pursued Open Skies agreements with all interested partners,

regardless of the size, strength and structure of their domestic aviation industries. The

United States has established Open Skies agreements with Liberia on the one hand

and Turkey on the other. Certain foreign carriers have made significant use of their

open skies rights, and some have made no use of them at all. Moreover, the sudden

fervor about the State ownership of Qatar Airways and the other Gulf carriers is hard to

understand, given that US carriers routinely do business with carriers that are State

owned, and with carriers that have been acknowledged to receive subsidy, such as Air

169 See, e.g., New York Times, Expansion by Mideast Airlines Sets Off a Skirmish in the U.S. (Mar. 16, 2015), available at http://www.nytimes.com/2015/03/17/business/gulf-airlines-expansion-sets-off-a-row-in-the-us.html.

170 Id.

171 See Comments of Travelers United, Docket No. DOS-2015-0016 (May 1, 2015); see also Business Travel Coalition, Why Are the Big 3 Silent on Consumer Harm from Gulf Carriers? The U.S. Big 3 Airlines’ War on Foreign Carrier New Entry (Apr. 21, 2015), http://www.businesstravelcoalition.com/press-room/2015/april-21---why-are-the-us.html.

172 See Appendix 15.

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China, Aeroflot, LOT, and Czech. In fact, many of the Big Three’s own alliance partners

have received significant subsidies during the course of their existence.173

By endorsing the assertions of the Big Three and seeking consultations to

reopen the Agreement, the US would be conveying the message to the larger aviation

community that the United States wants Open Skies only if its trading partners do not

make vigorous use of those rights. Qatar Airways’ operation of a daily service to seven

US cities can in no way be interpreted as a violation of the Agreement, and no

allegations about “unfair” pricing have been made under Article 12 of the Agreement.

Indeed, as JetBlue has noted, far from causing harm, services by carriers such as Qatar

Airways provide a valuable source of interline feed traffic and benefit US carriers.

It also is critical to note that the United States and Qatar have unusually strong

cultural, commercial and geopolitical relationships. American nationals living and

working in Qatar are a significant expatriate group, and many US companies and

universities have a presence in the country. Furthermore Qatar is a strong defense ally,

and serves as home to the US Central Command. Given these broader relationships,

the efforts of the Big Three to insert the United States into bilateral disputes being

propounded by their European alliance partners are especially misplaced.

And make no mistake – this controversy revolves around the interests of

European carriers, not US carriers.174 Indeed, ALPA has acknowledged that the alleged

harm is not from head-to-head competition between US carriers and Gulf carriers, but is

instead due to a loss of traffic “over European hubs which are operated by the U.S.

173 See supra, at section C3.

174 It should be noted that Qatar and the United Kingdom have entered into an Open Skies agreement. Moreover, British Airways and IAG, its corporate parent, have refused to embroil themselves in this controversy, despite the fact that Qatar Airways operates nine daily flights to the United Kingdom. Given the willingness of BA/IAG to let the competitive chips fall as they may, the position of American Airlines, BA’s joint venture and Qatar Airways’ codeshare and alliance partner, is especially hard to fathom. American does not serve even a single point in the GCC or India and has no competitive exposure to Qatar Airways.

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Carriers and their alliance partners.”175 The US Government should resist being drawn

into fights already being fought by European governments.

The Big Three are, in essence, urging the US Government to roll back a ground-

breaking Open Skies agreement because Gulf carriers have allegedly tapped into “their”

share of traffic to India and Southeast Asia. Setting aside the fallacy of this claim (US

carriers and their European partners have long neglected these regions), rolling back

this agreement would be ill-advised. As FedEx stated in another case, deviating from

Open Skies is not a step to be taken lightly, because

not only would it send a message of protectionism to our most favored trading partners . . ., it would also inform other aviation partners, both those already party to Open Skies agreements and those still considering them, that the U.S. is advocating market openings only when it is the foreign markets that are opening to U.S. carriers. That seems to be the message from some filings in this docket – perhaps an example of “buyer’s regret” when foreign carriers turn out to be able and even innovative competitors...176

While the situation that prompted FedEx to say this is different, the parallels to the

current situation are clear. Having been largely absent from the GCC region for decades

(and perhaps envious of the geographic position of Doha), US carriers are now saying

that Qatar Airways’ decision to enter the US market, and to serve it well, is somehow

“unfair.” This claim should be rejected on its face.

The parties that have the strongest stake in the US-Qatar market – non-aligned

passenger carriers, cargo carriers, and tourism and consumer interests, have been very

clear that they view the efforts to roll back the US-Gulf State aviation agreements as a

real threat. They have emphasized that: “Liberalizing international aviation is good for its

175 Comments of the Airline Pilots Association, International, Docket No. DOC-2015-0001, at 7 (May 28, 2015). ALPA’s submission shows an extraordinary degree of historic amnesia. In the early 1990’s France renounced its bilateral air service with the United States because US carriers had an “unfair” share of the US-France market. In a similar vein, Germany in 1992-1993 imposed unilateral constraints on US carrier Fifth Freedom services to and from Germany. In both cases, US interests complained bitterly that these actions were “unfair” and that US carriers were not “flooding” these markets with excess capacity.

176 Application of Norwegian Air International Limited, Answer of Federal Express Corporation, Docket OST-2013-0204, at 5 (Feb. 12, 2014).

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own sake. As international travelers ourselves and as concerned business executives

interested in lowering barriers to travel and trade, we do not wish to return to an era of

regulation or to insert new hurdles into international aviation agreements.”177

VI. CONCLUSION

The Big Three have couched their campaign in terms of “fairness,” and claim

that they are under grave threat by Qatar Airways and other Gulf carriers. As we have

shown herein, the claims and rhetoric of the Big Three are directly at odds with the

facts.

While the Big Three assert that their interests are identical with broader US

interests, the comments filed in this docket directly undercut these claims. US cargo

carriers have cited the very direct interest they have in preserving existing

arrangements with Qatar and the UAE, and the commercial risks they would face if

those agreements were abrogated. Non-aligned US passenger carriers have shown that

they need to draw feed from airlines other than the Big Three and their alliance

partners, and airports have emphasized the benefits they have received from new

services launched by Qatar Airways and other Gulf carriers. Consumer groups have

expressed concern that recent changes in the market have reduced customer choice,

and have lauded the competitive alternatives and superior services offered by Qatar

Airways and other Gulf carriers.

The Big Three are seeking to roll back the aeropolitical clock, and use trumped

up claims of “subsidy” to block new and attractive service options. The Big Three do so

despite the fact that they have benefited directly from many of the practices that they

decry here. For example, having for years touted the “pro-competitive benefits” of their

partners’ carriage of Sixth Freedom traffic and their own carriage of Fifth Freedom

traffic, they now declare these rights – which are fundamental to open skies – to be

177 USTA Letter, June 15, 2015, at 2.

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“unfair” when exercised by Gulf carriers.178 In a similar vein, they seek to cap even Third

and Fourth Freedom services operated by Gulf carriers, having apparently forgotten

their displeasure when the homelands of their own alliance partners sought to do the

same to US carriers.

Indeed, US carriers are complaining about the effects of technological changes

and emerging demographic trends. In the past, travel to India and the Indian

subcontinent required a stop in Europe. Now, longer-range aircraft permit passengers

to overfly European hubs. Although US carriers have almost no historical presence in

India and the ISC, the expansion of the middle class in the region has caused a boom in

demand for air travel.179 US carriers could seek to take advantage of this surge in

demand by working closely with the Gulf carriers to capture this traffic,180 but their

European JV partners181 have fought hard to thwart this. It should come as a surprise

to no one that Qatar Airways, which has a large expatriate Indian/ISC community in its

home country and which offers a wide variety of connecting services throughout the

Gulf, might be better able to sustain a large array of medium-haul services to India than

would a European carrier which can operate long-haul “spokes” only into the largest

Indian markets. These are immutable economic facts that have nothing to do with

subsidy.

The record shows that governments have a long history of promoting the

interests of their carriers, and encouraging the operation of new services. It is

astonishing that Delta can in one breath complain about alleged fuel tax breaks enjoyed

by Gulf carriers while concurrently demand that the State of Georgia continue to provide

it with the very same breaks. While the irony might elsewhere be fuel for amusement,

the situation here is serious. The Big Three in the name of these “principles” are urging

178 For a good discussion of this issue, See Airline Leader, “Alice in Wonderland goes to India (via the Gulf), May–June 2015, at 10-11 (“The real goal of the fair competition supporters is to preserve the status quo.”)

179 See generally, Intervistas Report, Section 4.7.

180 In fact, and despite the position it takes here, American code shares on Qatar Airways’ services throughout the region.

181 Except British Airways, which has stated in this docket that it supports Open Skies, and challenges the claims of subsidy made here as an effort to block competition.

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the US Government to turn its back on longstanding and respected aviation policies by

renegotiating aviation agreements that are working, and that are providing

demonstrable benefits to other US carriers.

The Big Three are far larger and are far better established than Qatar Airways.

Despite this fact, the Big Three claim to be threatened by Qatar Airways, even though

they do not compete directly with Qatar Airways on even a single nonstop route. (This,

needless to say, undercuts the claim that the Big Three have sustained any harm

whatsoever.) As FedEx and others have noted, even if there were evidence of harm,

the remedy available in the Agreement (challenging a subsidized price) is effectively the

same as would be the case if the US were to apply WTO/GATT rules that are expressly

inapplicable here. Neither arrangement would give the United States the unilateral right

to block either new or existing services operated by Qatar Airways.

The Big Three have attempted to mask the weakness of their claims by

presenting “facts” about subsidy that have been proven to be both wrong and

methodologically unsound. While Qatar Airways applauds the efforts of the US

Government to explore the relevant facts before reaching judgment, we also hope that

comments presented here can help all interested parties to cut through the rhetoric.

The real facts are that, far from injuring US interests, the services made possible as a

result of US-Qatar Open Skies have provided significant benefits to consumers,

airports, US businesses and many US carriers. Indeed, Qatar Airways has opened new

markets, raised the bar for customer service and catalyzed important new trade

opportunities between the US and Qatar. Accordingly, the US Government should

close this inquiry, and resist all imprudent demands to revisit its celebrated Open Skies

Policy.

- i -

Appendix 1: Exhibit 3 of the Capital Trade Report

- ii -

- iii -

Appendix 2: Exhibit 12 of the Capital Trade Report – QR Financials

Average ROE 2004-2007: 25.7%

- iv -

- v -

Appendix 3: Comparison of US Carriers v. Qatar Airways

- vi -

Appendix 4: Qatar Airways Has Robust Load Factors

Source: Qatar Airways corporate records

- vii -

Appendix 5: Excerpts of Comments from the U.S. Indian Community Submitted to the Departments of Transportation, State and Commerce.

Comment of Capitol Area Telugu Society (May 27, 2015)

[T]he Gulf States airlines currently offer the most convenient access to the Indian states of Andhra Pradesh and Telangana where many members of our organization migrated to America from and where we still have extended family. Whereas most other carriers access the area through Delhi and Mumbai, Etihad, Emirates, and Qatar Airways—offer single-connection flights through their hubs in the Middle East to get to Hyderabad and Chennai, [which] are two key cities for Telugus hailing from the states of Andhra Pradesh and Telangana. Total travel time currently is five to ten hours shorter. Connections are also easier to make than in busy Chatrapati Shivaji International Airport. Also, ever since these airlines have introduced the service, there has been more choice in routes and pricing.

Comment of Virginia India Business Roundtable (May 26, 2015)

Virginia residents of Indian descent have benefited from Open Skies. Many of us fly on Gulf States airlines. In some cases, the choice is driven by cost-savings, but often it is the more direct routes, fewer connections, or truly impressive amenities that are available. These airlines offer many welcome alternatives to connections in Mumbai and Delhi, and this factor alone has attracted many Indian-American business travelers and tourists.

Comments of the Indo-American Community Federation (May 26, 2015)

Our organization strongly opposes proposals to freeze expansion of service by Gulf airlines…Current Open Skies agreements are serving their purpose in supplying greater consumer choice and easier access to many international destinations that were, prior to the entry of the Gulf Airlines, very cumbersome to reach… The Gulf States airlines currently offer the most convenient access to many parts of India, [offering] single-connection flights through their hubs in the Middle East, which has made travel for Indian-Americans much more accessible, affordable and comfortable.

Comments of SJ Consulting (U.S.-India Business and Public Policy Consulting) (May 29, 2015)

Closing off U.S.-to-India routes currently operated by Emirates, Etihad and Qatar Airways would be detrimental to U.S. business interests. As all the major U.S. airlines have relied on alliance partners to reach Indian destinations, Emirates, Etihad and Qatar have developed one-stop routes to cities across India. The three Gulf Airlines offer key alternatives to arriving in Mumbai and Delhi, and offer greater convenience to travelers to Ahmedabad, Kochi, Chennai and numerous other cities. This service is unparalleled in convenience, affordability and accessibility for Indian Americans, whether on business or personal travel, to visit India.

- viii -

Comments of US India Chamber of Commerce DFW (May 13, 2015)

These [Indo-American] companies and households have a vested interest in ensuring that air travel is convenient and cost-effective. Airlines, including many of the international carriers, operating under the current Open Skies Policy, provide valuable new services to Indian-American community conveniently connecting businesses and families in several key Indian destinations not previously served by other carriers. As it relates to the Indo-American business community, these carriers have come in to an underserved market and have provided excellent business and economy service.

Comments of the LTD Hospitality Group (May 27, 2015)

Washington DC residents of Indian descent have benefited from Open Skies. Many of us fly on Gulf States airlines. In some cases, the choice is driven by cost-savings, but often it is the more direct routes, fewer connections, or truly impressive amenities that are available. These airlines offer many welcome alternatives to connections in Mumbai and Delhi, and this factor alone has attracted many Indian-American business travelers and tourists.

Comments of The Malayalee Association of Chicago (June 2, 2015)

[The Gulf carriers] are among the few that provide reasonably direct service from O’Hare to Kochi, Trivandrum and Calicut in Kerala, India. Without them, Malayalees will have to resort to more cumbersome travel arrangements, usually with multiple connections including stopovers in Europe, Mumbai or Delhi. Such flights are much less desirable, as they are longer and more tiring and also more expensive. In other words, the removal of choices offered by Emirates, Etihad, and Qatar will put up barriers to traveling to Kerala.

Comments of the US-India Political Action Committee (June 12, 2015)

Closing off U.S.-to-India routes currently operated by three key Gulf States airlines (ME3) would be obstructive. As the major U.S. airlines (US3) have relied on alliance partners to reach Indian destinations, the ME3 have developed one-stop routes to cities across the country. They offer key alternatives to arriving in Mumbai and Delhi, supplying greater convenience to travelers to Ahmedabad, Kochi, Chennai, and numerous other areas.

Comments of the Gujarat Sarnaj of Montgomery, Alabama (June 2, 2015)

The Gujarati community has benefitted from the expansion of Gulf States airlines, which now offer flights with only one connection to Gujarat from several U.S. cities. These flights make it easier to remain in contact with friends and family in India and to retain a sense of cultural identity by taking part in family, religious, and cultural events there. The competition they've added to the market has also helped reduce fares.

- ix -

Appendix 6: US Carriers Enjoy Very High Load Factors

Jan-14 84.47Feb-14 84.25Mar-14 83.22Apr-14 83.59

May-14 83.73Jun-14 82.98Jul-14 83.15

Aug-14 83.30Sep-14 83.24Oct-14 83.35Nov-14 82.40Dec-14 82.96

Average: 83.39

Source: DOT, Bureau of Transportation Statistics: http://www.rita.dot.gov/bts/press_releases/bts012_15

- x -

Appendix 7: The Big Three - Massive Profits in 2014 and 2015

American:

Net profit for 2014: $4.2 billion (115% increase over 2013)

2Q 2015: $1.7 billion

United:

Net profit for 2014: $1.97 billion (89% increase over 2013)

2Q 2015: $1.3 billion

Delta:

Net Profit for 2014: $4.5 billion (70% increase over 2013)

2Q 2015: $1 billion

Sources:

http://hub.aa.com/en/nr/pressrelease/american-airlines-record-2014-profit-earnings; http://www.usnews.com/news/business/articles/2015/07/24/american-airlines-beats-2q-profit-forecasts http://ir.united.com/phoenix.zhtml?c=83680&p=irol-newsArticle&id=2009546; http://ir.united.com/phoenix.zhtml?c=83680&p=irol-newsArticle&ID=2070357 http://ir.delta.com/news-and-events/news/news-release-details/2015/Delta-Air-Lines-Announces-December-Quarter-Results/; http://www.usatoday.com/story/money/2015/07/15/delta-earnings/30154211/

- xi -

Appendix 8: Delta’s Changing Reasons for Withdrawing US-India Services

Theory 1: We’re not in India because Air India is subsidized June 25, 2014 – Statement of Richard Anderson, House Financial Services Committee “And in September 2011, the Bank approved $3.4 billion to Air India to support that airline’s purchase of 30 new widebody aircraft. Air India provides an especially revealing example of the Bank’s disregard of the adverse impact its financial guarantees impose on U.S. airlines. Only two years earlier, Air India had used separate guarantees to secure below-market financing for the purchase of Boeing 777s and deploy them between JFK and Mumbai, in direct, head-to-head competition with Delta at significantly reduced ticket prices. Delta had no choice but to exit that market. I personally presented this problem to the Bank following the Bank’s September 2011 deal, but my concerns fell on deaf ears. With its latest round of Ex-Im guarantees, Air India continues to take delivery of subsidized widebodies to this day.” Theory 2: We’re not in India because Gulf carriers are subsidized May 15, 2015 - Richard Anderson, CEO, Delta Airlines, National Press Club “The harm is immediate. And the best way to describe the harm is the U.S. carriers essentially, except for two flights a day from United, American and Delta have exited the India market. And that’s really pretty stark when you think about it. India is a very big country. It has a huge trade relationship with the U.S., particularly for IT, has huge agricultural trade between the two countries. But in essence, we don’t really have any aviation trade. We’ve exited the market completely. Because essentially, what these carriers have done, is with subsidized government strategies, come into the marketplace to basically shift the traffic off of us and take us out of the Indian market, and you think about it, U.S. flag carriers ought to be in the Indian market. American and Delta should be in the Indian market. But it’s not sustainable when you have that-- when you have $41 billion dollars worth of subsidy, it’s very difficult, if not impossible, for us to be able to compete.” Theory 3: We’re not losing India traffic to Gulf carriers. We’ve not been a player in India, but plan to serve the market at some point. July 15, 2015 – Earnings call Q&A with Glen Hauenstein, EVP and Chief Revenue Officer, Delta Airlines Question: (Michael Linenberg - Deutsche Bank):”Yes I am just -- but I’m wondering Glen are you seeing some displacement of that traffic to competitors such as Emirates or Etihad or Qatar as they continue to add more and more seats into the marketplace? And I’m looking more like U.S. into India, Middle East, Africa because there is a decent amount of flow traffic between you and your partners”. Answer: “Correct. As we’ve stated in the past, we are not -- we have not been the largest player in the U.S. to India or the Indian Subcontinent but it is a significant long-term threat to us. As much a missed opportunity, we believe that under the right and clear circumstances that we should be able to fly non-stop from the U.S. into India.” Sources: http://financialservices.house.gov/uploadedfiles/hhrg-113-ba00-wstate-randerson-20140625.pdf https://www.press.org/sites/default/files/20150515_airlines.pdf http://finance.yahoo.com/news/edited-transcript-dal-earnings-conference-222604591.html

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Appendix 9: US-India Subcontinent Traffic Has Grown by 83% Since 2004

Appendix 9: US-Middle East Traffic Has Grown by 127% Since 2004

Source: Sabre GDD

- xiii -

Appendix 10: US Carriers Offer Nonstop Service to Only 6 Middle East and Southeast Asian Markets that Qatar Airways Serves Nonstop from Doha: European Carriers Serve Only 23182

Points served by Qatar Airways from Doha

Served Nonstop by a US carrier?

Served nonstop from BA, LH, KL or AF hubs?

Abu Dhabi, UAE (AUH) Y Y

Ahmedabad, India (AMD) N N

Najaf, Iraq (NJF) N N

Alexandria, Egypt (HBE) N N

Amman, Jordan (AMM) N Y

Amritsar, India (ATQ) N N

Ankara, Turkey (ESB) N Y

Baghdad, Iraq (BGW) N N

Bahrain, Bahrain (BAH) Y Y

Bangkok, Thailand (BKK) N Y

Basrah, Iraq (BSR) N N

Beirut, Lebanon (BEY) N Y

Bangalore, India (BLR) N Y

Cairo, Egypt (CAI) N Y

Chennai, India (MAA) N Y

Colombo, Sri Lanka (CMB) N N

Dammam, Saudi Arabia (DMM) N Y

Delhi, India (DEL) Y Y

Denpasar-Bali, Indonesia (DPS) N N

Dubai, UAE (DWC) N N

Dubai, UAE (DXB) Y Y

Erbil, Iraq (EBL) N Y

Faisalabad, Pakistan (LYP) – starting 17 July 2015

N N

Gassin, Saudi Arabia (ELQ) N N

Goa, India (GOI) N N

Ho Chi Min City, Vietnam (SGN) N Y

Al-Ahsa, Saudi Arabia (HOF) N N

182 Only Air France (AF), British Airways (BA), KLM Royal Dutch Airlines (KL), and Lufthansa (LH) flying nonstop from their hubs (AF–CDG, BA–LHR, KL–AMS, LH–FRA/MUC) to points that Qatar Airways (QR) serves behind Doha (DOH) with their own metal (Operating Airline) are considered in this study. BA will resume daily Kuala Lumpur services from 27 May 2015. Source: SRS Analyzer (July 2015)

- xiv -

Points served by Qatar Airways from Doha

Served Nonstop by a US carrier?

Served nonstop from BA, LH, KL or AF hubs?

Hyderabad, India (HYD) N Y

Islamabad, Pakistan (ISB) N N

Istanbul, Turkey (IST) Y Y

Istanbul, Turkey (SAW) N N

Jakarta, Indonesia (CGK) N N

Jeddah, Saudi Arabia (JED) N Y

Karachi, Pakistan (KHI) N N

Kochi, India (COK) N N

Kolkata, India (CCU) N N

Calicut, India (CCJ) N N

Kuala Lumpur, Malaysia (KUL) N Y

Kuwait, Kuwait (KWI) Y Y

Lahore, Pakistan (LHE) N N

Luxor, Egypt (LXR) N N

Medina, Saudi Arabia (MED) N N

Mashhad, Iran (MHD) N N

Multan, Pakistan (MUX) – starting 2 August 2015

N N

Mumbai, India (BOM) Y Y

Muscat, Oman (MCT) N N

Peshawar, Pakistan (PEW) N N

Phuket, Thailand (HKT) N N

Ras al Khaimah, UAE (RKT) – starting 1 October 2015

N N

Riyadh, Saudi Arabia (RUH) N Y

Salalah, Oman (SLL) N N

Sana’a, Yemen (SAH) N N

Sharjah, UAE (SHJ) N N

Shiraz, Iran (SYZ) N N

Sialkot, Pakistan (SKT) – starting 16 July 2015

N N

Singapore, Singapore (SIN) N Y

Sulaymaniyah, Iraq (ISU) N N

Taif, Saudi Arabia (TIF) N N

Tehran, Iran (IKA) N Y

Trivandrum, India (TRV) N N

Yangon, Myanmar (RGN) N N

- xv -

Appendix 11: US Carriers Serve Few of QR’s Top 15 Feeder Markets

- xvi -

Appendix 12: Qatar Airways Offers Superior Schedules to GCC/India/ISC Markets

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Appendix 13: According to Edgeworth Economics, US Carrier Traffic To India and the Indian Subcontinent Increased Between 2009 and 2014.

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Appendix 14: Qatar Airways Contributes to the Local Economy

- xx -

Appendix 15: Gulf Carrier Services are Good for Consumers