Airline CEOs Test Rex Tillerson on Trade

GettyImages-487206867-compressorFrom one CEO to another. That’ll be the way many businesses might see lobbying for change with the State Department, now that former ExxonMobil CEO Rex Tillerson is in charge.

And the CEOs of America’s three biggest airlines have wasted little time requesting a slot on Tillerson’s calendar.

On Wednesday, the heads of American Airlines, United Continental and Delta Airlines asked for a meeting with the Secretary of State in a letter since posted on the website of the Partnership for Open and Fair Skies. The industry-backed group has been pushing for the government to reconsider Middle Eastern carriers’ access to American airspace.

“We are writing to bring to your attention an issue of utmost importance to the future of our industry: the massive subsidization of three state-owned Gulf carriers … and the significant harm this subsidized competition is causing U.S. airlines and U.S. jobs.

In 2015, the three CEOs said their businesses were suffering unfairly because carriers including Emirates, Etihad Airways and Qatar Airways received government subsidies. Their complaints, however, didn’t gain much traction with the Obama administration.

Blocking or reducing foreign airline access could have negative political ramifications: airline ticket prices could rise due to less competitive pressure. But in light of Donald Trump’s protectionist attitude to other industries, such as the auto sector, there’s reason for U.S. airline CEOs to be optimistic.

Trump, of course, also has pledged to reduce corporate taxes and lighten regulations, something that could allow airlines to invest in keeping ticket prices low. Whether they would choose to do so is another matter.

“We are writing to bring to your attention an issue of utmost importance to the future of our industry: the massive subsidization of three state-owned Gulf carriers … and the significant harm this subsidized competition is causing U.S. airlines and U.S. jobs,” the letter to Tillerson said.

Emirates, Etihad Airways and Qatar Airways have received “over $50 billion” in documented government subsidies since 2014, the airlines claimed.

The Middle Eastern airlines have consistently denied accusations that they are propped up by state aid, arguing their respective governments are simply investing in their airline industries with an expectation of a financial return.

Having run the world’s biggest listed oil company for a decade, Tillerson is no stranger to dealing with complex business relationships between U.S. corporates and Middle Eastern governments. Exxon is among companies that suffered from a decision by big oil producers such as Saudi Arabia to maintain production volumes and lower global oil prices—though it’s very hard to imagine Tillerson engaging in a tit-for-tat strike against the region’s airlines.

Before becoming Secretary of State, Tillerson was an advocate of cross-border trade, having vocally supported the Trans-Pacific Partnership now shirked by Trump. Just how much influence he has over the president’s viewpoint may be about to get its first big test.

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Ross Kelly
Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.

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