- One of the wildest lobbying battles in DC involving America’s preeminent airlines nearly caused an international crisis.
- It’s centered on the efforts of Delta, American, and United Airlines to get the government to take action against Middle Eastern airlines they say are unfairly subsidized and hurting their business.
- The group representing the three US carriers has seen its funding shrinking, tax filings show – and the effort has gained little traction.
- The opposition includes those foreign airlines, smaller US airlines, and cargo carriers who say changes to what are known as “open skies” agreements will adversely affect them.
It’s not often you see a pair of conservative publications offering dueling reports attacking lobbyists on each side of an issue. But there isn’t much that fits cleanly into a partisan box when it comes to one of Washington, DC,’s most gruelling lobbying battles.
First, The Washington Free Beacon reported on the anti-Trump sentiments of a number of big-name Democratic lobbyists working on behalf of the Partnership for Open and Fair Skies. That’s a coalition of major airlines pushing the Trump administration to come down on Middle Eastern airlines – Emirates, Etihad, and Qatar Airways – which, the coalition says, are competing unfairly.
Days later, Breitbart News published a story taking aim at the partnership’s opponents, US Airlines for Open Skies, calling them out for employing “Never Trump” Republicans to pitch the White House. This group includes JetBlue, Hawaiian Airlines, and FedEx.
That’s just the latest episode in one of the wildest, most ruthless battles going on behind the scenes in the nation’s capital. And this battle really has it all: The nation’s largest airlines fighting one another as well as against a growing international threat, former Obama aides pitching the Trump administration, and backroom maneuvers that last month nearly triggered an international crisis.
The nastiest feud in the airline industry
The Partnership for Open and Fair Skies is a nonprofit backed by Delta, American, and United, plus some airline unions. Its aim is to get the government to reopen talks on “open skies” agreements that allow airlines to operate across borders from places other than their home country. The US has signed such agreements with many other countries.
They accuse the United Arab Emirates and Qatar of providing more than $US50 billion worth of unfair subsidies to their airlines, which in turn allows them to squeeze out their American competitors. The airlines, concerned about their market share on transatlantic flights, say that if the Trump administration doesn’t step up and begin taking a more protectionist stance, then they will inevitably have to cut jobs.
But their opponents, which include the Middle Eastern airlines and some smaller American airlines and cargo carriers, say the job losses that will occur if the administration were to fulfil the partnership’s goals would be much more substantial. Countries could quickly retaliate against the US, which could prove especially detrimental to shippers like FedEx and UPS.
These opponents on the side of the foreign airliners say that Delta is at the forefront of the partnership, which they said declared “war on us from minute one” and “the gloves came off instantly” with “punches below the belt from the bell.”
“So we were like, ‘f— this, we’re getting in the ring,” a lobbyist working for opposing interests told Business Insider. “It’s been three years. They didn’t get what they wanted out of Obama, and they haven’t gotten what they have wanted out of Trump.”
The lobbyist added that the push to punish the Middle Eastern carriers is Delta’s fixation and that American and United “came along for the ride.”
Delta spokeswoman Elizabeth Wolff said the airline “continues to work with” United and American through the partnership.
In a recent interview with Business Insider, Delta CEO Ed Bastian pointed to the more than 300 members of Congress who have expressed support for the partnership’s goal, saying that both Democratic and Republican lawmakers have given their backing.
“I can tell you everyone we’ve talked to in Washington is concerned,” he said, adding: “To get 300 members of Congress to agree to anything tells you the importance of this matter to our people. I think a resolution will come at some point.”
But the partnership’s most recent filing with the Internal Revenue Service showed its financial backing is dwindling.
In its 2015 filing, the partnership listed more than $US6.18 million in contributions. But in its 2016 report, provided to Business Insider, those contributions dipped by more than half, totaling just more than $US2.9 million. It’s a sign that some of the coalition’s members may be becoming weary.
American Airlines spokeswoman Shannon Gilson told Business Insider in a statement that the airline agreed “wholeheartedly with our competitors at Delta and United” on the issue, adding that the “partnership couldn’t be stronger.”
United did not provide comment for this story.
A source close to the partnership said the 2016 filing is the most recent, but it is out of date and covered a time when President Barack Obama was in office. They added that Delta, American, and United split the costs of the partnership equally.
The partnership’s opponents have zeroed in on is its use of top Democratic aides – many of whom are publicly critical of President Donald Trump – to pitch the administration.
‘These folks are on CNN during the daytime as pundits, as Democrats, and then are basically saying that the president is their hero’
That most recent filing showed that the coalition spent more than $US2.83 million – roughly 98% of its expenditures that year – on a trio of Democratic-connected lobbying firms: SKD Knickerbocker, The Messina Group, and Beacon Global Strategies. Those firms feature some of the best-connected Obama and Hillary Clinton flacks, such as Obama’s former campaign manager Jim Messina, top Clinton aide Philippe Reines, and Obama White House aides Anita Dunn and Bill Burton.
“Delta’s obsession with open skies … manifests itself in hiring resistance Democrats to lobby Trump,” Jonathan Grella, executive vice president of public affairs for the US Travel Association, told Business Insider. “You kind of can’t have it both ways. These folks are on CNN during the daytime as pundits, as Democrats, and then are basically saying that the president is their hero.”
Dunn did not respond to requests for comment from Business Insider.
The partnership has contracted with a few Republicans, and even seemed to supersede spokeswoman Jill Zuckman, a former Obama Department of Transportation aide, with Scott Reed, a Republican lobbyist, as the group’s top spokesman. The partnership spent about $US280,000 hiring Reed’s firm, Chesapeake Enterprises, in 2017, and also works with Republican communications firm CRC Public Relations.
“The notion that this is being driven by anti-Trump and Democrat consultants is simply not true and the effort to focus on that shows how the supporters of these foreign carriers play fast and loose with the facts,” a source close to the partnership told Business Insider.
Both Reed and CRC have become more public-facing in recent weeks. The group also says it is no longer working with The Messina Group.
Zuckman declined to comment for the story. In a statement to Business Insider, Reed repeated the partnerships argument about how the Middle Eastern airlines were violating the open-skies agreement and putting American jobs at risk.
But the idea that a team of “resistance” lobbyists was working on this issue already worked to kill one of Delta’s biggest efforts to combat the foreign airlines.
A last-minute tax-bill provision that set off international concerns
As the Republican tax overhaul was nearing passage late last year, Delta sought to include a provision that would demonstrably affect the Middle Eastern airlines. As The New York Times reported, the two-page amendment, submitted by Republican Sen. Johnny Isakson of Georgia, was narrowly written so that it would assess corporate taxes on airlines like Etihad, Emirates, and Qatar Airways, generating an estimated $US200 million over the next 10 years.
As sources told Business Insider, that provision nearly launched an international crisis, with the other countries taking issue with the amendment and possibly retaliating. The State Department had to jump in, the sources said. (When asked about this by Business Insider, the State Department did not answer.) Additionally, as a congressional source told Business Insider, the provision also led to a domestic kerfuffle. Atlanta-based Delta pitched Isakson, a home-state senator on the amendment. But what they did not prepare him for was that UPS, also headquartered in Georgia, would be up in arms over the provision.
“Delta lobbyists didn’t tell the Isakson folks that UPS – which is on the other side of town – would be against it,” the source said, adding that they saw an “opportunity to get Isakson, who has had some health challenges, to introduce this provision.”
A partnership source distanced the group from the tax provision, saying that it “doesn’t have anything to do with enforcing our open-skies agreements and is separate from the work of the partnership.”
Meanwhile, American Airlines gave a muted response in late November about whether it supported the Isakson amendment.
“We agree wholeheartedly with our competitors at Delta and United that the Gulf carriers are being illegally subsidized,” Gilson said. “That said, tax reform is a separate, complex issue that also needs to be solved, and we view it as such.”
The amendment was removed by the Senate parliamentarian for “technical reasons,” The Times wrote.
Isakson’s office did not respond to a request for comment from Business Insider.
‘One of the ugliest battles I’ve been a part of’
One of the biggest developments in this battle happened within the past few days. Qatar Airways committed to being more financially transparent in addition to agreeing not to run indirect flights into the US through other countries, Bloomberg reported.
Delta quickly hailed the move as a victory for its cause.
“This would be a landmark milestone for the American airline industry that will protect our workers and ensure that our foreign competitors play by the rules and do not undermine our international agreements,” Peter Carter, chief legal officer of Delta, told Bloomberg. “We all support the administration as it holds their feet to the fire to ensure they live up to their commitments.”
But their opposition says they are over-blowing the significance of the development as it relates to their cause. A connected source told Business Insider that Delta “struck out” with the Trump administration on Qatar, adding they did not get what they were ultimately seeking. The announcement by Qatar “respects both [sides’] wishes,” they said.
Both sides additionally claimed victory last month when the Trump administration announced it would continue informal talks about the Middle Eastern airline subsidies while maintaining the open-skies deals.
A State Department representative told Business Insider that “consistent with the administration’s approach on international agreements, we are reviewing relationships on aviation issues to confirm they are being implemented fairly and in the best interests of our companies.”
They added that the State Department is “leading an interagency effort to engage in serious negotiations with both Qatar and the United Arab Emirates to address concerns that US stakeholders have expressed in our industry consultations.”
Department officials met with a delegation from Qatar to discuss the issue last month, and it is “engaging both Qatar and the United Arab Emirates to address concerns about subsidized competition and a lack of transparency while preserving the open-skies framework,” the representative said.
Politico reported last month that the administration was holding off on any retaliatory measure for what the US airlines call unfair government subsidies, but it warned such action could come if it does not see “sufficient progress” on the issue.
Though the airlines view Trump as more favourable to the cause than Obama, Grella said the government was “no closer to convinced than they were three years ago.”
“It’s one of the ugliest battles I’ve been a part of,” Grella said. “What is it going to take is for American and United to come to the realisation that this isn’t going anywhere, and it’s better to cut your losses.”
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