Gulf carriers may be in crosshairs under foreign airline US tax exemption cut

Qatar Airways, Emirates and Etihad Airways have for years been accused by US competitors of being illegally subsidized by their governments. (Reuters)
Updated 17 November 2017
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Gulf carriers may be in crosshairs under foreign airline US tax exemption cut

CHICAGO: A US congressional proposal that would eliminate income tax exemptions for certain airlines could affect major Gulf carriers, potentially worsening an international spat between US airlines and their Middle East rivals.
US airlines have been petitioning the federal government for years to intervene in what they see as unfair competition by the three major Gulf carriers.
The proposal, tucked deep in the Senate tax-cut plan, calls for airlines headquartered in foreign countries to pay the US incorporate tax rate if: 1) the carrier’s home country does not have an income tax treaty with the United States and 2) the carrier’s country of origin has fewer than two arrivals and departures, per week, operated by major US airlines.
Qatar Airways, Emirates and Etihad Airways have for years been accused by US competitors of being illegally subsidized by their governments. The Gulf carriers deny the accusation.
They could not immediately be reached for comment on Thursday.
If the proposal passes, it could leave the Gulf carriers more vulnerable because their home countries – the UAE and Qatar – do not have income tax treaties with the US, according to the Internal Revenue Service website.
A number of nations could possibly also be affected at a time when perceived discrepancies in US trade agreements are facing a critical eye from US corporations and the federal government.
The language in the Senate proposal sets the stage for a crackdown in tax leniency for these and other airlines. This would likely be well-received by American carriers, which have for years petitioned the US government to intervene in the dispute.
Under US tax treaties, entities of foreign countries are either exempt or pay a reduced rate on their income, and vice versa for US entities abroad. Reciprocity agreements, however, are less formal deals that fall short of an official accord, according to tax attorney Sam Brotman of Brotman Law.
“Reciprocity agreements are usually with countries that are not necessarily 100 percent friendly with the US” Brotman said on Thursday. “We’ll call it a handshake deal.”
The bill’s wording stands to ramp up an already tense battle between US airlines and Gulf carriers.
The addition was introduced by US Senator Johnny Isakson of Georgia. Delta Air Lines, one of the most vocal critics of Gulf carrier practices, is headquartered in Atlanta.
A spokeswoman for Isakson did not mention the Gulf airlines. “This provision supports American jobs by providing a level playing field and mutual fairness in international passenger aviation,” Isakson spokeswoman Marie Gordon said in an email on Thursday.
“Foreign airlines should not receive preferential tax treatment if their countries choose not to open their markets to US companies.”
Delta declined to comment.


American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

Updated 15 November 2018
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American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

  • The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets
  • ‘Safety remains our top priority and is a core value for everyone at Boeing’

WASHINGTON: American Airlines Group Inc. said on Wednesday it was “unaware” of some functions of an anti-stall system on Boeing Co’s 737 MAX until last week.
Boeing and the US Federal Aviation Administration (FAA) issued guidance on the system last week after a Lion Air jet crashed in Indonesia on Oct. 29, killing all 189 people on board.
The FAA warned airlines last week that erroneous inputs from the system’s sensors could lead the jet to automatically pitch its nose down even when autopilot is turned off, making it difficult for pilots to control.
The system was designed to prevent the jet from stalling, according to information provided by Boeing to airlines.
“We value our partnership with Boeing, but were unaware of some of the functionality of the Maneuvering Characteristics Augmentation System (MCAS) installed on the MAX 8,” an American Airlines spokesman said.
“We must ensure that our pilots are fully trained on procedures and understand key systems on the aircraft they fly.”
Indonesian investigators said on Monday the situation the crew of a doomed Lion Air jet was believed to have faced was not contained in the aircraft’s flight manual. US pilot unions were also not aware of potential risks, pilot unions said.
The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets in the wake of the Lion Air crash, the regulator said on Tuesday.
The American Airlines spokesman said his airline was continuing to work with Boeing and the FAA and would keep pilots informed of any updates.
A Boeing spokeswoman said the manufacturer could not discuss specifics of an ongoing investigation but it had provided two updates for operators around the world that re-emphasize existing procedures to deal with situations relating to MCAS.
“We are confident in the safety of the 737 MAX,” she said. “Safety remains our top priority and is a core value for everyone at Boeing.”