Airline Subsidies: Can the Law Play a Role in Regulating Them?

Abstract

Airline subsidies have recently received attention largely because of US carriers accusing Gulf carriers of receiving subsidies. Although widely advertised allegations by the US carriers and counteraccusations by the Gulf carriers focus on questions of fact (i.e., whether the airlines in question received subsidies from their governments or not), there are more fundamental questions about whether airline subsidies can ground a legal action for unfair competition and whether the law can play a role in regulating airline subsidies. There are three obstacles to answering these questions. Firstly, there is no widely accepted legal definition of ‘subsidy’ in the context of airlines. Secondly, it is not clear which law applies to the subject matter because the Agreement on Subsidies and Countervailing Measures does not apply to air services and most bilateral air services agreements do not explicitly regulate subsidies. Thirdly, there is a question as to which international organization should be responsible for regulating airline subsidies. This article suggests that a transparency mechanism, based on subsidy provisions in newly developed air services agreements and the Chicago Convention of 1944, could play a significant role in disciplining unfair subsidies and thus contributing to fairer competition in the international aviation market.