U.S. Airlines Fought Gulf Subsidies—Now A $5.7 Billion Technology Upgrade Fund Excludes Every Foreign Carrier

U.S. airlines are about to receive billions of dollars from the government to retrofit their planes to accommodate new 5G wireless spectrum. Foreign airlines operating into the same U.S. airports are being required by the U.S. government to perform the same work, but they’re barred from the reimbursement program. World airline lobbying organization IATA, the International Air Transport Association, has gone to court over this. And it’s hard to miss the irony. American, Delta and United spent years arguing that government support for Emirates, Etihad and Qatar Airways distorted international competition. Subsidies were unfair when their competitors received them. When money flows to U.S. airlines while foreign competitors pay their own way, they’re happy to cash the checks. Subsidies for me, but not for thee. Why Every Airline Has To Replace Its Altimeters A radio altimeter tells an aircraft how high it is above the ground. That’s different from the barometric altimeter showing height above sea level. Its data feeds autoland, low-visibility approaches, terrain and collision warning systems, windshear detection and other flight controls. Radio altimeters operate in the 4.2–4.4 gigahertz band. Congress ordered the Federal Communications Commission to auction at least 100 megahertz of nearby Upper C-band spectrum by July 4, 2027, and the agency is making 160 megahertz available for wireless service. The problem is that many existing radio altimeters weren’t designed to reject powerful signals from nearby frequencies. We went through a version of this in 2022, when international airlines suspended some Boeing 777 service, wireless companies delayed or reduced 5G deployment around airports, and airlines began a first round of equipment modifications. This next expansion moves wireless service even closer to the altimeter band. The government’s long-term solution is to require equipment that can tolerate the new environment. It’s actually the Federal Aviation Administration rather than the Federal Communications Commission that requires the upgrades. U.S. scheduled airlines and large foreign airlines serving the United States must comply by December 30, 2030. Other affected aircraft have until October 31, 2034. The requirement applies in the contiguous 48 states and Washington, D.C. The FAA estimates that replacing approximately 58,500 radio-altimeter units across more than 40,000 aircraft will cost $4.82 billion to $7.13 billion. Equipment is expected to cost $80,000 to $120,000 per altimeter, including installation. Large commercial aircraft commonly carry more than one. U.S. Aircraft Get Up To $5.7 Billion—Foreign Airlines Get Nothing The Federal Communications Commission has created a rebate program estimated at $3.83 billion to $5.71 billion. Approximately $2.21 billion is expected to cover the first group of aircraft, including scheduled U.S. airlines. Another $3.5 billion is available for the later group. The actual rebate for each category of equipment still has to be set. Winning Upper C-band licensees will be required to fund the rebates in proportion to their winning auction bids—on top of what they pay for the spectrum itself. The federal government is compelling regulated companies to transfer billions of dollars to one domestic industry. And eligibility turns entirely on nationality: For the 2030 deadline, eligible operators must hold a U.S. air carrier or operating certificate and operate under the domestic scheduled airline rules. Foreign airlines operating under the separate foreign carrier rules are excluded. For the later deadline, aircraft owners must be listed in the Federal Aviation Administration’s U.S. Aircraft Registry. Foreign-registered aircraft are excluded. The government mandates the upgrade for carriers like British Airways, Lufthansa, Air Canada, Emirates and Singapore Airlines when they fly to the United States. Those airlines must absorb the full cost. The FAA estimates the foreign-operator burden at $962 million to $1.44 billion. A foreign airline can limit its expense by upgrading only those aircraft it assigns to U.S. service. That creates its own costs, since aircraft can no longer be moved freely throughout the fleet when schedules, maintenance or irregular operations require it. The FCC offered just one sentence explaining the exclusion. It said rebates for foreign aircraft would not be in the public interest because of the “fluid and itinerant nature” of their U.S. operations. British Airways’ daily flights to New York and Lufthansa’s flights to Washington aren’t really ‘itinerant’ in any meaningful sense. If the concern is that some foreign aircraft rarely enter the United States, reimbursement could be tied to historical U.S. operations, approved foreign carrier specifications or a commitment to maintain U.S. service. The agency instead excluded all of them. IATA Has A Strong Legal Case The International Air Transport Association filed both a petition for review and a notice of appeal with the United States Court of Appeals for the District of Columbia Circuit on August 31. The case is International Air Transport Association v. Federal Communications Commission, docket 26-1226 and advances four arguments: The foreign-aircraft exclusion is arbitrary and capricious because the Federal Communications Commission didn’t provide a reasoned basis for it. The agency failed its statutory duty to prevent harmful radio interference. The discrimination conflicts with U.S. Open Skies treaty commitments promising foreign airlines a fair and equal opportunity to compete. Changing the interference environment effectively modifies the terms of foreign airlines’ aircraft radio station licenses by making continued operation impossible without expensive new equipment. The first argument is legally the strongest. An has to explain them its reasoning for decisions, and they didn’t really explain why a foreign aircraft flying hundreds of U.S. segments annually should receive nothing while a domestic aircraft with much less exposure can qualify. Nor does the order address obvious alternatives such as prorating rebates based on U.S. operations. The Open Skies argument captures the competitive problem. Those agreements generally provide for government-to-government consultation rather than giving every airline a straightforward private claim for damages. Still, America’s promise of fair competition makes the one-sentence justification even weaker. If IATA wins it’s hard to see the spectrum auction or safety mandates being derailed. The FCC may just have to reconsider and rewrite its rule to either defend its desired result of consider a usage-based formula. U.S. Airlines Love Subsidies—As Long As They Get Them American, Delta and United spent much of the last decade lobbying Washington to restrict Emirates, Etihad and Qatar Airways. Their central argument was that government subsidies made international competition unfair and violated Open Skies agreements (they clearly did not). In 2016, then-American Airlines President Scott Kirby declared: “Fair trade requires fair competition. We like Open Skies but we can’t compete with $50 billion in subsidies.” Interestingly, Kirby’s United now partners with Emirates. His former employer American partners more closely with Qatar. And Delta takes subsidies from Saudi Arabia. Kirby also rejected the argument that American, Delta and United had themselves been subsidized through bankruptcy (or government funding of airports and air traffic control and on and on): “There was no government subsidy.” A year later, Delta CEO Ed Bastian put it this way: “We’ll compete with anybody. But we can’t compete with a government that’s nation-building.” Bastian explicitly defended the subsidies his airline received, though he also lobbied against the Export-Import bank which subsidizes foreign airline purchases from Boeing. He also supports joint ventures with foreign (and in his mind, subsidized) foreign carriers. In both cases, his preferred outcome benefits Delta at the expense of the customer who loses choice and lower fares. Here, airlines competing for the same passengers are having a cost imposed on them by government regulation and U.S. carriers are having that cost subsidized by the government – while foreign carriers must pick it up themselves. U.S. carriers lobbied for this and were not at all worried about a “level playing field.” Topics on this page