Updated, 11:30 a.m., Dec. 4, 2017: A provision that would've dinged a trio of Persian Gulf airlines -- long at odds with some major U.S. carriers -- was eliminated last week in the late-hour rush to pass the Senate GOP's tax bill.

The Wall Street Journal reported that the measure, which would've forced airlines based in some foreign countries to pay new taxes, fell victim to one of the Senate's arcane procedural rules.

Sen. Johnny Isakson, R-Ga., had offered the amendment. His state is home to Atlanta-based Delta Air Lines, which has joined with Fort Worth-based American Airlines and Chicago-based United Airlines in a years-long trade trade tussle with the Gulf trio over home-country subsidies.

Original post, Nov. 29, 2017: WASHINGTON — A full-throttle dispute between some major U.S. carriers, including American Airlines, and a trio of their Persian Gulf competitors may be getting some extra lift from the GOP's fast-moving effort to overhaul the tax code.

The latest tussle centers on a provision tucked in the Senate GOP's tax bill to force airlines based in some foreign countries to pay corporate taxes in the U.S. on a portion of their profits.

Among the affected locales would be Qatar and the United Arab Emirates. Those happen to be home to Emirates, Etihad Airways and Qatar Airways, the same carriers that Fort Worth-based American and others have accused of using home-country subsidies to elbow out competition.

"Tax reform is all about leveling the playing field for Americans and our businesses," said Sen. Johnny Isakson, the Georgia Republican who got the provision included in the tax bill.

Sen. Johnny Isakson, R-Ga., a member of the tax-writing Senate Finance Committee, got the airline provision included in the Senate tax bill. (J. Scott Applewhite / The Associated Press)

Who's pushing

The exact forces behind the tax push remain somewhat unclear.

Delta Air Lines, based in Isakson's state, declined to comment. And an American spokeswoman, while stressing the subsidies complaint, said that tax policy is a "separate, complex issue" and that it would be best to tackle the trade issue by "engaging directly" with the Trump administration.

But the implications are hard to ignore.

Etihad criticized the tax proposal as an example of "continued anti-competitive efforts by one or more of the Big 3 U.S. legacy carriers." An international aviation trade group expressed concern that the provision could cause other countries to retaliate with similar taxes of their own.

And a coalition of U.S. carriers that have backed the Gulf operators is singling out Delta for being "unconcerned about the collateral damage of its multimillion-dollar lobbying campaign."

"This is another poorly veiled attempt by Delta to shield itself from competition," said Andrea Christianson, spokeswoman for the U.S. Airlines for Open Skies Coalition, a group that includes JetBlue Airways, FedEx and Hawaiian Airlines.

Delta Air Lines is among the U.S. carriers that have said the Middle Eastern carriers have unfairly benefited from billions in support from their nation's governments. (File Photo / Smiley N. Pool)

The Gulf carrier dispute has divided the U.S. aviation industry for years.

American, Delta and Chicago-based United Airlines have long made the case that the three Middle Eastern carriers have unfairly benefited from billions of dollars in support from their nation's governments. That's distorted the market, putting U.S. aviation jobs at risk, they argue.

And the legacy airlines have enlisted some heavyweight help.

Isakson is among the many lawmakers who have lobbied the White House to intervene on what are known as open skies agreements. Others include Sen. Ted Cruz, R-Texas, and a host of Texas Republicans and Democrats serving in the House.

But the Gulf carriers have denied wrongdoing. The coalition of other U.S. aviation enterprises has said the push could jeopardize the existing network of international agreements. And some argue that the Middle Eastern trio has helped lower fares and improve customer service.

Trump's hedge

Then there is President Donald Trump, who has hedged on the issue.

He told a group of U.S. aviation leaders in February that he understood the U.S. carriers are "under pressure from a lot of foreign elements and foreign carriers." But he added that he wants to "make life good" for the foreign operators, since they often "come with big investments."

President Donald Trump has hedged on the airline issue. (Andrew Harnik / The Associated Press)

With that lobbying battle showing no signs of slowing down, the GOP's tax push has entered the equation.

Airlines typically pay taxes only in their home countries, thanks to reciprocal deals made across the globe, experts said. The Isakson provision would repeal that exemption for airlines from countries that don't have tax treaties with the U.S. while also seeing few flights from U.S. carriers.

That move appears to hit Qatar and the United Arab Emirates, but also countries like Saudi Arabia, Fiji and Ethiopia, according to media reports and industry observers.

"Foreign airlines should not receive preferential tax treatment if their countries choose not to open their markets to U.S. companies," Isakson said.

But there could be ripple effects. A spokesman for the International Air Transport Association, for instance, said the provision would "upend decades of precedent — which the U.S. has long supported — on the taxation of international aviation."

"Foreign governments — even those not directly affected by the proposed language — could be tempted to follow the U.S. example and impose reciprocal taxes," said Perry Flint, whose association represents some 275 airlines, including all of the players in the Gulf carrier dispute.

American Airlines is among the U.S. carriers that have complained about the Persian Gulf rivals. (Ron Baselice / Staff Photographer)

That point was echoed by the U.S. Airlines for Open Skies Coalition, the group of U.S. operators who've backed up the Middle Eastern trio. And even American spokeswoman Shannon Gilson, while still dinging the Gulf carriers, offered a muted response to the Isakson tax proposal.

"We agree wholeheartedly with our competitors at Delta and United that the Gulf carriers are being illegally subsidized," she said. "That said, tax reform is a separate, complex issue that also needs to be solved, and we view it as such."

Whether the aviation jab remains part of the GOP's tax push is unclear.

The Senate could vote on its version of the tax overhaul as early as this week. But lawmakers would then have to reconcile the legislation with the House's offering, which passed this month without the inclusion of the aviation provision.