In 2002, the US and UAE agreed to allow carriers unrestricted flight rights into either country. Since then the agreement has been continually called into question by the big three US carriers – United, American and Delta – who claim that airlines from the Gulf, including Emirates and Etihad, were able to grow rapidly thanks to government subsidies that violated terms of the agreement.
Both the UAE’s biggest carriers have always vehemently denied the allegation. However, a series of travel-related restrictions levied against Middle Eastern airlines by the US government last year, including the infamous laptop ban, brought forward a sense of urgency that the open skies debate needed to be resolved.
That resolution, of sorts, happened last week when the US and UAE announced the conclusion of negotiations over whether Emirates and Etihad could continue to fly to the US as per the Open Skies accord.
Through their lobbying body, the Partnership for Open and Fair Skies, the US carriers toasted “a win for American jobs” saying, “The UAE has finally admitted what we have said all along – its government subsidies harm competition.
Unfortunately, not everyone was on the same page. Emirates also sent out a statement saying the new deal “explicitly recognises Emirates’ longstanding practice of publicly releasing audited financials… as well as engaging in arms-length market-based third party transactions without recourse to government subsidies.”
It takes two to make a deal, and there seems to be no mutual agreement about the new one”
Missing details
Besides financials, a core point of contention between Gulf airlines and the US carriers have been so-called “fifth freedom” flights – rights that allow an airline to stop in a second destination and carry passengers on to a third. Emirates currently flies into the US on a number of routes via European cities and was looking to grow its fifth freedom operations.
“This agreement will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia,” read a statement from the Partnership for Open Skies.
“Contrary to some media reports, there is no freeze on any of the operating rights prescribed… or any tacit undertakings to do so,” Emirates then claimed.
When Arabian Business asked Emirates chairman Sheikh Ahmed Bin Saeed Al Maktoum what he made of the situation, he said, “We won’t expand for no reason… [But] under the bilateral [agreement] we can.”
That understanding was echoed by Sultan Bin Saeed Al Mansoori, Minister of Economy and chairman of the General Civil Aviation Authority. UAE airlines can now, he said, “plan and begin new services, including fifth freedom flights, without limits.”
The two-way capacity between the US and the UAE
So who is right?
It takes two to make a deal, and there seems to be no mutual agreement about the new one. The Partnership for Open and Fair Skies took out media ads praising President Trump’s “decisive action” – an obvious attempt to woo the President by appealing to his jingoistic voter base.
Unfortunately, it’s probably the only way they can woo him. The US administration might like congratulatory adverts for its tough line, but it also has a “Made in America” promise to honour – and Emirates has an outstanding $76bn order for 150 Boeing airplanes.
Sir Tim Clark has already said that if the Open Skies accord were to be revised, “I certainly won’t need those 150 planes”.
And this is the point. Last year, the International Air Transport Authority (IATA) pushed back against political rhetoric and protectionism, and US carriers are unwise to rely on domestic politics to win a global argument about aviation’s growth.
In the last few years, the big three US carriers have picked Boeing once, by American Airlines for a $12.3bn order for new A350s.
At the last Dubai Airshow, Emirates and Flydubai bought aircraft worth nearly three and a half times that amount.
The lesson is obvious to anyone outside Trump’s America: look where the money is coming from. Emirates clearly has the upper hand.
Shayan Shakheel, CEO Middle East editor
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