United States & United Arab Emirates Reach Deal On Open Skies

For several years the “big three” US carriers have been running a smear campaign against the Gulf carriers. I think they could have had a case, but instead they were running a campaign based on faux-patriotism, suggesting that if the Gulf carriers aren’t stopped then airline employees in the US will lose their jobs, and that we won’t be able to get our military where they need to be. Yes, unfortunately I realize campaigns like this often work, and that’s why they took such a disingenuous approach.

The US carriers didn’t have any luck pleading their case with the Obama administration, and they haven’t had much luck with the Trump administration either. Of course they (especially Delta) want to save face, so they don’t want to come out of this looking like they lost.

In January the US and Qatar reached an agreement in their dispute, which was a victory for Qatar Airways. Under this agreement, Qatar Airways agreed to release audited financial statements in accordance with internationally recognized accounting standards, and Qatar’s civil aviation authority had to agree that they were unaware of any plans by Qatar Airways to start fifth freedom flights to the US. That didn’t even restrict them from doing so in the future.

This deal was specifically between the US and Qatar, and didn’t include anything between the US and UAE. We had heard rumors that a deal between the US and UAE would be reached soon, and it looks like that happened today.

The Open Skies battle between the US and UAE is now over. This deal was signed in private today at the State Department by Assistant Secretary of State Manisha Singh and Emirati Ambassador to the US Yousef al-Otaiba.

So, what’s included in this deal, which is said to have been carefully crafted to allow both the US and UAE airlines to claim victory? According to the AP:

Under the deal, Dubai-based Emirates and Abu Dhabi-based Etihad Airways agreed to voluntarily open up their accounting books by publishing annual financial statements “consistent with internationally recognized accounting standards.”

In a side letter, the Emiratis state they currently have no plans to add more so-called “Fifth Freedom flights” in which passengers can fly to or from the United States to third countries without ever setting foot in the UAE. Those flights have long been the bane of the U.S. carriers, who argue the flights undercut their own routes.

“The delegations stated that government support in whatever form — including policies, practices, and rules — is neither uncommon nor necessarily problematic in the global aviation sector,” the agreement says, paradoxically.

US airlines weren’t able to get a full “freeze” on fifth freedom flights here, in the sense that there’s not a binding agreement from the Gulf carriers that they won’t add these routes in the future. The UAE doesn’t promise to never add these routes, but simply indicates that none are planned as of now. Still, it’s said that the agreement rests on the tacit understanding that more of these routes won’t be added.

Not surprisingly, the Partnership for Open & Fair Skies (the lobbying group for American, Delta, and United) has already sent out a press release claiming victory:

“This agreement is a win for American jobs and shows that President Trump stands up to countries that violate our trade agreements,” said Scott Reed, campaign manager for the Partnership for Open and Fair Skies. “We are extremely pleased that the UAE has finally admitted what we have said all along – its government subsidies harm competition. This agreement will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia. We deeply appreciate President Trump’s leadership in enforcing our international agreements and standing up for American workers.”

Yawn…

This agreement is basically structured the same as the deal between the US and Qatar. As I said then, I consider this to be much more of a victory for the Gulf carriers than the US carriers.

It’s business as usual for the Gulf carriers. They haven’t even been interested in adding more fifth freedom flights to the US, and they’ve naturally been reducing, rather than adding, capacity to the US.

Ironically this resolution doesn’t even get at the crux of what the US airlines were claiming, which is that the Gulf carriers are capacity dumping in the US. They can continue to funnel as many passengers as they want through their hubs as part of this agreement.

We can now put this, long, ridiculous, stupid fight behind us, which was such a waste of resources for everyone involved.

Comments

  1. Now how about the US3 stop colluding to freeze the ME3 by reinstating codeshares.

  2. Aaaaaaand… cue the xenophobic Trump-scum bleeting nonsensical rubbish. Lock ‘er up, lock dem Muslims up…or something along those lines? Go for it guys.

  3. “This agreement is a win for American jobs and shows that President Trump stands up to countries that violate our trade agreements…” THEY WERE DEFEATTED BUT THEY CLAIIM VICOTRY!!!!!! THIS IS HARDLY DRUMPHS ‘STANDING UP TO” ANYYONE!!!!!!!1!!!!!

  4. Ironically after being the beneficiaries of the A380 and other large aircraft that could shuttle large groups of people to their hubs, the Gulf carrier’s are increasingly being undone by the 787 and other planes that allow for thin non-stop routes internationally that simply hop over them. Having the nicest business class seat doesn’t really matter if your flight takes you an additional 5-10 hours to complete.

  5. Maybe I am in the minority but I would rather fly Emirates Biz class (for ex) with a stop versus United direct somewhere. I dont mind a few extra hours if I get to enjoy a superior product. But thats me.

  6. Well, if the ME3 must publish their financial reports in accordance with international standards, it will finally be clear that at least 2 of them are totally unsustainable as businesses and that they are in fact dumping seats in order to generate at least some sort of cashflow. Any normal, non government supported business would have been bankrupt for years already this way, something that Al Baker admitted himself in Berlin lately.
    This whole Open Skies thing is more political ass kissing than that it has anything to do with promoting sound business practise.

  7. *facepalm*

    Spend millions of dollars, maintain status quo and proclaim victory!
    Does Partnership for Open & Fair Skies really think we are that stupid?

  8. I agree with ‘Chatter’. There’s no way I’d fly a U.S. carrier overseas. I feel sorry for mileage whores who fly United when they could be flying Air France, or Delta when they could be flying JAL. I’ll happily connect – even layover – to stay off any airline based in the States.

  9. I guess their number are dwindling, but did Japan ever complain about US3 fifth freedom flights from NRT to elsewhere in Asia?

  10. @Super VC-10 wrote “There’s no way I’d fly a U.S. carrier overseas.”

    I would. Air China, China Eastern, no, I’d fly United or Delta, instead. But EVA Air, Cathay Pacific, sure.

  11. I think Derek and SuperVC and I are pretty much saying that good Intl flight > US > shitty intl flight. So yes, will take a stopover with Emirates but maybe not with …. ???

  12. @ chatter and @ super vc-10, sooo right. Why fly the crappie us3 when there are way better choices.?BTW I used to love flying the vc-10 as a child

  13. Umm…it is already working. Clearly Emirates and Etihad saw this coming and is the reason behind their cutbacks so they don’t get caught showing massive unsustainable losses that are being subsidized by endless capital injections from their governments. I still can’t understand the vitriol behind the US3 position. Privately funded companies cannot compete against government funded companies It is literally one of the first things they teach you in business school.

  14. Of course the biggest subsidized airlines in the world are domiciled in China. Then again, the US3 would never rail against that, lest they lose the precious PEK and PVG slots.
    In fact, the US3 are busy bowing BIGLY to the Chinese Communist party parroting the Chinese party line.

  15. Did you miss the accompanying press release by Delta. In it they reaffirmed their commitment to American jobs and announced the cancellation of all their Airbus orders. NOT.

  16. It’s interesting how the US3 accused the ME3 of dumping capacity to the US yet the US3 have said nothing about the handful of Chinese airlines that have started service to the US, especially LAX.

  17. @ AT and @Ed
    Don’t worry, they will get to the Chinese airlines. Right now, we have bigger fish to fry when it comes to Chinese dumping in several industries, many of which are strategic. I.E. it will be hard to win a war in 50 yrs against a China that will have 100 times the manufacturing capacity of the U.S. Particularly if we allow our existing base of manufacturing steel, autos, airplanes, weapons and the replacement parts to support those to go out of business. China is engaging in state sponsored subsidization of these industries for the purpose of eroding profit margins industry wide and driving U.S. privately funded companies out of business to deny us the ability to make these things in the future and strengthen their strategic position to project their power.

  18. The vast majority of people fly to get somewhere at a specific time and often within narrow time frame around work and family obligations. While it’s nice to say you would love to take a Gulf carrier over anything else the reality is that if one airline is offering hours if not in some cases a days worth of time wasted not being where a person wants to be they will simply take the most direct and nonstop flight.

  19. @ Foppe

    “if the ME3 must publish their financial reports in accordance with international standards, it will finally be clear that at least 2 of them are totally unsustainable as businesses”

    So exactly the same as the US3, then, which each had to go through Chapter 11 to shed a mass of investment debt before they could emerge as “profitable”?

    The only significantly-sized airline that hasn’t done that, and is hugely and genuinely profitable, is much-hated British Airways – and all the avgeeks on here complain about its elderly equipment…

  20. Look, while EK does publish financials – we all know they’re BS.

    They unwittingly revealed the depths of their corruption in last weeks summary.

    4% less employees at the airline – alongside a company wide pay freeze, no bonus given, break of contracts, huge cost cutting across the board in every facet of employee expenditure, no investment made. So they must have saved a lot of money huh?

    And Yet…. the total cost of ’employees renumeration’ went UP 4% against all the above. How is that possible? The difference rounds out to $380m that has gone unaccounted, or more likely to some tiny select group of ‘managers’.

    We all expect they’re taking from the kitty, but this much?

    I’d love a journalist to ask Timmy on camera, where that money went.

  21. I read this just to see comments from “Rob”, and his comments were a great pleasure to read.
    He actually thinks this is a victory for the US, amazing! And I bet he honestly truly is foolish enough to think all those manufacturing jobs will ever return to the US.

  22. However you view the US3’s statements on Gulf routes, it is odd that a US carrier doesn’t have a single slot at a single airport in the gulf while multiple ME3 carriers have dozens of slots all across the US. You can’t silence the statistics

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