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UAE Confirms Agreement With United States Over Emirates and Etihad: Says “Business as Usual”

UAE Confirms Agreement With United States Over Emirates and Etihad: Says “Business as Usual”

UAE Confirms Agreement With United States Over Emirates and Etihad: Says "Business as Usual"

For the past several years, the big three U.S. airlines – Delta, United and American Airlines, along with a number of other groups, have been battling against what they call the unfair expansion of Middle East airlines like Emirates and Etihad Airways into the United States.  They even created a lobby group, the Partnership for Fair and Open Skies, to make their point heard with as many lawmakers as possible.

They argue that the so-called Middle East Three or ME3 – made up of Emirates and Etihad Airways in Dubai and Abu Dhabi, UAE respectively, as well as Doha-based Qatar Airways, have received illegal government subsidies that have created an unfair playing field for U.S. airlines to compete with them.

The coalition of U.S. carriers says the ME3 are putting millions of American jobs at risk as they continue their unchecked expansion into the United States and around the world.  Much hope had been pinned on the election of President Trump and what appeared to be his protectionist policy stances.

Last year we saw the Trump Administration introduce what became to be known as the ‘Muslim Ban’ and then the ‘Laptop Ban’ – The embargoes only affected certain airlines, the majority of which were in the Middle East and included the ME3.  The Persian Gulf airlines saw demand drop off a cliff and profits were hit hard.

The American lobbyists had been hoping Trump would implement a protectionist approach to aviation like in neighbouring Canada – which limits the access of foreign airlines into the Canadian market.  The Administration said it would begin discussions with the government’s of the UAE and Qatar to enforce Open Skies regulations.

Emirates celebrates the arrival of its inaugural flight from Dubai International Airport (DXB) to Newark Liberty International Airport (EWR) via Athens International Airport (ATH) on Sunday, March 12, 2017, marking the launch of its twelfth U.S. gateway, Newark, N.J. (Stuart Ramson/AP Images for Emirates)

Essentially, Open Skies are international agreements between two countries that allow airlines from each country free access to the other.  Airlines like Delta claimed the ME3 were breaching the agreements because they received illegal government subsidies.

But the ME3 strongly denied these claims.  Emirates has always said it is operated as a commercial business – subject to the same market forces as any other business.  Etihad pointed to the huge loss it made in 2016 as proof it suffered the same problems as any other airline.

Earlier this year, the U.S. State Department and the nation of Qatar announced a landmark deal to bring the dispute to an end.  Many commentators hailed the deal as a victory for Qatar – the government-owned airline, Qatar Airways would open up its accounting books and confirmed it didn’t intend to start any fifth freedom flights to the U.S.

But that doesn’t mean that Qatar Airways won’t start a fifth freedom service in the future and the agreement didn’t put any other limits on the carrier.

As a brief explainer, a fifth freedom flight is when a foreign airline operates an international flight via a third country with the intention of picking up passengers for the onward journey.  Just like the controversial Emirates services from Dubai to Newark via Athens, Greece.  Emirates also operates a fifth freedom flight from Dubai to New York JFK via Milan, Italy.

At the time the agreement was announced with Qatar, we were led to believe that negotiations with the UAE were still ongoing – and now, after a weekend of speculation, an agreement with the Emirati government has been announced.  And it’s very similar to the deal struck with Qatar:

  • They have agreed to use internationally recognised accounting and auditing standards
  • They’ll apply commercial terms to all transactions
  • And they’ve agreed not to open any further Fifth Freedom flights

Lobbyists have hailed the agreement a victory for their campaign (and of course, for American jobs), saying the rules will prevent illegal subsidization of the government-owned airlines in the UAE.  In reality, analysts don’t expect anything to really change.

In fact, the UAE’s foreign minister, Sheikh Abdullah bin Zayed Al Nahyan has said the agreement “confirms business as usual by validating all the rights and benefits – including “Fifth Freedom” services — included in the 2002 Air Transport Agreement between the two countries.”

Sheikh Abdullah bin Zayed Al Nahyan, UAE Foreign Minister, meets with US Secretary of State Mike Pompeo in Washington DC.
Sheikh Abdullah bin Zayed Al Nahyan, UAE Foreign Minister, meets with US Secretary of State Mike Pompeo in Washington DC.

Those comments have led to some disagreement as to whether Emirates and Etihad can open another Fifth Freedom flight in the near future.  Peter Navarro, an assistant to President Trump has said there will be “no additional routes into the United States until further notice.”

‘That’s a promise that will be kept,” he claims.

The UAE, however, says they can open (or close) services as they see fit – depending on the commercial need and demand.  Just as U.S. carriers have the same freedom.  They have long argued that UAE-based airlines have supported hundreds of thousands of American jobs and contributed significant sums to the U.S. economy.

Both Emirates and Etihad have multi-billion dollar contracts with American aerospace giant, Boeing.  They say those contracts will support U.S. jobs for years to come.

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