U.S. and UAE Settle Long-running Open Skies Debate

 - May 13, 2018, 12:04 PM

The U.S. and UAE governments have reached an agreement to resolve the years-long debate surrounding open skies policies between the two countries and alleged government subsidies. The deal, expected to be formally announced on Monday, resembles an agreement reached with Qatar in January and will not amend the U.S.-UAE open skies agreement, which according to both sides has created “many benefits” and are an important part of the two countries’ “vibrant” commercial and economic relations.

The UAE is the largest international buyer of U.S. commercial aircraft, the largest importer of U.S. goods in the Arab world and host to over 1,500 American firms, according to the Record of Discussion seen by AIN.

As part of the deal, of which the sides reached terms on Friday, the U.S. acknowledges that many airlines are fully or partially state-owned and government support is neither uncommon nor necessarily problematic in the global aviation sector. While the text notes that government support in whatever form “may adversely impact competition,” it does not accuse either side of distorting the market’s level playing field.

The US major airlines for years argued that the Gulf carriers received $50 billion in unfair subsidies from their governments over a decade, accusations Emirates, Etihad Airways, and Qatar Airways denied. They, in turn, said the U.S. airlines benefited from government support after the 2001 terrorist attacks and from bankruptcy rules that wiped out debts and pension obligations.

The UAE is committing financial transparency for its airlines, and Etihad will publish annual financial statements in accordance with internationally-recognized accounting standards after its restructuring. Emirates has published audited financial reports for many years.

A confidential side letter to the agreement states that there are currently no plans to expand fifth-freedom routes; however, it doesn’t outright prohibit the two UAE airlines from operating more fifth-freedom flights. U.S. carriers, keen to protect the lucrative transatlantic market, are irritated by Emirates’ flights to the U.S. from Dubai via Milan Malpensa and Athens.  FedEx is the largest operator of services using fifth freedom rights, maintaining a regional hub in Dubai, the UAE noted.

Just as had happened following the deal with Qatar, both sides described the accord as a win.

“The UAE is very pleased that our understanding with the U.S. preserves all of the benefits of open skies for travelers, airlines, communities, and aerospace companies,” said UAE Ambassador to the U.S. Yousef Al Otaiba.  “All the terms and provisions of the air transport agreement including fifth freedom rights remain fully in place, with UAE and U.S. airlines free to continue to add and adjust routes and services.”

Scott Reed, campaign manager for the Partnership for Open and Fair Skies, a coalition of American Airlines, Delta, United Airlines, and labor groups that campaigned for a review of the open skies deal with the two Middle east countries, said the UAE agreement amounts to a “win for American jobs and shows that President Trump stands up to countries that violate our trade agreements.”