ATW Editor's Blog

US Big 3 glosses over UAE Open Skies outcome

by Karen Walker
Jun 25, 2019

Reading the US Partnership for Open & Fair Skies’ press release on the US-UAE joint government policy statement on their Open Skies agreement, the expression "lipstick on a pig" comes to mind. Except it’s more about gloss than lipstick.

The whole saga began some five years ago when American Airlines, Delta Air Lines and United Airlines were riled about Emirates starting its Dubai-Milan-New York Fifth Freedom service, as permitted within the US-UAE Open Skies agreement. The US carriers joined forces with their labor groups, hired a Washington lobbying group and began a large public campaign to curtail the growth of the three large Gulf carriers—Emirates, Etihad and Qatar Airways—and Emirates in particular. The message was that these carriers were heavily subsidized by their governments and were therefore contravening the UAE and Qatar Open Skies pacts.

It’s been a long, weary, expensive road since then, mostly benefiting lawyers and lobbyists. But it seemingly came to a conclusion in 2018 when the Trump administration and the UAE and Qatar governments each released Records of Discussion documents that essentially upheld the Open Skies pacts, while making clear that heavy government subsidies were not allowed, and that the Gulf carriers should make their annual financial records transparent.

But those Records of Discussion quickly turned contentious when White House trade director Peter Navarro started talking about “side letters” in which the UAE and Qatar had also agreed their airlines would not add any more Fifth Freedom flights via Europe to the US. Qatar Airways, which did not operate any such flights, seemed okay to go along with this. The UAE was not happy. Emirates, by this time, was also operating Dubai-Athens-New York as well as the Milan flights and did not want any implication that it was not entitled to add similar routes. And Navarro had implied that the terms of the UAE Open Skies agreement had been changed, when they had not.

Among US carriers, meanwhile, JetBlue Airways—which will operate its planned new transatlantic flights under US-UK and US-European Union rights—and cargo carriers like Atlas Air and FedEx, which need the Fifth Freedom rights, saw a gnawing away of Open Skies bedrock principles. They opposed what the “Big 3” US carriers were doing via the US Partnership for Open & Fair Skies’ campaign.

The interpretation and positive reception of this week’s US-UAE joint policy agreement has been unified and overwhelming, with travel consumer organizations joining the Atlas-FedEx-JetBlue coalition and Emirates in seeing it as a clear reaffirmation of the 2002 US-UAE Open Skies agreement, complete with full Fifth Freedom rights for all airlines.

The Open & Fair Skies campaign, meanwhile, glosses over this with a statement about its gratitude to President Trump for taking up the issue with the UAE leadership. But it also claims, contrary to the policy statement, that the 2018 side letter “halted the UAE’s plans to expand flights through Europe to the United States.”

I asked the organization to clarify that statement and was given this response, attributed to managing director Scott Reed, “Last year’s agreement with the UAE included a side letter in which the UAE agreed that its airlines would not launch further fifth freedom flights to the United States.” Which is a repeat of the press release that does not align with the government policy statement.

American, Delta and United have put so much money into this issue, it’s hard to see them giving up even now, which likely explains why the Open & Fair Skies press release sticks to the same talking points. They are also now focused on Qatar Airways and its 49% stake in Air Italy, which operates to the US under US-EU Open Skies, but which the US carriers insist is a Qatar Airways’ Fifth Freedom route. It’s not; if it were, then BA's flights to the US would also be because Qatar Airways also has a substantial stake in IAG, parent of BA, an American Airlines partner.

The biggest point of all, however, is not the scrap over Fifth Freedom interpretations. American, Delta and United went into this long campaign determined to clip the wings of the Gulf carriers by demonstrating that they had violated the fair-and-equal opportunity to compete principle of open skies. Had the US carriers demonstrated this beyond the circle of their own employees and labor groups, the two Open Skies agreements might have been torn up. Most tellingly, the US carriers have never acted on their beliefs by filing an International Air Transportation Fair Competitive Practices Act complaint. Meanwhile, their share of the transatlantic market within antitrust immunized alliances (American with British Airways, Delta United with Lufthansa and the pending expanded Delta-Air France-KLM-Virgin Atlantic joint venture) has grown to the point where they dominate the market and dictate its fares.

The Trump administration appears to get that.

karen.walker@informa.com

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