U.S., UAE resolve airline subsidy battle
Both sides claim victory as Emirates, Etihad to open books
WASHINGTON — The United States and the United Arab Emirates signed a deal Friday to resolve a years-old spat over alleged Emirati government subsidies to its airlines and accusations of unfair competition in the U.S.
After months of negotiations, a deal was reached that was carefully constructed to allow both sides to claim victory. Yet in a sign of how testy the issue has become, the Emiratis and the U.S. airlines immediately disagreed about what the deal said about the most controversial issue: flights to the U.S. that don't stop in the UAE.
The deal was signed in private at the State Department by Assistant Secretary of State Manisha Singh and Emirati Ambassador to the U.S. Yousef al-Otaiba. The State Department declined to comment. The Associated Press obtained the text of the agreement, known as a “record of discussion.”
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.” The major U.S. carriers — Delta Air Lines, American Airlines and United Airlines — have long alleged those financials obscure billions in hidden subsidies by the Emirati government.
The more sensitive issue related to 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.
The U.S. airlines had sought a “freeze” — a binding commitment that they wouldn't offer any more Fifth Freedom flights — from the Gulf airlines. Instead, they got a side letter in which the Emiratis state they currently have no plans to add more of the flights. Currently, Emirates offers flights from New York-area airports to Milan, Italy, and Athens, Greece.
Otaiba, the Emirati ambassador, called that a victory, because Emirati airlines would remain “free to continue to add and adjust routes and services.”
Not so, said Scott Reed of the coalition representing the big three U.S. airlines.
“This agreement will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia,” Reed said in a statement.
The reality is somewhere in between. In the side letter, the Emiratis do not explicitly promise never to add more such routes but simply indicate none are planned. Still, the agreement rests on a tacit understanding between the U.S. and Emirati governments that more routes won't be added, several individuals familiar with the negotiations said.
The deal is expected to be announced Monday when the Emirati foreign minister visits Washington, according to a State Department official, who wasn't authorized to speak to reporters about the agreement and requested anonymity.
The deal closely mirrors one reached in January between the U.S. and Qatar. For the UAE, the agreement averts the more serious step U.S. airlines wanted: reopening the open skies treaties, which could ultimately lead to less favorable conditions for Persian Gulf airlines.