US and UAE Finally Reach Deal to End Airlines’ Feud

May 11, 2018

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A bitter spat between US airlines and United Arab Emirates-based carriers over aviation subsidies has finally come to a close — for now.

Officials from both countries privately signed a deal Friday that experts with inside knowledge of the agreement say was carefully worded so both countries could walk away feeling victorious.

US airlines have accused carriers from the UAE — namely Abu Dhabi-based Etihad and Dubai-based Emirates — of receiving secret financial subsidies from their government that put them at an unfair competitive advantage. The three major US airlines, United, Delta and American, accused Etihad and Emirates of obscuring billions of dollars’ worth of financial aid from the UAE government through surreptitious accounting practices. The Gulf airlines have long denied these claims.

Another point of contention for the three major US carriers was whether the Gulf airlines had plans to operate additional routes to the US from destinations outside of the UAE. Those routes, called fifth freedom flights, would undercut US airlines’ profits for the same routes, the US airlines contended. Emirates currently operates two such nonstop routes, from New York-Kennedy (JFK) to Milan (MXP) and Newark (EWR) to Athens (ATH).

Now, under the new agreement, both Etihad and Emirates will open their accounting books by publishing yearly financial statements that are “consistent with internationally recognized accounting standards.” This provision is a win for the US airlines, who have long believed that the subsidies would end if the Gulf carriers’ accounting practices were transparent.

Also on the alleged subsidies, the deal states “that such government support in whatever form may adversely impact competition in providing international air transportation.”

But, as a concession, language was also added to the deal that states government subsidies are neither “uncommon nor necessarily problematic” in international aviation.

The UAE airlines also say in the deal that they have no future plans of adding fifth freedom flights. (Technically, the Gulf carriers say in the deal they don’t have any fifth freedom flights planned — not that they promise to never add any more in the future — but officials say this is just another example of the careful wording that lets both sides feel like they’ve bested the other).

The deal will not be publicly announced by officials until Monday, but an unnamed US State Department official confirmed to the Associated Press that the agreement had been signed by representatives of both nations.

Both countries have spent months negotiating a potential deal to end the feud, with rumors swirling in mid-April that a potential deal was on the horizon. The US and Qatar reached a similar agreement in January.

The new deal is probably a welcome conclusion for the US carriers, who have collectively spent significant chunks of money lobbying two presidential administrations over the course of three years to take action on the matter.

H/T: AP

Featured image by Alberto Riva / The Points Guy.

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