US and UAE sign deal to resolve airline competition allegations

David Casey May 14, 2018

An agreement has been reached between the US and United Arab Emirates designed to resolve claims that Gulf carriers have received unfair government subsidies.

The deal aims to address the concerns of major US airlines which claim that Emirates and Etihad have unfairly benefited from more than $50bn in government subsidies. State-owned Qatar Airways had also been implicated in the claim, but an agreement was reached between the US and Qatar in January.

The voluntary agreement between the US and UAE follows more than two years of pressure on the US government from American Airlines, Delta Air Lines and United Airlines over alleged government subsidies for Gulf carriers. Qatar, Etihad Airways and Emirates have denied those accusations.

Under the terms of the arrangement, UAE has committed to its airlines issuing annual public financial reports under internationally recognised accounting standards. When Etihad Airways’ restructuring is complete it will issue regular financial statements as Emirates does.

"The UAE is very pleased that our understanding with the US preserves all of the benefits of open skies for travellers, airlines, communities and aerospace companies in both countries and around the world," said Yousef Al Otaiba, UAE ambassador to the US.

"All the terms and provisions of the Air Transport Agreement including fifth-freedom rights remain fully in place, with UAE and US airlines free to continue to add and adjust routes and services."

Both nations added that aviation is an "essential part of the two countries vibrant commercial and economic relations, facilitating trade, tourism, investment and connectivity".

A statement from UAE Embassy added that all current and future rights for both countries' carriers to fly all flights, including fifth-freedom flights, remain in place as an outcome of the discussions.

“Airlines in both countries are free to continue to add, reduce or adjust flights and services consistent with the broad provisions of the 2002 Air Transport Agreement,” it said.

“These rights allow US and UAE airlines to operate services to the other via third counties.”

The UAE is the US' largest export market in the Arab world, generating an annual $15.7bn trade surplus for the US in 2017. UAE airlines are also the largest non-US buyer of US commercial aircraft.

A statement from the US Department of State said the two governments recognise "the possible adverse impact of government support on competition".

"This outcome is a result of the Department of State-led effort to address concerns about subsidized competition and a lack of transparency in the global aviation sector," it added.

"We are maintaining the open skies framework, which continues to yield real benefits for airlines, airports, labor, the travel industry, and consumers, among others. Our goal is to provide beneficial results for as many US stakeholders as possible."

The growth of Gulf carriers on routes between the US and the UAE and Qatar has far outstripped that of US counterparts over the past five years, despite the temporary ban on electronics and proposed travel restrictions hitting demand in 2017.