The US and United Arab Emirates have agreed a deal to resolve a bitter dispute between both countries’ major airlines, following allegations that Emirates and Etihad Airways breached the US-UAE open skies agreement by relying on unfair government subsidies.
As part of the deal, Emirates and Etihad Airways have reportedly agreed to voluntarily publish annual financial statements, opening up their books to conform to “internationally recognised accounting standards”, Associated Press reports, which obtained a copy of the deal or “record of discussion”.
The deal follows months of negotiations and ends a long-running dispute between the US and UAE airlines. The Partnership for Open & Fair Skies lobbying group – which counts Delta Air Lines, American Airlines and United Airlines as it members – had accused the UAE carriers of benefiting from billions of dollars of unfair subsidies from the UAE government.
The deal was reportedly signed in private on 11 May at the US State Department by assistant secretary of state Manisha Singh and Yousef al-Otaiba, UAE’s ambassador to the US. A public copy has not yet been published.
In a statement on 14 May, a State Department spokesperson confirmed that Etihad plans to publish its financial reports on completion of its restructuring, but added that “Emirates Airlines and the US airlines [concerned] have issued such reports for years”.
The State Department said that the two governments “recognise the possible adverse impact of government support on competition” and affirmed their commitment to financial transparency. However, AP added that the deal paradoxically states that “government support in whatever form... is neither uncommon nor necessarily problematic in the global aviation sector”.
The negotiations also addressed the controversial issue of Fifth Freedom flights, which allow UAE airlines to operate flights to the US from third countries.
AP reported that the UAE stated in a side letter to the deal that Emirates and Etihad do not currently plan to offer any more of these flights. Emirates began operating its second fifth-freedom service to the US last March, from Dubai to Newark Liberty International Airport via Athens, following authorisation by the Greek government.
US airlines have long believed that such flights have allowed UAE carriers to undercut them on certain routes and reportedly sought a complete “freeze” of these routes.
The UAE contradicted the AP report when Sultan bin Saeed Al Mansoori, the UAE minister of economy and chairman of the country’s civil aviation authority, said that there would be “no freeze on or any change to operating rights”.
“The UAE's international airlines can plan and begin new services, including Fifth Freedom flights, without limits and consistent with the 2002 Agreement,” he added.
However, AP quoted several individuals familiar with the negotiations saying that the agreement rests on a tacit understanding between the governments that more routes won’t be added.
The deal is similar to one reached between the US and Qatar in January, which followed similar complaints by US airlines regarding unfair Qatari subsidies. As part of that deal, airlines from both countries agreed within two years to publicly disclose significant new transactions with state-owned enterprises and to take steps to ensure that such deals were based on “commercial terms”.