Delta plans new services as deal ends Gulf acrimony

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May 15, 2018
Etihad bomb suspect death
Photo: Etihad.

Delta plans to push ahead with new international routes, American Airlines heralded it is a victory for US workers and United said it was an important step in the direction of a level playing field.

US carriers claimed vindication this week after a deal was signed May 11 to end an acrimonious war of words with Gulf carriers over alleged government subsidies.

A statement issued Monday after a meeting between US Secretary of State Mike Pompeo and United Arab Emirates Foreign Minister Abdullah bin Zayed Al Nahyan said “high-level political commitments” had been made to address US carriers’ concerns about government support of Gulf airlines.

The key win for US carriers appears to be that Abu Dhabi-based  Etihad Airways will now issue audited financial statements, something that Emirates already does.  The trade-off is that the existing 2002 Air Transport Agreement remains in force with all rights and provisions.

The statement declared an  intention by both governments to promote “best practices for marketplace participation by their airlines.”

Watch Emirates superjumbo creates a snowy blast.

The governments also understood that financial transparency was best served when airlines issue annual financial reports audited in accordance with internationally-recognized accounting standards.

“Emirates Airline and the U.S. airlines that provide or have provided scheduled combination international air services under the agreement have issued such reports for years,’’ the memo noted. “And Etihad Airways intends to do so upon completion of its restructuring and reorganization.

“Those airlines should endeavor to take steps to ensure that material transactions with government-owned providers of goods and services of either country are based on commercial terms.”

The governments plan to meet again within a year to review the progress of the deal, which is similar to one struck with Qatar in January.

The UAE told the US  there were no current plans to launch further “fifth freedom” flights —  services where a carrier whose flight originates in its home jurisdiction can pick up passengers in a  foreign country and fly them to a third country.

But this was muddied by a statement by the UAE Foreign Minister welcoming the agreement.

“Today’s announcement confirms business as usual by validating all of the rights and benefits –including ‘Fifth Freedom’ services — of the 2002 Air Transport Agreement between the two countries,’’ he said.

Emirates later reinforced that view.

“Contrary to some media reports, there is no freeze on any of the operating rights prescribed in the Air Transport Agreement or any tacit undertakings to do so,” it said. “The Record of Discussion also makes clear that the UAE and its designated carriers are, and have been at all times in full compliance with the agreement, and that there were never any violations of the agreement by UAE carriers.”

Emirates was also pleased the record of discussion recognized its “longstanding practice of publicly releasing audited financials in full compliance with international standards”.

“The closure of this issue permits Emirates in the US to solely focus on providing our customers with greater competitive choice and the best travel experience possible with our world-leading product,” it added.

UAE airlines currently serve 12 US gateways with 131 flights a week and supporters of the Gulf carriers estimate the services generate tens of billions of dollars into both economies and support hundreds of thousands of jobs.

While Delta CEO Ed Bastian did not specify which destinations the US carrier would add in the wake of the UAE deal, CNBC quoted him as saying the airline had been hurt in India and routes currently served by the Gulf carriers were ripe for the opportunity for Delta to fly.

Delta stopped flying to Dubai, home of Emirates, in 2015. It blamed unfair competition by the Gulf carriers.

In a joint statement with other US carriers welcoming the deal, Bastian described it “as a truly significant moment in a years-long pursuit of a level playing field for Delta and other U.S. carriers”.

American Airlines chief executive Doug Parker said the deal addressed “the illegal subsidies received by Emirates and Etihad Airways and most importantly help create a level playing for American workers.”

United’s Oscar Munoz added: “This development signals an important step in that direction and we applaud the administration for its efforts.

“United Airlines will continue to work as a constructive partner in advancing a competitive environment where American aviation can thrive and consumers win.”