Boost for carriers as US and UAE reaffirm open skies agreement and 'fifth freedom' rights

Etihad Airways and Emirates free to keep expanding capacity in the United States following years of wrangling with big-three American rivals over accusations of unfair competition

Delta and the other big US carriers United and American Airlines have been urging their government to restrict the expansion of Gulf rivals. Charlie Riedel / AP Photo

The UAE’s ambassador to the United States welcomed a deal between the two countries following discussions that he said would ensure fair competition between airlines around the world.

The recent talks - part of a Record of Discussion signed and released by the two governments - involved Emirates and Etihad and resolved a dispute that centred on US claims that carriers from the Gulf, Qatar Airways included, received unfair government subsidies. The Gulf airlines have long denied this, instead saying that their rivals Delta, American Airlines and United were unable to compete with them.

“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,” the ambassador, Yousef Al Otaiba, said in a statement released on Friday.

The open skies agreements that the United States has signed since 1992 with Gulf states and other countries are designed to eliminate government involvement in airline decision-making about routes, capacity and pricing in international markets.

"We are pleased to note that the Record of Discussion explicitly recognises Emirates’ longstanding practice of publicly releasing audited financials in full compliance with international standards, as well as engaging in arms-length market-based third party transactions, without recourse to government subsidies," an Emirates spokesperson said.

"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."

During the discussions between the US and UAE the principles of open skies were "strongly reaffirmed", as was the 2002 air transport agreement between the two countries.

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The ambassador said the UAE was free to add routes and services including for 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.

"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,” he said.

Currently, Emirates offers flights directly from New York airports to Milan, Italy, and Athens.

The US airlines have feared Emirates or Etihad could expand their offerings by adding flights from Abu Dhabi or Dubai to, say, Paris or London, stop to pick up more passengers, then fly on to New York.

Since 2015 the largest American carriers have urged the US government to take action against the airlines by restricting their expansion.

The UAE also raised concerns about some US policies and practices that may adversely impact competition for international air services. In the Record of Discussions, both countries marked their intentions to promote best practice relating to market participation.