May 14 - A House Of Cards No Longer


INDUSTRY ANALYSIS

 

US Protects Airline Consumers with UAE Agreement

 

May 14, 2018, WASHINGTON, DC – This afternoon in Washington, DC US Secretary of State Mike Pompeo and Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation for the United Arab Emirates, will meet to formally announce the results of Open Skies discussions between the two countries.

Business Travel Coalition and OpenSkies.travel today issued the following statement.

The United States (US) and the United Arab Emirates (UAE) last week concluded informal technical discussions with no restriction, limit or prohibition whatsoever on Etihad’s or Emirates’ right to fully and freely exercise their Fifth Freedom rights(*) contained in the US-UAE Open Skies Agreement.  A great victory for consumers and competitive choice!

It is only fitting that, in a scripted Washington, DC House of Cards kind of way, a political campaign based on a legal fabrication compounded by lies and fueled by seemingly limitless corporate money would end with bizarre claims of victory even when, by the “victors” own definition of success, it was a colossal failure. That is precisely what happened last week when news broke that the US and the UAE reached an understanding to end a three-year-old fake controversy.

Delta Air Lines and American Airlines were unambiguously clear about what constituted victory for each company. Let’s see exactly how the US-UAE agreement measures up to how Doug Parker, CEO of American, and Ed Bastian, CEO of Delta, defined victory.

In a September 2016 interview, with the publication The Street, Parker said his bottom line was to end Fifth Freedom Europe-US flying. Two months ago Parker doubled down telling the US Chamber of Commerce’s Aviation Summit “[w]hat really matters is that they [Qatar Airways] will not add fifth freedom flights (a false claim), and that is what we hope to see happen with the UAE as well.”   

In a 2016 earnings call, Bastian was asked what is Delta’s bottom line for victory? Bastian said, “freezing and/or eliminating fifths would be a great start.” It logically follows that failing to freeze or eliminate Fifth Freedom flying would be a terrible outcome, right? If success has many fathers, then failure has many spin-doctors.

In an extraordinary statement on its website, that would make even House of Card’s Francis Underwood blush, the lobbying arm for Delta, American and United – the Partnership for Open & Fair Skies - says, “This agreement will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia.”  Likewise, Delta’s Washington advocacy organization - Americans for Fair Skies - similarly trumpeted, “the UAE has agreed to end its market-distorting subsidies & freeze any additional new 5th freedom routes into the U.S.”                                       

Contradicting those statements, in no uncertain terms, the Embassy of the United Arab Emirates in a May 11 statement stated, “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 ATA.”

Furthermore, a 5-paragraph statement from Emirates puts even finer points on the US-UAE agreement.

“Emirates airline welcomes the conclusion of informal technical discussions between delegations representing the Governments of the UAE and the United States. 

The Record of Discussion and related side letter fully preserves Open Skies as per the existing Air Transport Agreement between the US and the UAE, guaranteeing complete commercial flexibility that benefits consumers, communities, and the economies of both countries.

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. 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.

We are pleased to note that the Record of Discussion explicitly recognizes 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. 

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.”

Finally, episodes of the House of Cards are no longer; the series has been canceled. The US airline protagonists have wasted tens of millions of shareholder dollars without a return while inadvertently making the ironclad case in Washington, in full view of Brussels, that antitrust immunizations and industry consolidation can produce greed, arrogance and protectionist, highly anticompetitive behaviors. One can only hope that the shareholders and Boards of Directors at Delta, American and United finally hold their managements to account for their fiduciary recklessness.

(*) A Fifth Freedom allows a carrier to transport revenue traffic from its home country to a second country and onto a third country.

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