Def. Airline Related but some will turn it into a Political Item

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May 14, 2018 @ 11:28 AM 1,023 2 Free Issues of Forbes

Airline Groups Praise President Trump On Deal With Gulf Carriers, But Questions Linger

Marisa Garcia , Contributor I offer an insider’s view of the business of flight. Opinions expressed by Forbes Contributors are their own.

An ongoing dispute between the top three U.S. airlines — American Airlines, Delta Air Lines, and United Airlines — and Gulf carriers — Emirates, Etihad Airways and Qatar Airways — over alleged unfair subsidies appears to have been resolved satisfactorily, but differences in the understanding of the terms linger.

On Friday evening, Americans for Fair Skies and the Fair and Open Skies Group issued statements praising President Donald J. Trump as instrumental in protecting U.S. airlines from alleged unfair competitive practices by Gulf airlines, involving claims that government subsidies allow Gulf carriers to operate loss-making routes.

“[A]s a result of President Trump’s leadership on trade enforcement to safeguard U.S. jobs, the United Arab Emirates (UAE) has agreed to end its market-distorting airline subsidies and freeze any additional new Fifth Freedom routes into the United States. This is a huge step forward in the fight for fair competition in the international aviation marketplace,” Americans for Fair Skies said in their statement. “President Trump’s leadership and deal-making savvy have now led to successful negotiations for U.S. workers with both the UAE and the State of Qatar, which was announced this past January.”

Fifth Freedom refers to a category of Freedoms of the Air established by the International Civil Aviation Organization (ICAO). Fifth Freedoms let airlines sell tickets to carry passengers from stops in countries between their home country and a third country as the ultimate destination. France authorizing the sale of tickets from Paris to New York on a flight that originated in Singapore but stops in France to pick up additional passengers is an example.

Scott Reed, campaign manager for the Partnership for Open and Fair Skies, said in a statement: “This agreement is a win for American jobs and shows that President Trump stands up to countries that violate our trade agreements. We are extremely pleased that the UAE has finally admitted what we have said all along — its government subsidies harm competition. This agreement will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia. We deeply appreciate President Trump’s leadership in enforcing our international agreements and standing up for American workers.”

Americans for Fair Skies added, “[T]he Trump Administration successfully received assurances from the UAE and Qatari governments that they will not operate any new Fifth Freedom flights into the United States. This is huge, especially for the UAE, as Emirates had been planning a massive, job-killing expansion into the United States, which is now frozen.”

Emirates Response

When contacted for this story, Emirates presented a different view of what was accomplished. A spokesperson for the airline responded: “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,” the Emirates spokesperson continued.

 

“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 U.S. to solely focus on providing our customers with greater competitive choice and the best travel experience possible with our world-leading product.”

 

The Associated Press, which first reported on the disparity of perceptions on Friday evening, finds that the language of the documents was tailored to allow all parties to save face and claim a win, sometimes with contradicting statements.

 

News over the weekend disseminated by Spanish airline news blog, Va de Aviones, raised questions of whether other trouble may be brewing for Emirates in the Americas.

 

Va de Aviones reported that Mexico’s transport secretary had cancelled Emirates' permit to operate flights to Mexico City connecting through Barcelona. The Spanish government had granted Fifth Freedom rights to Emirates this March, which allowed Emirates to fly from Dubai to Barcelona and sell tickets onward to Mexico City. This cancellation was confirmed by additional reporting from EnElAire and SDPnoticias. (All links in Spanish.)

 

 

 

The reason given for the cancellation was that Aeromexico planned to re-start service between the two cities, which the airline had previously cancelled in 2012. Flights, expected to launch later this year, will be operated by Aeromexico’s new Dreamliner aircraft.

 

It is notable that Delta Air Lines holds a 49% equity share in Aeromexico. The two carriers have a joint cooperation agreement (JCA) to operate transborder flights between the U.S. and Mexico. When the JCA and shares purchase were formalized last May, Delta asserted the alliance would “allow the carriers to expand competition and serve new destinations.”

 

 

“The ability to cooperate fully with Aeromexico brings additional competition to one of the most dynamic transborder markets in the world,” Delta’s CEO, Ed Bastian said at the time.

 

When asked about the cancellation of the Barcelona to Mexico City route, an Emirates spokesperson neither denied nor clarified reports.

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The only people turning this into a political story are the politicians themselves. This is seriously screwed up. 

 

Navarro clashes with State Department over UAE airline deal

by Josh Lederman | APMay 22 at 2:17 PM

WASHINGTON — After striking a delicate deal with the United Arab Emirates this month on rules for airline competition, the Trump administration went to war with itself.

It’s a story of how a wonky aviation pact became a bitter, lobbyist-fueled international incident when Peter Navarro, President Donald Trump’s trade adviser, repeatedly contradicted the State Department’s carefully crafted script about what the agreement actually said. The Emiratis complained to the administration.

The drama has played out as Navarro, a nationalist who has sought aggressive protections for U.S. businesses, seeks to assert authority from his perch at Trump’s recently created White House trade and manufacturing policy shop. Earlier in May, tensions between Navarro and Treasury Secretary Steven Mnuchin over Navarro’s role in China trade talks erupted into a profanity-laced confrontation in Beijing, Bloomberg and the website Axios reported.

In the airlines dispute, the most explosive issue was so-called Fifth Freedom flights, by which Emirati airlines fly directly from the United States to places like Europe, never stopping in the UAE. The major U.S. airlines loathe such flights, which compete with their own lucrative routes.

Navarro has insisted that the deal includes a “freeze” in such flights. The State Department, which overseas international civil aviation agreements, insists it does not.

From the start, Navarro sought to exert influence over the negotiations, pushing for stricter limitations on Persian Gulf airlines, according to half a dozen U.S. officials and other individuals involved in the dispute. They weren’t authorized to discuss the issue publicly and requested anonymity.

After a similar deal with Qatar’s airline was reached earlier, Navarro intervened last-minute and demanded changes to the agreed-upon text, two of the individuals said. So concerned was the State Department that the deal would be scuttled that at one point Assistant Secretary of State Manisha Singh urged parties with a stake in the fight, such as the U.S. cargo airlines, to voice concerns about Navarro directly to the White House, other officials said.

Navarro disputed the notion he had undermined the State Department or created discord over the agreement.

“The White House worked collaboratively on this issue through the inter-agency process” with the State Department, Navarro said. A senior State Department official also said the effort had been “collaborative” and geared toward achieving “a positive result for as many U.S. stakeholders as possible.”

But behind the scenes, the dispute devolved into one-upmanship, word games and subtle subterfuge, magnified by hard-hitting lobby groups that have seized the chance to exploit divisions within Trump’s administration.

The deal with the Emiratis was reached May 11 after months of negotiations. The agreement itself glossed over Fifth Freedom flights, which were instead resolved in a “side letter” from the Emiratis. In the letter, obtained by The Associated Press, the Emirati economic minister says both of his country’s airlines “voluntarily” informed the UAE that they had “no current plans in place to make any changes” to the routes. There is no talk of a freeze or commitment not to change those plans in the future.

By design, the letter was to be kept private, allowing both sides to save face by staying intentionally vague about its contents. But within hours, both the U.S. airlines and the Emiratis rushed to define the agreement on their terms.

The Partnership for Open & Fair Skies — a lobby group for Delta Air Lines, American Airlines and United Airlines — said the agreement “will freeze Emirates and Etihad Airways from adding additional direct flights from the United States to Europe and Asia.” An hour later, Emirati Ambassador Yousef al-Otaiba said the opposite, insisting his country’s airlines were “free to continue to add and adjust routes and services.”

Anticipating that scenario, the State Department had circulated talking points ahead of time to be used by government spokesmen if asked whether the deal included a freeze.

“No,” said the talking points, which were obtained by the AP.

But then Singh and Navarro hosted a conference call to brief industry lobbyists about the deal, and the situation deteriorated.

Navarro brought up Otaiba’s comments and said they “seemed to undermine the intent of the letter.” Singh replied with a non-answer, saying the letter speaks for itself. So Navarro jumped back in, asserting that there will be no additional routes until further notice and adding, “that’s a promise that will be kept.”

A lobbyist for the U.S. Travel Association, funded by the Emirati airlines and others who oppose the U.S. airlines on this issue, asked repeatedly for clarity. Singh said there was no freeze and that the rights to add flights “do not change. That is correct.”

Navarro said the opposite, declaring there was “a freeze on routes until further notice. So there it is.”

By longstanding practice, such briefings are generally considered private and off the record. The Partnership for Open & Fair Skies immediately posted a partial transcript of the call on its website and promoted it on social media with paid ads and a photo of Navarro. The White House was incensed, one official said.

A few days later, the transcript was quietly pulled down from the Partnership’s website. The AP preserved a screenshot from the original post.

The Emiratis, meanwhile, protested to the administration, insisting the mess be fixed. And so began the battle of the written statements.

A State Department notice pointed out that “all rights” to adjust routes remain in place, calling the agreement the “result of the Department of State-led effort.” Three days later, a White House statement stuck to the “no current plans” language, but downgraded the State Department’s role, saying the deal resulted from “a White House task force.” The next day, the State Department released the full text of the agreement — but not the side letter addressing the flights issue.

At the last minute, Navarro was added as a speaker to an event held Monday at the conservative Hudson Institute. State Department officials called around to groups aligned with the Emirati position and encouraged them to show up and ask questions that would force Navarro to clean up his past statements, three individuals familiar with the calls said.

Just as Navarro took the stage, an op-ed under his name appeared online in the Washington Examiner in which he reverted to the State Department talking points about “no current plans,” while avoiding any mention of a freeze. For his remarks at the event, he read his op-ed word for word.

Americans for Fair Skies, a lobby group formed by Delta, paid part of the cost of the event, the Hudson Institute said.