Last updated: 04:34 PM ET, Thu July 14 2016

What To Expect When Open Skies Talks Begin

Airlines & Airports | Delta Air Lines | Rich Thomaselli | July 14, 2016

What To Expect When Open Skies Talks Begin

Photo Illustration by Barry Kaufman

After 18 months of public discourse, terse back-and-forth accusations, allegations of billions of dollars of impropriety — and some real genuine dislike — the governments of the United States and the United Arab Emirates will finally sit down and talk face to face about the Open Skies Agreement.

The big three U.S. airlines have asked the government to meet with government counterparts from both the UAE and Qatar about allegedly subsidizing their three major airlines based in the Middle East — Emirates and Etihad in the UAE, Qatar Airways in Qatar.

American, Delta and United airlines have alleged that the Gulf carriers have accepted almost $50 billion in government subsidies; the Gulf nations have denied the claim, calling any monies received “loans” that must be paid back.

But don’t expect much to come out of the meetings on July 18 and 19 between the U.S. and UAE, or on July 25 when the U.S. sits down with Qatar.

READ MORE: There’s Still No Clear-Cut Winner In Open Skies Dilemma

U.S. government officials agreed to host “informal” talks in Washington, but it appears the Obama administration will not agree to the big three’s demand to open formal renegotiations of the Open Skies Agreements with the two countries — nor, more importantly, to freeze the Gulf carriers from creating new routes to U.S. cities.

From the point in January of 2015 that a 55-page report commissioned by American, Delta and United forwarded to the Obama administration became public, alleging the subsidies, the Gulf airlines have added at least 10 new routes to the U.S. during those 18 months.

“I believe that there will be an all-around discussion about subsidies with an emphasis on government support of airlines moving toward and mirroring true market conditions as well as accounting transparency, but on a forward-looking basis only,” Kevin Mitchell, chairman of the Business Travel Coalition, told TravelPulse. “For example, our government will likely want to talk about items such as interest rates on loans to airlines, and Qatar and the United Arab Emirates will likely want to talk about post 9/11 bailouts, low-interest U.S government loans and Chapter 11 bankruptcy-protection benefits. There appears to be no intention of entering formal consultations or accusing anyone of Open Skies agreement violations.”

Still, Mitchell cautioned that the State Department has a delicate job to do as the Gulf countries could be insulted and balk at such requests.

“They could point to all the countries with which the U.S. has Open Skies agreements that have ownership positions in their flag carriers and support them financially on an ongoing basis,” he said. “China is "Exhibit A,” and Delta Air Lines is a beneficiary with its $450 million dollar investment in China Eastern Airlines. What’s more, 49 percent of U.S. carriers’ codeshare partners are government owned.”

The Partnership for Open & Fair Skies, the umbrella lobby group for the big three U.S. airlines, surprisingly declined to comment for this story about the meetings next week. The Partnership has previously been quite vocal in advancing the case for American, Delta and United, but it might see the writing on the wall — the Wall Street Journal quoted a State Dept. spokeswoman as saying that while "it takes seriously the competition claims raised by some U.S. airlines, it also remains committed to its open skies aviation policy, under which liberal air treaties are struck to boost passenger choice and help the broader economy through increased travel, trade and job growth."

The three U.S. airlines sent emails and letters to its employees, which were obtained by The Street, and sounded a positive note.

"The State Department meetings next month are a positive development and an important next step in the process," American told its employees. "We have demonstrated to our government that the massive subsidies provided to Emirates, Etihad and Qatar are a real threat to American and our employees."

Delta chief legal officer Peter Carter wrote: "These meetings are a clear signal that the State Department is taking the foreign subsidies seriously. We are very pleased with this advancement in the diplomatic process."


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