Turbulence signs flashing again over US-Gulf skies

Return to your seats and keep your seatbelt fastened. Relations between the American and UAE airlines are about to hit another period of bumpiness and, with Donald Trump in the White House, who knows how they will emerge from the next bout of open skies confrontation.
Aviation experts will need no reminding of the troubled state of relations between the Big Three in the US — United, American and Delta — and Gulf airlines, who have been accused of unfair commercial practices on their operations into the US.
The charges were that Emirates, Etihad and Qatar (more of which later) subsidized their north American operations to such an extent that the Americans were losing business, and jobs, to the Gulf. Indeed, in apparent proof of these nefarious activities, the American trio pulled out of all their routes to the Arabian Gulf, claiming they had become uncommercial.
The Gulf airlines dismissed these allegations, pointed to the fact that levels of service and scheduling made them much more attractive than their American rivals, who they also accused of getting billions of dollars of hidden subsidy from the US government and local airport authorities. The Gulf operators produced hard evidence — in terms of economic activity and jobs generated in the US by their flights — that seemed to knock the American claims into a cocked hat.
Former President Obama obviously wanted no part in the squabble between friends, and passed it for further investigation to the US departments of state, commerce and transportation, effectively kicking it into the long grass of Washington bureaucracy.
This was the situation when Trump entered the White House just over a year ago, but since then much has changed.
The most obvious is the US administration. Trump’s “America First” stance would seem to make him wide open to the US airlines’ lobby to protect American jobs and advance American industry.
His transportation secretary, Elaine Chao, apparently shares his philosophy. So you might think the Gulf airlines would be in for a hard time.
At least until now, that has not happened. The Gulf airlines were comfortable with the new administration and its “transactional” approach, and concluded that Trump would do nothing to upset his Gulf allies, such as blocking their rights to fly to the US under the “open skies” agreements.
The other big change has come in the internal dynamic of the Gulf aviation industry. The three airlines who found themselves the subject of the US allegations never really acted in unison in their defense.
Emirates, under its president Tim Clark, did most of the public campaigning, while Qatar’s combustible Akbar Al-Baker could be relied on to produce occasional inflammatory headlines. Etihad was the most low-profile of the three.

With tensions building between the American and UAE airlines and a mercurial Trump at the helm, there could be trouble ahead

Frank Kane

Since then, there has been a change of top management at Etihad, which has also unveiled big financial losses on its global strategy of taking share stakes in other airlines, fueling further claims by the Americans of unfair subsidy by the state-owned airline.
Emirates flies on under the same management, but has recognized the new commercial realities of the aviation industry in the Gulf by getting closer to its no-frills sister, flydubai, and by indicating it will operate in much closer unison with Etihad in areas such as procurement and security. A full-blown merger between the two UAE airlines still seems wide of the mark, but there is no doubt they are singing increasingly from the same song sheet.
The big changes have come at Qatar. Under pressure from the boycott of its airspace by Etihad and Emirates because of the diplomatic stand-off between Saudi Arabia and the UAE over allegations of terrorism funding, Qatar has decided it has to be on best possible terms with the Americans.
It has promised to publish detailed financial results according to international accounting and audit standards, and promised not to launch new flights to the US from other countries (the so called “fifth freedom” rights).
Coupled with Al-Baker’s recent statement that Trump was a “friend” with whom there has been a “misunderstanding,” that amounts more or less to a Qatar climb-down in the open skies confrontation — or at least something the Americans could claim as a climb-down.
So the Gulf trio is down to a duo, and the US aviation lobby thinks it can pick off Emirates and Eithad more easily. Certainly Peter Carter, executive vice president of Delta, which has always been the more hawkish of the US three, thinks so. He recently launched another broadside against the UAE airlines, and seemed to suggest that the Trump administration was moving toward harsher action against them.
This comes after a series of top-level talks between a US team led by transportation official and UAE federal aviation authorities in Abu Dhabi recently, which are said to have been inconsequential but also comparatively friendly.
So on one side there are the increasingly triumphal Americans, fresh from their Qatar victory; on the other the Emiratis, pragmatic but determined to protect their aviation industry.
In between, there is the mercurial character in the White House. It would be a brave soul who would predict the outcome.
 

• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai