May 29 - The Bastian-Parker-Munoz $50 Million Folly



Movey Down The Drain

On May 11, Delta Air Lines, American Airlines and United Airlines’ (Big Three) long-running challenge to the US-UAE Open Skies agreement ended with an extremely expensive whimper, not a commercially meaningful bang.  

It is reported that the Big Three lavishly spent at least $50 million shareholder dollars on their anti-competitive lobbying campaign. That is $50 million that could have been spent by the Big Three improving their customer service thereby enabling them to compete more effectively. The question is did shareholders receive $50 million worth of return on that investment, and did management more prudently spend their money on an extravagant lobbying campaign rather than investing it in product improvements and enhancing the Big Three’s customer value proposition? The answer is a resounding and unequivocal no.

Don’t take my word for it. The facts speak loudly for themselves, and they are very stubborn things. The Big Three spent $50 million for a #nothingburger.

The Big Three’s lobbying surrogates - the Partnership for Open and Fair Skies and Americans for Fair Skies - immediately declared victory. Of course they would. Could they honestly admit the millions of dollars lavishly spent for their services was wasted money?  Peter Carter, Delta’s Chief Legal Officer, was even more emphatic in an Aviation Daily op-ed where he spiked the ball with an itemized list of each of the Big Three’s purported victories.

However, could you expect otherwise from Delta, the ringleader airline that concocted the anti-competitive scheme, herded American and United like lemmings, masterminded the failed strategy, led execution of the anti-consumer campaign and unsparingly spent shareholder money to accomplish no more than a reaffirmation of the US-UAE Open Skies agreement? Genius, right?!

Their claims of “victory,” just as the underlying fake allegations the Big Three lodged, are nothing more than hugely expensive fiction. Let’s see how Mr. Carter’s point-by-point “victory” tally stands-up to the sunshine of facts – the language of the US-UAE Record of Discussion (ROD) and the UAE Government’s side letter stating UAE carriers have no current plans for new Fifth Freedom flights but expressly preserving their right to launch such flights in the future.  


The agreement secured a freeze on Fifth Freedom flying, the Big Three’s “No. 1 goal” according to Mr. Carter. In fact, according to Mr. Carter’s boss, Delta CEO Ed Bastian, and Doug Parker, the CEO of American, achieving a freeze on future Fifth Freedom flying was their publicly declared litmus test for victory or defeat.


Mr. Carter’s freeze claim has been thoroughly and unquestionably rebutted by the White House, State Department and Associated Press (AP). Accordingly, based on Mr. Bastian and Mr. Parker’s own measuring stick, the Big Three’s campaign failed.

-- The White House’s May 17 statement does not mention the word freeze, and was intended to correct any mischaracterizations to the contrary. (See

-- Instead, the White House, like the State Department, made clear the side letter on Fifths simply is a statement of no current plans. State emphasized and expanded in its May 14 and May 18 statements, respectively, that “all rights and provisions of [the 2002 US-UAE Open Skies agreement] remain in force” and “nothing in their [the UAE] communication amends or otherwise changes the 2002 Agreement or any rights therein.” (See and

-- This is confirmed by paragraph two of the ROD that states “[t]he Delegations reaffirmed their strong support for the Air Transport Agreement between the United States and the UAE, signed on March 11, 2002, including all rights to conduct international air transportation contained therein.” (See the US-UAE ROD at

-- The AP, in its May 22 report, indicated that it had seen a copy of the side letter from the UAE Government to the US Government on Fifths. According to AP, that letter contains “no talk of a freeze or commitment not to change those [current] plans in the future.” Moreover, AP further reported that it obtained a copy of the State Department’s talking points “to be used by government spokesmen if asked whether the deal included a freeze. ‘No,’ said the [State Department] talking points.” (See AP report at  


The UAE expressly acknowledged airline subsidies and that they harm competition. 


The ROD convincingly shows that claim is false.

-- A global word search of the US-UAE ROD reveals the words “subsidy” or “subsidies” do not even appear in the ROD. In contrast, the word “subsidies” appears in Paragraph three of the US-Qatar Understandings dated January 29, 2018.

-- According to Paragraph four of the ROD, “[t]he Delegations stated that government support in whatever form – including policies, practices, and rules – is neither uncommon nor necessarily problematic in the global aviation sector, and further noted that many airlines are wholly or partially state-owned. The Delegations also stated that such government support in whatever form may adversely impact competition in providing international air transportation.” In other words, both governments acknowledged policies, practices and rules – including antitrust immunity grants to the Big Three, the Fly America program and the US’s cabotage restriction preventing foreign carriers access to the US domestic market, the largest such market in the world – may adversely impact competition.

-- In Paragraph three of the ROD, “the UAE Delegation stated that the UAE and its designated carriers are and have been at all times in full compliance with the Agreement.” This flatly contradicts Mr. Carter’s mischaracterization that the UAE acknowledged or admitted subsidies.


The transparency requirement will end the days of Emirates, Etihad and Qatar hiding billions of dollars in subsidies.


Accepting Mr. Carter’s premise that financial transparency exposes subsidies, it follows that transparency also confirms the absence of them. Accordingly, following Mr. Carter’s logic, he has admitted that Emirates is a fully commercial airline that does not receive subsidies, and the Big Three’s contentions to the contrary were lies.

-- Paragraph seven of the ROD states “[t]he Delegations noted that such audited financial reports have for many years been issued by Emirates Airline and by the U.S. airlines.” In other words, both Delegations acknowledged Emirates already is fully transparent, and therefore cannot, and has not, hidden any subsidies.

-- As to Etihad and Qatar airlines, both have committed in the future to publicly release audited annual financial statements consistent with international standards. When those audited financial statements are issued, they will speak for themselves.


Emirates and Etihad have allegedly received billions of dollars from “sweetheart” related-party transactions that will be prevented in the future by requiring greater transparency and disclosure.


Another case of Mr. Carter not allowing facts to cloud his hollow political narrative.

-- Emirates, which the US Government acknowledged in Paragraph seven of the ROD has publicly issued audited financial statements for “many years,” and also recently directed PricewaterhouseCoopers LLP (PwC), its accounting firm, to conduct several audits of its transactions with suppliers similarly owned by the Government of Dubai. Those PwC audits, that were provided to the US Government, concluded that all of Emirates’ related-party transactions in fact were arms-length and at market-based prices. Mr. Carter is correct, transparency and heightened disclosure can be dispositive on this issue. In Emirates’ case, it already has been. The PwC audits conclusively show Emirates has received no “sweetheart” deals from related-party transactions.

-- Paragraph eight of the ROD is bilateral, not unilateral. It applies to “each country’s airlines.” Moreover, it is an aspirational statement, not a mandate. In other words, it does not target UAE carriers nor does it presume a potential problem exists any more than it does with respect to the Big Three. It is a statement of best practices. Paragraph eight provides “each country’s airlines . . . would endeavor to take steps to ensure that material transactions with government-owned (in whatever form) providers of goods and services of either the UAE or the United States are based on commercial terms equivalent to those that prevail in arm’s length transactions.”


The ROD imposes new requirements on UAE airport fees.  


Paragraph nine of the ROD is reciprocal, not unilateral. It applies to airport charges in both countries. It specifically says “[t]he Delegations affirmed that airport user charges imposed by the competent charging authorities or bodies in the United States and the UAE should be reasonable, not unjustly discriminatory, and equitably apportioned among all users, taking into account the relevant International Civil Aviation Organization guidance.”

-- In other words, the current “reasonable, not unjustly discriminatory, and equitably appropriated” approach the UAE already applies for airport user charges will continue to be consistent with ICAO guidance.

-- Had Delta and United sincerely believed UAE airport user charges deviated from ICAO guidance, and they were blatantly discriminated against and commercially harmed as a result when each served Dubai International Airport, there was a commonly used statutory remedy available to them for such instances, a complaint under the International Air Transportation Fair Competitive Practices Act. Given that they failed to file an IATFCPA complaint, they obviously believed they could not make a convincing case to the US Department of Transportation. UAE airport charges will continue to follow the same appropriate approach they do today consistent with ICAO principles.

It obviously was completely unrealistic to expect Mr. Carter and the Big Three’s richly paid lobbyists to accurately present the facts of the US-UAE ROD and side letter. To do so, they would have had to admit that their three-and-a-half year-old anti-Open Skies, anti-competitive and anti-consumer lobbying campaign was historic for all the wrong reasons: (1) a historic waste of shareholder money; (2) a historic distraction from other Big Three public policy priorities like ATC reform; and (3) a historic flop.

Let’s hope the Boards of Directors at Delta, American and United take note of the Bastian-Parker-Munoz $50 million folly. It is time to move on, not to double down wasting more shareholder money.

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