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Doha the big winner from EU open skies deal

After two and a half years of negotiations, the European Union and Qatar concluded a landmark open skies agreement earlier this month, granting the two sides unrestricted access to one another’s air space. It’s the first such agreement agreed by the EU and a member of the Gulf Cooperation Council (GCC), whose respective carriers have become rivals in their scramble for emerging markets in Africa and Asia.

Known officially as the Comprehensive Air Transport Agreement, the deal will be phased in by 2024 and replaces the bilateral dealsQatar previously struck with individual EU members. It grants both sides universal access to both the ‘third’ and ‘fourth’ aviation freedoms, so they can land in and take off from any airport in each other’s territory. It also provides “limited” fifth freedom rights, which allow a carrier to fly directly between two foreign countries, although this only applies to cargo routes.

But this deal is far more than just a set of traffic regulations; it’s supposed to facilitate a common framework on a range of aviation issues. It obliges both sides to improve their social and labor practices, adhere to international reporting standards, and observe a comprehensive dispute resolution system. Yet the most significant part of the compact is its commitment to fair competition, something which has long caused friction between the two sides.

Critics in Europe have claimed Gulf flag-carriers, such as Qatar Airways, receive an unfair advantage through state subsidies and lack of local regulation, enabling them to undercut competitors by slashing ticket prices and providing expensive long-haul services to smaller airports. On the other hand, Gulf representatives have suggested the nebulous idea of ‘fair competition’ would be used as a stick to beat them with. Qatar Airways’ CEO Akbar al-Baker has long pushed for clarity on this concept, while telling Europe’s aviation leaders to start treating their Gulf rivals with respect.

Now al-Baker and his officials have committed to a “fair and friendly business environment” which, they claim, will give European airlines “unrestricted commercial opportunities unlike ever before.” In practical terms, this means carriers won’t have to hire a sales agent if they want to operate flights to Doha, and can scale their service up and down to meet demand – as long as there’s enough slots in the airport.

With just three years until Qatar stages the football World Cup, an event expected to attract 1.5 million tourists, this is certainly a timely improvement. What’s more, under its previous bilateral agreements, Qatar Airways faced restrictions on the number of passengers it could carry to each country (it flies an estimated 30 million people a year). Now, those restrictions have been removed, allowing the carrier to ramp up services to flagship destinations such as London, Paris and Barcelona. The fifth-freedom rights also allow the airline to expand into Europe’s air freight market, which accounts for nearly 25% of global demand.

With such obvious advantages on offer, it might seem surprising that the UAE pulled out of its own open skies talks with the EU back in January. Yet, on closer inspection, it’s easy to understand why Qatar has been so much more enthusiastic than its Gulf neighbor. For one thing, the UAE has already negotiated individual open skies agreements with 20 EU member-states. For another, the UAE has two national carriers to Qatar’s one, and they don’t always see eye to eye. While Etihad, which has struggled financially, is eager to enter talks, Emirates, already the world’s fourth-busiest airline, sees less reason to make concessions.

Of these two local rivals, Qatar Airways is much closer to Etihad in its recent performance. In September, it reported 12-month losses of $69 million, compared to $770 million profits the previous year. But there’s a bigger picture behind these recent struggles: the airline is still in the process of recovering from the 2017 boycott imposed by a coalition of Qatar’s neighbors, including the UAE, which was designed to throttle Qatar’s prosperity. The boycott forced Qatar Airways to cancel flights to 18 regional cities and led to a 10% drop in passenger numbers.

To fill the gap, Baker and his fellow bosses turned to Europe, opening a string of new routes including Nice, Prague and Malaga. They also acquired 49% of the Italian airline Meridiana, and promptly turned it into Air Italy. The purpose was clear: Qatar wanted to get around the existing European restrictions by creating its own satellite carriers. But now, it’s free to saturate the European market with no need for further loopholes.

So, though both sides say this is a win-win deal, it’s clear that one side has won more than the other. The EU’s airlines are sure to feel the benefit when the World Cup comes round, but in the short-term it is unlikely the deal will have much significance to them beyond that. For Qatar, on the other hand, the agreement is a crucial step forward in its drive to not only mitigate the effects of the boycott, but also increasingly present itself as a major player on the world stage.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.

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