Sunday, February 25, 2018

Emirates Airline boss reveals that the nastiest feud in the airline industry could kill his $76 billion Boeing order

Emirates Airline president Sir Tim Clark believes the US aviation industry could become a victim of the trade dispute centered around the Open Skies agreements that govern air travel between the US and the United Arab Emirates where his airline is based.

The US Airlines led by American, Delta, and United have accused Emirates, Etihad, and Qatar Airways of receiving more than $50 billion in state aid over the past decade. Something the Middle Eastern carriers have vehemently denied.

According to the US carriers, this is a violation of Open Skies and would like to see the agreements re-evaluated.

This, Clark believes, threatens to weaken the network of Open Skies agreements that have served the aviation industry so well over the past couple of decades.

"There are those in the United States who would like to see a shut down of the Open Skies," Sir Tim said in a recent interview with Business Insider.

However, if the Open Skies agreements are scrapped or made more strict, it may take a toll on the US economy and the US aviation industry, specifically.

"When the US went Open Skies I thought it was the best thing because if the US had done it then everybody would follow suit," Clark told us.

Indeed that's what has happened. Since 1992, the state department has signed more than 120 Open Skies agreements that have opened up air travel into and out of the US.

"I know that as a result of what they did, the number of planes Boeing sold went nuclear," Clark declared. "Because the number of aircraft sold was a direct function of the Open Skies versus closed skies relationship."

In the 26 years since the first Open Skies agreements were signed, Boeing has sold an average of 10% more planes a year than it did in the five years prior to the treaties.

Emirates is one of Boeing's most lucrative customers. Not only does the airline buy in bulk, it buys Boeing's most expensive products in bulk. Emirates operates nearly 170 Boeing 777 airliners, the largest fleet of its kind in the world by a large margin.

In 2013, Emirates agreed to an order for 150 of Boeing's next-generation 777X jets worth a record $76 billion. Although it is believed Emirates received a healthy discount from Boeing as the plane's launch customer. In addition, Emirates signed a $16 billion deal with GE Aviation to service and maintain the 300 GE9X engines that will power the 150 777Xs.

According to Clark, the whole Open Skies system is put in jeopardy if the US decides to go after the agreement with the United Arab Emirates and Dubai.

So what happens if the Open Skies agreements are rolled back and restricted?

"For one thing, I certainly won't need those 150 planes," Clark said in regards to his record-breaking order.

(Benjamin Zhang - Business Insider)

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