The three largest U.S. all-cargo airlines are opposing a request by Saudi Arabian Airlines for permission to operate cargo flights from Liege, Belgium, to New York and Chicago because the Kingdom of Saudi Arabia doesn’t grant similar flexibility to U.S. carriers to fly there from third countries.
FedEx Express (NYSE: FDX), UPS (NYSE: UPS) and Atlas Air said in separate responses to the Department of Transportation on Tuesday that they support expansive air traffic rights but that the Saudi government restricts them from flying the most commercially efficient routes. The country’s flag carrier shouldn’t get a privilege that isn’t reciprocated, they argued, because it would put them at a competitive disadvantage.
The dispute centers on so-called “seventh freedom” flying privileges, which don’t require an air service to connect to the home country. The right means an airline can essentially operate a foreign hub, which is especially helpful for all-cargo carriers that often get booked for ad hoc charters to irregular destinations. A first freedom, for example, provides overflight rights. A third freedom allows a carrier from one country to land in the country granting the right to deliver passengers and/or cargo. Freedoms of the air are usually conferred through bilateral negotiations between countries.
Saudi Arabian Airlines applied for an exemption from the existing bilateral rules governing air transport by U.S. and Saudi carriers so it can commence all-cargo service early this year between Belgium and the U.S. Saudia said the grant of seventh-freedom rights will expand airlift options during a period of heavy volumes as many companies shift to moving goods by air to avoid backlogs at U.S. seaports. The airline said it has received numerous requests from customers to provide trans-Atlantic service due the limited availability of cargo flights.
It currently operates passenger and cargo service to the U.S. under a short-term license because the DOT has yet to act on Saudia’s application several years ago for a permanent foreign carrier permit. Saudia Cargo operates seven Boeing 747 and 777 freighters.
The U.S. cargo airlines said the U.S.-Saudi Arabia Open Skies agreement only allows fifth freedom, or “beyond rights,” allowing traffic that originates in or is destined for the carrier’s home country with an intermediate stop in another country. They found it ironic that the Saudi flag carrier is seeking liberal flying rights when the Saudi government has rejected U.S. proposals to exchange seventh-freedom rights for cargo.
Other Gulf nations — Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates and Yemen — each enjoy seventh-freedom cargo rights with the United States.
“To meet the future needs of shippers … U.S. cargo carriers need the opportunity to grow their networks and to compete on equal footing with their foreign competitors. A grant of the authority sought by Saudia will remove or reduce any incentive that the kingdom of Saudi Arabia might have to liberalize the [Open Skies] Agreement to include all-cargo seventh-freedom rights,” FedEx said in its response to Saudia’s petition.
The U.S. carriers urged the DOT to defer any action on Saudia’s application until the Saudi Arabian government relaxes all restrictions on seventh-freedom all-cargo rights
Atlas Air (NASDAQ: AAWW) added that there are numerous U.S. and European Union carriers that can provide direct air transportation services between Belgium and the U.S., and other foreign carriers can operate those routes based on the air services agreements their nations have with the U.S.
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