Canada VS the UAE: The Dispute of Canada Disallowing Landing Rights to Emirati Airlines

The international relations sphere is an ever-changing area of international connections and interactions between different actors. The United Arab Emirates is a country that endeavors to take its place in the international community, being entirely involved in international commerce activity. Escalating tensions in the air transportation sphere between Canada and the UAE will possibly further affect their political and diplomatic relations and can call into question the safety of rules and regulations of air transportation.

“Blessed with extensive oil and gas reserves, development and investment in the sector are substantial” (“Overview of the Gulf Cooperation Council (GCC)”, 2010, p. 1). According to some experts, it is possible that only in 10-20 years the United Arab Emirates will run out of oil resources. As a major part of the economy is supported by petrodollars, the UAE will inevitably face an economic crisis. To diversify the economy and prevent this crisis, the government of the UAE began to look for alternative ways of earning money. It redirected the massive amount of its surplus capital in various infrastructure projects. It included educational and medical establishments. But the most successful was the idea to invest money in the aviation sector. It would be useful to present background information about the development of the above-mentioned sector. The UAE-Canadian air relations and the disputed, which exists between the parties, will be considered as well.

First of all, one must admit that the allocation of the Arabian Peninsula plays a crucial role in this context. It has become a supportive point of intercontinental flight. Great Britain has created the prerequisites of the evolving aviation sector within the Emirates and some other Gulf countries. The thing is that the British Empire wanted to establish stable links with India, Hong Kong, and Australia. According to Ulrichsen (2015), “When Imperial Airways (the forerunner of the British Overseas Airways Corporation and, still later, of British Airways) launched its eastern route from London’s Croydon Airport to Brisbane in Australia in 1932, it established an overnight stop and constructed an airfield in the Trucial State of Sharjah.” This idea reflected later in creating Gulf countries’ own airways. The Airline Emirates was instituted in 1985 and Etihad emerged in 2003. Emirates Airlines have been instituted by Sheikh Mohamed bin Rashid Al Maktoum. As stated by Ulrichsen (2015):

With US$10 million in seed funding from the ruling family together with a US$88 million gift of two Boeing 727s from the royal fleet and an Airbus and a Boeing leased from Pakistan International Airways, Emirates’ four-strong fleet commenced operations with a flight from Dubai to Karachi on October 25, 1985. (p. 7)

Etihad has been established by Emiri Decree and chaired by Sheikh Hamad bin Zayed AL Nahyan. The growth of this airline company has been very rapid and fast. Almost immediately, it ordered a lot of aircraft. It purchased about 205 new planes after establishment, which amounted to about US$20 billion.

Step by step, the government of Canada has been establishing international relations with different countries. The UAE started cooperation with Canada in 1974. It was not easy to build a reliable and long-term partnership. For about 36 years, they have successfully collaborated in a wide range of spheres. However, not everything goes as it should go.

As stated by Sammut and Karasik (2010):

At first glance, Canada, and the UAE should enjoy perfect relations. Both have sensible governments that try to contribute to good international relations, both are prosperous and both have welcomed the people of their land from many nations who have contributed to their prosperity.

But both countries faced the problem in 2010. The thing was that the UAE wanted to extend its profit and presence in Canada through the increase of landing rights for Emirates Airline and Etihad Airways. It is necessary to take into consideration that the Arab party had been proposing Canada to increase air service from 2001. They needed to spread their services in other cities (Calgary, Vancouver) and expand their services to Toronto. They had flights 3 times per week instead of the desired 6 times. The air company of Canada, Air Canada, was afraid that the UAE airline companies were eager to grasp a bigger part of the international travel market. Failure of negotiations between the two countries concerning a larger number of slots was presented to the publicity after the relevant statement of the UAE ambassador.

The problem became more acute when the government of the UAE decided to retaliate against Canada. In 2001, Canada established a military base (so-called Camp Mirage) near Dubai. The base was used to support Canadian military forces in combatting in Afghanistan. It is clear that it was subject to the jurisdiction of the UAE and the latter took advantage of this fact when it decided to close the base. It cost the Canadian government US$300 million. In this regard, high officials of Canada had to relocate operations to Germany and Cyprus. The situation was aggravated more when the permission to use the UAE airspace by Canada’s defense minister having the flight from Afghanistan was denied. After that, the UAE voted against Canadian bid for a seat in the Security Council of the United Nations. This action has also impacted negatively the relations between the two parties.

The airlines of the UAE have faced more similar conflicts. For example, they wanted to obtain landing slots in a new Berlin airport. However, Lufthansa objected to this demand, saying that it flies to only one city in the UAE (Dubai), while Emirates flies to 4 German cities. That is why Lufthansa has made the government deny extra landing slots for Emirates.

Unfortunately, it is not the end of the conflict. Canadian citizens now have a problem with the UAE visa. The fact is that Canada was one of 33 states whose citizens could get a free visa upon arrival. According to airline companies, it will not influence business. Although Canada has its own view on the situation, the government is convinced that it will negatively impact both large and small firms. Hence, high prices will inevitably cause movement of firms’ headquarters from Ottawa to Abu-Dhabi or Dubai. Now, people desiring to visit the UAE have to order a visa in advance. There are two ways to do this: through the UAE Embassy in Ottawa or airlines. It will take about 15 days in the first case and about five or seven in the second. To tell the truth, the price is very expensive. It is about 250$ for 30 days of visiting, while other countries propose lower prices for a longer period. It is unfavorable for regular visitors.

Nevertheless, now the world can observe some changes (so-called “thaw”) in the relations between the two mentioned countries. They have signed the codeshare agreement, which presupposes cooperation between their airlines. It will open up new destinations in Latin America and Canadian citizens will be able to use Etihad’s networks through the Middle East, Asia, and Africa. Another thaw concerns the cancellation of the “special” visa regime for Canadians in the UAE.

The decision of the Canadian authorities to shut down the agreement on extending landing slots for the UAE, allowing their flying companies to operate more intensively within the Canadian market, is not likely to be grounded on mere protectionism considerations. In fact, Canada is one of the largest economies in the world with its GGP estimated at $1.6trn in 2015. Furthermore, the Canadian-UAE economic cooperation has been increasing since the two countries exchanged diplomatic missions in 1999 with the total bilateral trade having grown from $365m to more than $2bn by the end of 2011. The UAE has been arguing that enhancing air carriers’ capacity from their country to Canada would result in a total of 1,660 jobs for Canadians, as well as $227m added to Canada’s GDP every year (“Emirates and Canada”, 2012, p. 1).

However, it is noteworthy to admit that the UAE has not, in turn, provided any information regarding the benefits it would have received as a result of the implementation of a new air transportation agreement. Air Canada would possibly have seen its share of local air transportation market decrease, given that Emirates Airlines and Etihad Airways offered, in general, more competitive prices and services. While the economic cooperation between the countries could have increased, the United Arab Emirates would have been the only country to benefit their economy from this cooperation.

The economic policy Air Canada pursues in respect to foreign countries and other air carriers is strikingly described by the term ‘selective partnership,’ whereby the company takes a decision depending on whether it would be beneficial to it and/or their partner companies or not. This cannot but affect negatively the Canadian air transportations market. “By protecting one set of foreign airlines from competition from other foreign airlines, Canada suffers from a lower level of tourism visitation, less air cargo capacity and higher prices.” (6) In particular, seeing the increasing demand for flights to other regions, which Air Canada cannot meet in full measure, it deliberately prohibits other market players to enter in order that the demand should be replenished, contributing to the local economy, but endangering Air Canada’s own competitiveness.

The mechanism through which collaboration between air carriers was intended to have been established is called a code-share agreement, implying that two air companies would provide their facilities (planes, landing slots, etc.) to transport passengers, both sharing responsibility for the success of the flight. The mechanism establishes clear rules for international transportations, which Canada appears to have meant to hamper the UAE. It is worthwhile considering the argument by the Canadian party that Emirates should serve passengers only in Dubai without carrying out their activities in other countries. It is necessary to take notice of the fact that previously Air Canada had allowed large air companies from Germany, the UK, France, Japan, and some others to establish so-called connecting services with Canada, which means that passengers from Canada could reach other countries by flying on the said airlines with transfer at their hubs. The same appeal from the UAE, in contrast, was subject to objection, the reasons of which remain unclear for observers:

[W]hy has Canada not objected, now or in the past, to connecting services by other foreign government-owned carriers such as Air New Zealand, Air France, Alitalia, etc., some of which have been massively subsidized by their government or who have benefited from massive government equity injections? (Tretheway, 2010, p. 16)

However, Air Canada itself pushes forward a policy of establishing connecting services for US passengers, in fact being the largest air company providing services for Americans in Canadian-US bilateral air relations. In this respect, the argument against allowing the Emirates to carry out the same policy in Canada seems to be an effort to prevent the appearance of a new competitive air service on a global scale, which has little to do with protectionist activities.

While assessing impacts that the incident might have on Canadian-UAE relations, it is necessary to mention that the issue in question has contributed to a succession of events negatively affecting cooperation between the two countries. These include the dispute over BlackBerry services, which were provided with secure protection from eavesdropping and message intercepting that resulted in the UAE asking Research in Motion (RIM), the Canada-based manufacturer of BlackBerry phones, to bring the devices in accordance with the UAE internal regulations. This was followed by a false report in Canadian mass newspaper National Post about a UAE port allegedly being used by the Iranian government. “Though admitted unacceptable by the two sides, the incident eventually contributed to worsening relations” (Sammut & Karasik, 2010). Another explanation is that at that time the Canadian government was led by the Conservative party, which had an unchanged stance on the matter.

The incident concerning air regulations seems to have generally affected Canadian-UAE economic cooperation. According to the statistics provided by the Embassy of Canada to the United Arab Emirates, from 2011 to 2015 the amount of bilateral trade had slightly decreased from $2,26bn to $2,17bn with increasing product exports from Canada and shrinking export from the United Arab Emirates. Considering the fact that the UAE is the largest trade partner of Canada in the Middle East, Canadian positions in the region have been undermined. Some observers have argued that it is “a new assertiveness and determination in its foreign policy” that the Emirates have shown during the air dispute.

The dispute has lasted for more than six years and no viable solution to the conflict has been devised yet. Possible options the two countries could resort to may include handing in the dispute to an arbitrary body such as the World Trade Organization (WTO) or the International Civil Aviation Organization (IKAO), to which both of them are parties. Indeed, the organization is intended to settle situations under question in international product and service commerce. However, this instrument is admitted to have proved to be mostly ineffective since many international agreements and conventions have not managed to establish equal opportunities and conditions for carrying out economic activities for different countries, thus eliminating causes of such disputes. Some analysts notice that “[t]hat is why governments resort to other methods, such as those used by the UAE over the past few weeks with Canada” (Sammut & Karasik, 2010).

In addition, it is highly likely that new developing countries will be pursuing the same policy with respect to other developed countries due to the causes of globalization, which deepens the difference in development between states. Resorting to ‘blackmailing,’ as former Prime Minister of Canada Stephen Harper put it, commenting upon the closure of the Canadian military base in the UAE, may be viewed as the only possible option to challenge economic policies more powerful countries to impose on the less powerful. Research by Sammut and Karasik (2010) points out that Canada may have been taken aback by the UAE’s response, but the country and its G7 partners should brace themselves for similar responses in the future. In the globalized world, similar entanglements will be involving more and more countries, thus forcing them to develop joint strategies and responses to challenges.

When in 2011 the Conservative Party won parliamentary elections in Canada, having obtained the majority of seats, the United Arab Emirates stated that they would “let some time pass” before returning to the issue of air transportation between the two countries. (8) Now, with the change of the government in Canada, the situation may change for the better. In September of 2016, Minister of Foreign Affairs and International Cooperation of the UAE Sheikh Abdullah bin Zayed held talks with Prime Minister of Canada Justin Trudeau, discussing mutual cooperation. As both parties were left pleased with the result of the negotiations, one can expect the situation to gradually ameliorate, thus improving the general state of relationships between the countries concerned.

Tensions in the Canadian-UAE relations in the aviation sphere have once again indicated that global competitiveness between developed and developing countries can sometimes assume rather exacerbated forms with the latter possessing a number of tools at different levels and being able to reinforce their assertions. In interstate dealings between countries at different levels of development, both parties have to consider that it is quite likely that their interdependence is going to result in a growing willingness of those states weaker in economic terms to take advantage of existing opportunities to expand their influence far beyond their boundaries. In the case considered herein, Canada eventually has had to turn down its military presence in the United Arab Emirates and renounce a deal that could have led to more jobs and other economic benefits. Preserving sovereignty, both in political and economic terms will make the countries in question sacrifice opportunities for mutual development they would otherwise have.