Tiresome: Now American is Complaining About Competition from an Italian Airline

Legacy US Airways management never much liked competition. They avoided routes other airlines flew, and stopped flying virtually all routes that weren’t to or from a hub. Now that they’re in charge at American Airlines they have scaled back in the intensely competitive New York market. They’ve dropped nearly all Chicago – Asia service. And they continue to drop non-hub routes like Fort Lauderdale – Port-au-Prince.

It’s no surprise they hopped on board Delta’s campaign to have the government limit competition from Emirates, Etihad, and Qatar.

US airlines complained that those airlines were subsidized. US airlines are, too, and they fabricated evidence against their Gulf rivals. Parker said yesterday “give us $40 billion from the U.S. government and we’ll put showers in first class as well.” Of course US airlines have been given more than $40 billion from the U.S. government.

The stated objective of the campaign against Emirates, Etihad, and Qatar was anti-customer: fewer flight choices and higher prices.

Back in May the issue was settled with US airlines gaining nothing of substance. Gulf carriers agreed to issue transparent financials (Emirates already does) and said they had no current intention to launch new routes between the US and Europe (Emirates keeps theirs, Qatar hasn’t wanted any since they obtained aircraft that could fly to Doha non-stop and owns stakes in other carriers to do it in any case, and Etihad has been scaling back routes not expanding).

Delta outmaneuvered American in all of this. American Airlines was suckered into dropping its codeshares with Etihad and Qatar — which gave them reach into India, Pakistan, and North Africa — and then they were outmaneuvered by Delta and lost their partnership with Indian carrier Jet Airways.

American’s CEO Doug Parker just doesn’t know when to quit. After US carriers spent at least $50 million on lobbying and walked away empty handed, and American found itself in a worse competitive position, he’s decided to re-play his same losing hand. Now he’s complaining about Italian carrier Air Italy flying between Italy and U.S. because of Qatar’s 49% stake in the carrier.

“We have side letters that talk about they don’t intend to fly nonstop flights from outside the Gulf to the United States,” Parker said. “We have one of them now using a carrier they made an investment in to fly to the United States.”

…“This is about American jobs,” he said. “It needs to be addressed.”

Parker is shocked, shocked, that Air Italy flies to the U.S. even though Qatar purchased its 49% stake in Meridiana (now Air Italy) in 2017 prior to settling US airline complaints over their perfect legal activities under the US-Qatar Open Skies Treaty.

And the hypocrisy here is risible. There’s never been any complaint about Gulf carriers investing in European airlines which fly to the U.S.

  • Qatar is the largest shareholder in IAG, which owns British Airways, Iberia, Aer Lingus, and Vueling. British Airways and Iberia (and likely soon Aer Lingus) have an anti-trust immunized revenue sharing joint venture with American.

  • Etihad was the most recent airline to control and provide subsidies to Alitalia, which has been part of an anti-trust immunized revenue-sharing pact with Delta.

  • Etihad controlled and subsidized the now-defunct oneworld member and American Airlines partner air berlin.

Parker is worried about airline jobs when airline employment is at a peak and when his own flight attendants and mechanics unions are furious at him. Although it’s a well-worn strategy to blame foreigners as a distraction for problems at home. It’s even more ironic though because he did this in a speech where he also talked about inclusion.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Here’s an idea: if all 3 carriers are so against the Gulf Carriers, since they generally provide a superior product, why doesn’t one of the big 3 dive head first into partnering with them? I would think that they would gain a lot of that market if they did (i.e., the enemy (gulf carrier) of my enemy (big 3) is my friend)? I would think some kind of deal could be made where the gulf carriers are required to give more Americans jobs and, thus, placating concerns about American jobs (which we all know is BS, because of Delta’s aversion to Boeing). Or is this all about pride?

    I may just be being ignorant, but, hey, it might work.

  2. Far more “tiresome” than Doug Parker’s comments about subsidized Middle Eastern airlines is your demagoguery on the matter. “Air Italy” is an “Italian airline” like Papa John’s is an Italian pizza chain. The company is effectively run as a Qatar subsidiary by Qatari management. The only “European” investor in the airline (necessary to establish European citizenship) is Shah Karim al-Hussaini, aka tha Aga Khan, who holds a British passport.

    I know you don’t care that certain Middle East governments pump tens of billions of dollars into subsidized airlines that distort the international aviation market, but it’s mind-boggling to me how you completely fail to see how others with different interests feel very differently. The US airlines and their employees reasonably want to only compete against for-profit companies, as they know it’s impossible to compete against government-run companies with blank checks. You want subsidized luxury flights. Their arguments seem much more rationale and legitimate to me.

  3. @HT, I could see DL doing this with EY. I think EK and QR are too strong to go along with what DL would demand in exchange for the partnership, but EY are struggling and beggars can’t be choosers. AA do not have the brains to do anything of the sort and I am not sure UA need to do it. Not sure UA ever really led the charge against the ME3

  4. Did Parker every think by running a good program with reasonable award availability like prior to his tenure ,Not making the passenger experience miserable and having superior customer relationship management might create a fierce loyalty where customers wouldn’t consider some other foreign carrier ?
    Today I fly everyone else to avoid American for so many reasons
    starting with primary ones stated
    Prior to the devaluation and the lack of saver awards I would never have flown Singapore Airlines Emirates and others but today it’s equal opportunity while American remains severely damaged

  5. @chopsticks I know you don’t care that certain Middle East governments pump tens of billions of dollars into subsidized airlines that distort the international aviation market, but it’s mind-boggling to me how you completely fail to see how others with different interests feel very differently.

    I do not see why it matters how some people “feel” on this issue. Meridiana has been the long-standing number 2 airline in Italy. They obtained outside investment from Qatar even before this issue was settled.

    The idea that it is ‘impossible’ for US airlines – which have been earning the bulk of the world’s airline profits over the past 5 years – to compete against *Air Italy* is absurd.

    These US airlines are heavily subsidized, I posted a link recently to Doug Parker testifying before Congress in favor of subsidies that he ultimately obtained at America West. If those subsidies hadn’t happened, if the federal government hadn’t taken over pension liability at US Airways, if the Pension Benefit Guaranty Corporation hadn’t weighed in on the plan to merge American with US Airways, Doug Parker wouldn’t even be RUNNING American!

    When you say you want to protect US airlines from subsidized foreign carriers you are saying that you want to transfer wealth from US consumers to airline shareholders through higher fares. That’s what I have a problem with, not this red herring about ‘subsidized luxury flights’ (frankly I’d rather fly American Airlines business class than Air Italy’s).

  6. Shut your cake-hole, chopsticks. Doug Parker is so out of touch with reality it makes me laugh.

    If AA and Parker got $40 billion from the government, it would NEVER be spent on an airplane, unless he could stuff in more seats, shrink the bathrooms and take a fat bonus to match his fat butt.

  7. @ Gary — Again, more demagoguery from you, not facts. You’re certainly smart enough to know that the US government giving America West a loan after 9/11 (since repaid at a usurious interest rate, and only offered because the terrorist attack closed the commercial credit markets to airlines) is NOTHING like the Qatari government throwing billions of dollars of subsidies into a non-profit airline to enhance their Kingdom’s glory and hopefully spur general economic development.

    You are correct that when an American buys a subsidized airline ticket from a Middle Eastern airline, that customer saves herself money that she can spend or save elsewhere. But is that the type of savings America wants? I’m pretty sure the vast majority of Americans (not frequent flyer gamers) would say that’s wrong: that our government should implement polices that allow American companies to compete on a level playing field.
    And that heavily-subsidized foreign companies that steal business from American companies and cost American workers jobs should be reasonably restricted in the US marketplace. Falsely arguing that “everyone is subsidized” — when you’re obviously smart enough to know that there is no equivalence between what the US does for its airline industry and what Qatar does for its — is just demagoguery.

  8. @chopsticks – I am not ONLY talking about 9/11 support (and you know it) although I was opposed to that. By the way US airlines have lost far more money than Qatar has! If money losing routes were the issue then American Airlines says they lost $100 million on Chicago – Asia…

  9. @Gary — Well, of course, the reason AA is dropping most of its ORD-Asia service is because of ANOTHER subsidy problem. The Chinese airlines don’t function “normally” either: I can buy a walk-up fare from Chicago to Shanghai for around $400. Southwest charges the same to go to Dallas! So while it’s incredibly strategic for AA to fly to Asia from Chicago, AA is a public company with shareholders who demand a return. There is a negative return when even your walk up fares don’t cover the unit cost of the seat. AA can’t wait for the Chinese airline market to “rationalize.” And the “subsidies” that the Chinese airlines get — less than $2 billion a year total — are miniscule compared to Middle East airline subsidies. This is why private US airlines sometimes need the US government’s help on these issues. I am sorry you find it “tiresome,” but if you were in their shoes, or in their employees’ shoes, I suspect you’d see it differently.

  10. @Chopsticks —> Sorry. Air Italy is an Italian airline. It’s based in Sardinia. The airline is a subsidiary of AQA Holding, owned by Alisarda (51%) and Qatar Airways (49%). Alisarda is an Italian company. Sure, 49% is owned by Qatar directly. 49% of Virgin Atlantic is owned by Delta. Is VS an American airline? DL owns 49% of AeroMexico…are they an American airline? Just curious.

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