Watch Out, US Airlines Are Trying to Get Government to Pick Your Pocket Again

Earlier this year Delta, United, and American took out a full page ad praising Donald Trump.

The leadership at each of these airlines has not actually been made up of supporters of the President. The only US airline CEO that vocally supported Trump’s candidacy was the head of Virgin America.

But they were trying to curry favor, to build up capital, in hopes of cashing in for their own ends. They had just lost a 3 year intensive lobbying battle to get the government to make it illegal for Emirates, Etihad and Qatar to lower airfares and to limit flights to the US by these three airlines — so consumers would have to pay more and have fewer choices — they lost.

The Obama Administration went through an extensive process — collecting public comment, examining US aviation treaties, engaging in diplomacy — and refused to take any action at all. With Donald Trump elected as President Delta declared they would have another bite at the apple. They viewed nationalist rhetoric as aligned with their policy goals and Delta’s CEO declared himself encouraged by Donald Trump.

At the end of the day the Big 3 airlines got nothing of substance.

  • The Gulf carriers will publish audited financials conforming to international accounting standards. Emirates already does this. Etihad will have cleaned up its balance sheet by the time they do this. Qatar will keep getting subsidies and use the UAE/Saudi blockade as justification.

  • The Gulf carriers say they aren’t currently planning to add more flights between the US and Europe. Etihad isn’t adding more flights between anywhere and anywhere these days. Qatar only flew Europe-US back when they didn’t have the aircraft to fly from Doha non-stop and owns significant stakes in airlines flying US-Europe, they are the largest owner of British Airways, Iberia and Aer Lingus and also of Air Italy.

  • The agreement specifically says that subsidies aren’t illegal or improper. Which is good for Delta, American and United, because the US airlines are subsidized as well. (And by the way the paper US airline lobbyists keep referring to about Gulf carrier subsidies contained outright fabrications.)

Then in September American Airlines CEO Doug Parker signaled the big 3 US airlines wanted to re-litigate the whole thing when he claimed Qatar was cheating on the agreement through Air Italy.

  • Air Italy, which they own a 49% stake in. The second largest carrier in Italy dates to 1963, when Aga Khan Prince Karīm al-Hussaynī founded its predecessor to promote Sardinian tourism. The airline became known as Meridiana in 1991.

  • This majority Italian-owned enterprise took advantage of the weakened state of flag carrier Alitalia. The plan was well-known at the time the US and Qatar signed their agreement to end the dispute over the Doha-based carriers flights to the U.S. And it’s perfectly legal.

  • US airlines did not complain about Qatar’s investment in British Airways, Iberia, and Aer Lingus or Etihad’s investment in Alitalia or air berlin. Those investments benefits American Airlines and Delta.

Yesterday Air Italy announced that in addition to New York and Miami service they would be adding Los Angeles and San Francisco flights.

Now the lobby shop representing Delta, United, and American — the Orwellian “Partnership for Fair & Open Skies” which lobbies against Open Skies agreements — has put out a statement. They don’t claim there’s anything illegal about the flights. Instead, the flights disrespect Donald Trump. (HT: One Mile at a Time)

With the announcement of new routes from Air Italy to the U.S., fueled by money from Qatar Airways, the government of Qatar has demonstrated a stunning lack of respect for President Trump and Secretary of State Pompeo.

Qatar Airways has received over $25 billion in documented subsidies from its government owner, in violation of the Open Skies agreement with the U.S.

When the Trump administration negotiated an agreement with Qatar earlier this year to protect American jobs and restore fair competition to international aviation, the Qatari government agreed that its state-owned airline would not launch future ‘fifth freedom’ flights to the U.S.

By exploiting its investment in Air Italy to create a loophole and dodge this pledge, Qatar has violated this agreement and the trust of the United States. What is now clear is that Qatar Airways has no intention of playing by the rules and of working cooperatively with the American government. We expect the Trump administration will take strong action and stand up for American workers in response to these violations.”

Virtually everything in this statement is a lie.

  1. “subsidies from its government owner, in violation of the Open Skies agreement with the U.S.” Not only doesn’t the US-Qatar Open Skies agreement prohibit subsidies, the agreement settling the dispute earlier this year explicitly recognized that.

  2. “the Qatari government agreed that its state-owned airline would not launch future ‘fifth freedom’ flights to the U.S.” False. They said they were not aware of plans to do so. And Qatar Airways has not done so. Everyone in the aviation world was already well aware of plans for Air Italy to do so, however. And a European-based airline flying to the U.S. from their home base is not operating a fifth freedom route in any case.

  3. “stand up for American workers” The U.S. unemployment rate stands at 3.7%. What jobs is Air Italy stealing? Their fleet is compromised mostly of Boeing aircraft. 47 of 49 planes they have on order are from Boeing. Delta orders primarily from Airbus. American workers’ paychecks will go much farther with greater choices and lower fares which result from competition. Standing up for American workers doesn’t mean picking their pockets and redistributing their income to shareholders of United, Delta, and American.

There’s an old legal saying, “When the facts are on your side, pound the facts. When the law is on your side, pound the law. When neither is on you side, pound the table.” And they’ve hired lobbyists to pound the table.

And it’s working, too. Here’s a letter from Ted Cruz joined by 10 other Senators (.pdf) It begins by commending the Trump administration for its actions to date dealing with Qatar. And then suggests flying to New York is ‘commercially questionable’ as though that’s legally relevant even though United, Delta, and American all fly between Italy and New York, too — and it’s by far the biggest Alitalia route.

Oddly Senator Cruz makes no mention of Los Angeles and San Francisco which aren’t served non-stop by US airlines and where US consumers clearly will benefit from the addition of Air Italy non-stops.

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. It’s not their fault the ME3 have better service. You can suck it up and improve service standards, and that means you will win in the long run. I cannot see how US3 have not realized this point yet.

  2. @Brian
    Improving service would involve spending money in the short term. The US3 would go to any lengths to cut costs, no matter the long term effects.

  3. @Ted – absolutely zero. I have never been paid anything by Qatar, Etihad, or Emirates nor have I knowingly done any work with entities related to them. In fact I do not even have current contact with the PR departments of any of them.

  4. So Qatar ‘disrespect’ Trump and Pompeo ? What a sensible position to take; join more than half of the American public! Next think they will be accused of being populist…….

  5. In normal countries this qualifies as collusion and is usually prosecuted. I’m surprised this is even allowed in the US. Seems you guys have quite a way to go in terms of corporate governance. Years behind virtually any other country.

  6. I haven’t ever believed Gary is being dishonest on this issue or is being paid by the ME3. He always lays out exactly why he thinks the US carriers are the bad guys. I personally believe he is just wrong on this issue without any intent to be deceptive or dishonest. For all of the point for point discussion about this in the past, I have just boiled it down to the fact that he just truly believes the ME3 explanations. He’s willing to accept that they “adhere to international accounting standards” because they say so and he just overlooks that none of them are listed on any U.S. exchange because then they couldn’t just say that anymore, the SEC would be the judge. And for some reason I just cannot understand, he thinks an industry that is barely eeking out a 9% profit margin at the peak of the earnings cycle is somehow the evil empire picking your pocket and creating a disinformation campaign for the sake of protecting their fat profits of $19 per passenger.

    https://www.wsj.com/articles/how-much-of-your-355-ticket-is-profit-for-airlines-1518618600

  7. @ron, our antitrust situation is weak indeed. This certainly does look like collusion, but perhaps no more so than copycat policies and a key top executive shifting seamlessly from one to the other of the three-headed monster. And of course they need protectionist policies, because in a really free market, their disdain for the consumer and general ineptness would be met with the loss of business to competitors.

  8. @ron THERE IS NO COLLUSION! This is just another fake news witch hunt led by the liberal mainstream media, the band of angry democrats and George Soros to get revenge on behalf of the Clintons (where are the emails btw) and let the ME3 invade our country with their globalist A380s and A350s and Krug champagne.

  9. @Austin 787
    Exactly. If they don’t spend money they gradually get worse and worse. If they do invest it will get better in some cases. So the amount you invest and the quality of your brand are directly correlated.

  10. Womp! Womp! Oh, please!

    Cry me a river!

    And of course, “Lyin’ Ted” [Cruz] is leading the charge and spreading these full-on myths and outright lies on behalf of our greedy and dishonest airlines!

    Such abject, shameless, breathtaking liars, criminals (pilfering sand from a public beach on the cheap with “plausible deniablility” from a too good to be true low cost contractor, anyone?) hypocrites & frauds are far too many of those with offices in the C-suites at our domestic airlines (and at Waterside near London’s Heathrow Airport [BA]), and especially the thieving ones whom sit on the Board of Directors who approve such bs claptrap.

    Their selfshness and greed knows no bounds.

    Do they not realize how pathetic and ridiculous their bald faced lies look and sound to anyone with more than an eighth grade education?

    Let me guess, that full-on jackhole, in addition to “Lyin’ Ted”, creepy Newt Gingrich (he’s being paid millions $$$ to lobby on behalf of our “Saintly” airlines), came up with this utter nonsense – and he, or his similarly immoral and corrupt fringe right wing nut job sycophants will be all over Faux News growing their noses ever longer as they whip their cultists into a freenzy over how better to let their greedy overlords screw them with even greater precision than they already rolled over and agreed to let them do!

    Our airlines seem to run by some of the biggest jerks, jackholes, hypocrites and crybabies; you know, the same precious Divas who won’t deign to sit amongst the riff raff in those teensy, weensy pre-K sized economy class seats they stuffed into 30”-31” pitch, no legroom rows because it’s not comfortable enough for their own Royal Tushies – yet whom gleefully pocket the copious (and obscene) amounts of cash from those they treat like dirt stuck on the bottom of their (expensive) shoes while they screwed them left, right and every which way with their crappy products and the endless array of bs fees and other sleazy, dishonest, fraudulent pricing practices/oligopolist business models that our current asleep at the switch Administration seems to think is perfectly acceptable.

    We’d all be much better off if we laughed right in their faces and said “yeah, right we SOOOOOOO feel your pain.” (Cue virtual eyerolls – bigly! 😉 )

  11. RE: “@ron, our antitrust situation is weak indeed. This certainly does look like collusion, but perhaps no more so than copycat policies and a key top executive shifting seamlessly from one to the other of the three-headed monster. And of course they need protectionist policies, because in a really free market, their disdain for the consumer and general ineptness would be met with the loss of business to competitors.”

    @DaveS,

    **Spot on!**

  12. @Rob – Emirates has followed international accounting standards. The other two not as much. But it’s irrelevant, there was no such requirement in the open skies treaty. .

  13. The bottom line is this: if the US airlines are frightened by the competition from Air Italy, lift your game Yanks. Stop moaning.

    Look at AA, it’s positively laughable the way they treat passengers. The flight attendants they allow to fly are so fat and overweight and old, they are not going to save anyone in an emergency. They are lazy, they are fat, they have attitude beyond comprehension in a service environment. And most of the boys, prancing up and down the aisles like little queens.

    And to all the correspondents above, don’t fly with Qatar or Emirates or Etihad if you have a problem. But you keep doing it. Let the market decide.

    If you have the courage of your American conviction, stop buying tickets on the Middle Eastern carriers and soon they will have to stop flying there. It’s called market conditions you fools.

    But as long as you keep buying tickets because the flights are better, the product is better, the aircraft are newer, the flight attendants are better, the service is better and the prices are better, shut the fuck up Americans and stop moaning. Jeez.

    Thanks for bringing this to our attention Mr Leff.

  14. Any airline that disrespects trump sounds like a carrier with common sense to me. Can’t wait to fly them again.

  15. @Ron. Many one-eyed republicans would swallow your satirical post, hook, line and sinker! Sad, as their orange hero would say…….

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