CEOs of Delta, American and United Take Out Full Page Ad for Protectionism

Qatar Airways owns a 49% stake in Air Italy and is attempting to revive what was once Meridiana into the dominant airline in Italy. With Delta partner Alitalia struggling, that seems possible. Although given Alitalia’s challenges, draining subsidies from Air France and then Etihad and the government of Italy the Italian aviation market isn’t a place that’s likely to produce profits. Delta sniffed around looking to invest in Alitalia, but no deal has been done.

US airlines don’t want to compete with Air Italy, though. They don’t want to compete with anyone, and there’s always a chance to go to the administration and complain about foreigners. Today the CEOs of Delta, United, and American took out a full page ad asking President Trump to do something that would limit choices consumers have and raise prices.

  • Qatar Airways flights to the US are perfectly permissible under the US-Qatar Open Skies agreement. Lobbying against them during the Obama administration went nowhere. To make the issue go away under the current administration Qatar agreed to increase financial disclosures and offered a side letter saying they had no current intentions to offer flights between the U.S. and Europe, even though they’d be legally entitled to do so.

  • At the time I observed that Qatar had absolutely no need to fly between Europe and the U.S. since they’re already the largest shareholder in IAG, the parent company of British Airways, Iberia, and Aer Lingus which offers plenty of transatlantic service.

    And I noted that they were already 49% owner of the second largest Italian airline as well, and could run as many flights between the US and Europe as they wanted. US carriers were at least as aware of this at the time as I was since the investment was announced in 2016 and their intentions for growing the carrier were already clear when Us carriers declared the agreement to be a major victory.

  • Now they are shocked — shocked — that this 14 aircraft airline is adding flights to the U.S. and want the government to stop it, even though (and especially because) many of Air Italy’s routes provide non-stop service that US airlines do not offer.

There is nothing illegal about these flights. US airlines say Qatar is breaking their agreement because an airline they own 49% of is flying to the U.S.

Note that American Airlines does not complain that British Airways flies to the U.S., and Qatar is their largest owner. BA and American share revenue across the Atlantic. Just like Delta never complained about Etihad’s stake in Alitalia, since Delta and Alitalia were sharing revenue across the Atlantic.

What Qatar is doing of course is standard across the industry. American Airlines purchased a stake in China Southern (and so did Qatar). Delta owns 49% stakes in Virgin Atlantic and Aeromexico, and stakes in other carriers around the world like Gol and China Eastern. Delta is effectively ‘using’ Aeromexico to fly between Mexico and Japan, something that Delta itself is not permitted to do.

Bizarrely Delta, American, and United say that more flights between the US and Europe are bad for American jobs, even though those flights themselves create jobs and the passengers they bring create jobs. I’d note that Delta has not been a Boeing customer in many years while Qatar is a large customer for Boeing aircraft.

Just yesterday the CEOs of JetBlue, Fedex, and Atlas Air published their own letter in support of allowing greater competition in air service. Fedex has a cargo hub in the Mideast that’s only possible because of our Open Skies agreements.

At the start of this campaign against Gulf carriers the CEO of Delta made clear this was about raising prices. After getting nowhere in the last administration the campaign was reinvigorated with the US airlines counting on nationalists advising the President. They’ve made misleading claims after misleading claims after misleading claims (not to mention fabricating evidence).

Here’s the letter ad from the CEOs of the 3 largest US airlines:

President Donald J. Trump
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear President Trump,

Your administration was built on the enduring principle that the U.S. government will stand up for American workers against foreign governments that break their trade agreements with our country. The American people are grateful for that promise.

Today, America’s airline workers are counting on you to step up on their behalf.

In January 2018, your administration reached a historic agreement with Qatar over its Open Skies violations. While we hoped this agreement would hold Qatar accountable and force its heavily subsidized airline, Qatar Airways, to follow the rules and stop hurting American workers, that did not happen.

Today, Qatar Airways is ignoring the 2018 agreement that your administration signed by using massive government subsidies to launch new routes to the United States through its stake in Air Italy. Air Italy was a struggling regional carrier until Qatar Airways injected tens of millions of dollars into the company to circumvent the agreement and expand its U.S. presence. In the last few days, Qatar Airways has used its Italian proxy to launch routes to Los Angeles and San Francisco, and added flights to Miami – a further effort to undermine U.S. airlines. Simply put, Qatar Airways represents a grave threat to American jobs and the health of the airline industry.

No rule-abiding business can compete with a massively subsidized airline that ignores economic realities and can wipe away losses with one infusion of government cash after another.

We respectfully encourage your administration to hold Qatar accountable for violating its agreement with the United States and affi rm that we will not tolerate these continued infractions. We appreciate your resolute leadership in enforcing fair trade principles and ask that you continue to stand up for the more than 1.2 million U.S. workers whose jobs depend on a strong and vibrant passenger airline industry.

As they say, “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.”

Delta at least has a clear benefit if they can limit competition from Air Italy that benefits their Italian flag carrier partner.

American made a strategic blunder in cutting off codesharing with Etihad and Qatar, because that limits their feed from India, Pakistan and Africa. They’d be better off focusing leadership time on their own product and union agreements than on an airline on the other side of the Atlantic with 14 aircraft which has every legal right to operate the flights they object to.

And it takes exceptional gall for United – which lost a CEO in a bribery scandal seeking government benefits – to complain about the unfairness of competing against an airline whose investor is backed by its government.

If they really had an interest in fair competition, US airline CEOs would support a plan to regularly auction of use off slots and gates at congested airports, rather than claiming that government-conferred benefit as a property right for themselves.

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. While I usually take issue with your politics and that of the Koch Brothers, particularly as to the need for strong environmental protection and voter rights laws, I share your general belief in open markets and free trade.

  2. I usually don”t comment on politics but the foreign carriers protest against US carriers declaring bankruptcy (not paying suppliers, lease holders, etc.) and the railway labor (preventing strikes) is unfair to them.

  3. @VaCavalier – on the environment I suspect we merely disagree about what constitutes strong environmental protection (wall mounted toiletry dispensers in hotel bathrooms ain’t it, imho) and I don’t think I’ve ever written on “voter rights laws”..?

  4. 3 new routes “represents a grave threat” they wrote…? That is just bonkers. If it was true, than 3 major US airlines are in deep hole. The US government already subsidized them all after the financial crisis, but did they share with the US government?
    Afraid of competition because they can’t keep to be competitive globally – that’s the real reason and a real scare for big 3.

  5. If they are so worried about American jobs, why do they continue to purchase foreign manufactured aircraft?

  6. These 3 clowns are the airlines version of the Big 3 carmakers in Detroit. Their argument is BS and only fills their own overpriced coffers, versus doing what is best for the CONSUMER . (newsflash you 3 idiots, WE are the ones that matter not you).

  7. I think the biggest (yuuuuuugest) hole in their argument is this notion of 49% ownership being a proxy for “taking over the world” (USA bubble the US3 live in). Hello DL, hypocrisy much? VS, AM, MU (which is state-owned I might add), are all “proxy” carriers for DL’s intentions under those terms. AA has a stake in CZ, another state-owned carrier…give me a break. The problem is the public doesn’t understand the issue in detail and will believe what the ‘Merican carriers tell them.

  8. And these would be the same airlines that have a long history of anti-competitive behavior, from the way reservation system results were presented to capacity dumping/fare cuts to run competitors out of their fortress hubs.

    Just another example of how the regulatory process (intended to protect the public) is used by large commercial interests as a weapon against the public interest.

  9. The US airlines should have more competition not less. US Airline service is not great and is terrible in comparison to many of the Asian airlines.

  10. For all the blather, Gary continues to ignore all the real facts he doesn’t like. FACT: Air Italy is 100% controlled by Qatar. This is very different from (for example) Delta’s relationship with Virgin. FACT: Air Italy is not owned, in the slightest, by Italians. The supposed 51% ownership that is not directly owned by Qatar is owned by Imam of the Nizari Ismaili Shias, Prince Shah Karim al-Husseini. He is merely a proxy for the Qataris, because he “conveniently” has multiple citizenships, including in the UK. FACT: Like other failed and failing airlines the Middle Eastern airlines have invested in, there is no evidence that Air Italy is a for-profit airline capable of flying with constant infusion of Middle East money.

    Now, obviously, the interests of the major US airline CEOs are very different from Gary’s. They want to make money. Gary wants free luxury flights. Gary’s motives are not more noble than the CEOs. The CEOs can at least provide jobs for workers and earnings for shareholders, almost all of whom are American. Few of us would want to operate businesses that have to compete against companies heavily subsidized by foreign governments.

  11. I still don’t understand why they are so worried. Oh wait, yeah, more competition means more choices for passengers and less ability for the Big Three to keep screwing us with crappy service and devaluations. The horror!

  12. Look at Canada and what protectionism does. We have a horrible airline with 50% OTP making billions because it really doesnt have to compete against the big boys ME3

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