American, Delta, United All Fly New York to Milan yet Emirates Gets Fed Route Contract

American Airlines (AAL) flies daily between New York and Milan. Delta (DAL) flies daily between New York and Milan. United (UAL) flies daily between New York and Milan, as do Alitalia and Emirates.

So guess which airline won the fiscal 2017 General Services Administration contract for official U.S. government travel?

The answer is JetBlue (JBLU) , which does not operate a single flight on the route, never has and likely never will.

However, JetBlue has a codeshare agreement with Emirates. In a codeshare agreement, airlines sell seats on one another’s flights and share revenue.

Because JetBlue is a U.S airline, it is apparently eligible to win a GSA contract, even though it doesn’t operate on the route in question and even though the 1981 Fly America Act stipulates that federal employees flying on business must fly on U.S. carriers.

The award means government employees will fly on Emirates at a time when the State Department is conducting informal negotiations with Qatar and the UAE regarding $50 billion in subsidies to the two countries’ three airlines — Emirates, Etihad and Qatar.

Under Open Skies treaties, the three airlines can offer unlimited numbers of flights to the U.S. But subsidies violate the spirit of the treaties, the U.S. carriers said.

“The award is for JetBlue in name only,” Peter Carter, Delta’s executive vice president and chief legal officer, wrote two weeks ago in a letter to GSA expressing disappointment that JetBlue/Emirates had won the contract.

Carter said the decision not only fails to benefit U.S airlines but also actively undermines them.

Emirates, he said, is “a state-owned Gulf carrier that exploits an improper advantage over U.S.-flag carriers by receiving massive subsidies from its home government.”

“In addition to the subsidies it receives from its own government, Emirates will benefit from a revenue stream of U.S. taxpayer dollars,” Carter said.

Jill Zuckman, spokeswoman for the Partnership for Fair and Open Skies, which represents the big three U.S. airlines and their labor unions in the battle with the three Middle East carriers, called the GSA decision “a violation of the Fly America act and a poke in the eye to Congress.

“The U.S. carriers use their own (aircraft and crews) to fly this route,” she said. “JetBlue couldn’t fly this route if it wanted to” because JetBlue lacks long-haul aircraft,

Previously, American held the GSA contract for JFK-Milan.

While the U.S. carriers have been concerned by the Mideast carriers’ explosive growth on U.S. routes, they have been uniquely troubled by the Milan-JFK route because it doesn’t even include a Mideast carrier hub in Abu Dhabi, Doha or Dubai. Rather, Emirates is exercising a fifth freedom right to operate a flight that does not involve its home country.

A GSA spokeswoman said the agency is simply seeking to save taxpayer money.

“GSA’s city pairs program awards routes to airlines that can deliver the best value to the federal government and that are in compliance with the Fly America Act,” the spokeswoman said.

Overall, the GSA fiscal year 2017 city pair program “leverages the purchasing power of the federal government” to secure a 51% discount to comparable commercial fares and to reduce federal employees’ airfare by $2.4 billion, she said.

JetBlue didn’t respond to emails.

The JFK-Milan contract award marks the second time in 13 months that the JetBlue/Emirates partnership has taken a government contract from a big three U.S. carrier that actually flies the route in question.

In August 2015, GSA awarded the fiscal 2016 contract for the Washington Dulles-Dubai route. In January 2016, United ended service on the route and formally protested the award as a violation of the Fly America Act.

It got nowhere.

Orginally Published on The Street.

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