The Democrat who will head the House of Representatives committee that oversees aviation has lashed out at Qatar Airways for allegedly subsidising Air Italy and giving it an unfair advantage as the Italian carrier increases its routes to the US…. Read More.
Ed Bastian op-ed: Air Italy’s mysterious benefactor
How Qatari state subsidies flow to an obscure Italian airline, circumventing a key agreement with the U.S. and putting thousands of American jobs at risk.
A Deutsche Bank airline analyst asked a question recently: “Who is funding Air Italy’s losses?”
In a Dec. 7 report, the firm noted the obscure Italian carrier produced a negative pretax margin – i.e., a loss – of 18.4 percent last year, on top of a negative margin of 9.2 percent in 2016, representing losses of hundreds of millions of euros. Yet despite its financial hemorrhaging, the airline suddenly has a fleet of brand new jets, and has announced a major global expansion of flights between Milan and North American cities including New York, Miami, Chicago, Los Angeles, San Francisco and Toronto.
It doesn’t take Sherlock Holmes to solve this particular mystery. The airline’s benefactor is Qatar Airways, the government-owned airline of Qatar, which recently acquired 49 percent of Air Italy. Even though Qatar’s recent financial statements (which remain opaque) show that it is one of the worst performing airlines in the history of the airline industry with over $2 billion of operating losses over the past three years, Qatar has been giving its new acquisition billions of dollars’ worth of new airplanes, including Boeing 787 and 737 jets, with plans to deploy larger Boeing 777 and A350s as well. Qatar is using the tiny, close-to-defunct Air Italy to skirt its promise to the U.S. to not add so-called “Fifth Freedom” flights to the U.S., which are routes that operate outside of a carrier’s home country – such as nonstop flights between the U.S. and Europe.
Qatar’s promise was part of an agreement with the U.S. in which Qatar said it would finally take steps toward fair competition in aviation, after it had enjoyed the benefits of billions of dollars in government subsidies. These subsidies drove U.S airlines out of the Mideast and India, and threatened thousands of airline jobs in the U.S.
Only months later, Qatar is back to their old tricks, thumbing its nose at the Trump Administration with its clumsy scheme to get around its promises. These Italian routes, already highly competitive and well-served by existing carriers, are simply not economically viable without Qatari subsidies. By flooding these markets with subsidized capacity and dropping prices far below cost, Qatar is launching another assault on U.S. airline employees and travelers, and disrespecting the Administration.
We shouldn’t be surprised, given that if it played by the same rules as everyone else, Qatar Airways simply wouldn’t exist. It’s remarkable that in an era when global aviation is thriving, Qatar must keep its state-owned airline aloft with a massive infusion of subsidy dollars. The airline lost $1.3 billion in its most recent fiscal year, flew fewer passengers, and has said it may ask its government for another capital injection.
Thankfully, these concerns have gotten the attention of Congress. More than a dozen U.S. senators recently sent letters to the administration raising their concerns about the Air Italy-Qatar connection and its impact on U.S. jobs.
As the CEO of Delta, my No. 1 job is taking care of our 80,000 employees, who are the best in the business and work hard every day to ensure all of our flights are safe and reliable. On their behalf, I join those Senators in asking the Trump Administration to examine this situation and send a strong message to the Qatari government that these actions simply won’t be tolerated.
We should demand an answer to the Deutsche Bank question: Who is funding Air Italy’s losses?
Originally Published on Delta.
Newt Gingrich: Left unchecked, China will cheat American industries and workers — Just look at what Qatar has done
As the Trump administration continues to negotiate and define its trade relationship with China, it’s important to remember that whatever agreement comes out of the current détente will only be one step in a continual process.
Worldwide trade is incredibly complex and ever-changing. No trade regime with China can be completely defined or enforced under a single agreement. The moment one deal is made, China will immediately begin looking for other ways to gain an unfair advantage – and they are not the only ones.
This is why the Trump administration must continue to develop a system that can enforce the trade agreements it makes with China – and every other country with which the U.S. does business.
For example, the Qatari government had provided an estimated $25 billion in illegal subsidies to its state-owned carrier, Qatar Airways, in violation of its years-long Open Skies agreement with the U.S. – a bilateral treaty that ensures fair competition in the aviation market. These subsidies essentially propped up Qatar Airways, wiping away massive losses and insulating the carrier from challenging market forces. The global aviation community correctly recognized that it would be impossible to compete with an airline that didn’t have to worry about profits or demand.
President Trump brought the Qatari government to the negotiating table and held it accountable for its dubious actions. A new agreement struck in January represented an opportunity for Qatar to turn the page, and for rule-abiding airlines to finally compete on a level playing field. Qatar pledged to be more transparent in its financial transactions and in a letter accompanying the agreement, said it had no plans to launch “fifth-freedom” routes, such as those from Europe to the United States.
The Qatari leadership has continued to do virtually everything it said it wouldn’t.
Qatar’s finances have only become murkier. In late 2017, prior to the latest agreement, Qatar Airways bought a 49 percent stake in the holding company of the long-troubled airline Air Italy (once known as Meridiana). Early this month, Air Italy announced it will launch new routes from Milan to San Francisco and Los Angeles next year.
This isn’t a coincidence. Qatar Airways is simply dumping its government subsidies into Air Italy, so it can gain access to the United States via the Italian airline. Air Italy would not have been able to launch these routes without the financial backing of Qatar Airways, and Qatar would have not been able to provide its backing without illegal subsidies. Prior to Qatar’s purchase, Air Italy was mainly serving just a few regional routes.
This puts the U.S. aviation industry and the 1.2 million jobs it supports at risk.
Consider this: Qatar’s ability to skirt markets and dump subsidies into pet projects is a fraction of a fraction of China’s capability.
Even before news of Air Italy’s California routes came out, there was widespread concern that Qatar was violating the January agreement. Recently 11 senators, including Ted Cruz, R-Texas, and Rand Paul, R-Ky., wrote to Secretary of Transportation Elaine Chao, Secretary of State Mike Pompeo, and Secretary of Commerce Wilbur Ross, expressing concerns over Qatar Airways and Air Italy.
Consider this: Qatar’s ability to skirt markets and dump subsidies into pet projects is a fraction of a fraction of China’s capability.
This is why President Trump is taking China so seriously. He knows that he has to bring maximum toughness to every negotiation with China so China’s leaders begin to understand that cheating will not be tolerated.
However, the system that the Trump administration builds for keeping China and other trading partners accountable once these deals are made must be even more tough. To be sure, Trump’s resolve in the fight over trade with China has caused some U.S. industries some pain, but this is nothing compared to what an unchecked China could do. Chinese President Xi Jinping has been clear about all of the sectors he intends to dominate.
This is potentially the greatest challenge President Trump – and America as a whole – face in the coming decades. Free, fair, and reciprocal trade is a fight we must win. Our survival depends on it.
Originally Published on Fox News.
U.S. Airlines Complained About Air Italy’s New Routes Into America; It Responded By Adding Even More
A transatlantic war of words has broken out between a small Italian airline and the giants of U.S. aviation
Air Italy – a minnow in the global aviation industry with a fleet of just 16 aircraft – announced in early December that it was preparing to launch new services to Los Angeles and San Francisco from Milan Malpensa airport, starting in April next year.
It marked a doubling of the carrier’s route network into the U.S., adding to its services to New York and Miami it had launched earlier in the year.
Airlines launch new routes all the time without any fuss. But not this time. A group called the Partnership for Open & Fair Skies, a coalition that includes American Airlines, Delta Air Lines and United Airlines, issue a strongly-worded statement calling for the U.S. government to step in.
“We expect the Trump administration will take strong action and stand up for American workers in response to these violations,” the group said.
An Air Italy Boeing 737 Max plane at Milan Malpensa airport, Italy on May 14, 2018. (Photo: Pier Marco Tacca/Getty Images)GETTY
Its issue isn’t with the idea of an Italian carrier launching flights to U.S. cities though; it is with Air Italy’s second biggest shareholder.
Partnership for Open & Fair Skies was set up to campaign against what it says is unfair competition from the three big Middle East airlines: Emirates, Etihad Airways and Qatar Airways. The last of these owns 49% of Air Italy.
According to the lobby group, the Italian airline’s new services amount to a violation of the commitments made by Qatar in January 2018 that Qatar Airways would not launch any more so-called “fifth freedom” flights to the U.S. (in other words, flights between two foreign countries).
“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,” said Scott Reed, campaign manager for the Partnership for Open & Fair Skies. “Qatar has demonstrated a stunning lack of respect for President Trump and Secretary of State Pompeo.”
Some U.S. politicians have added their voice to the criticism, with a group of senators calling for an investigation into Qatar Airways.
If all that was meant to cower Air Italy, it has not worked. On December 18, Air Italy said it was going to launch a non-stop service from Milan to Chicago O’Hare International airport from mid-May. Chief operating officer Rossen Dimitrov said the new route “reflects the importance of the North American market to us.”
Dimitrov has also denied that his airline was being unfairly aided by Qatar. “We are registered in Italy and not subsidized by Qatar Airways, who are minority stakeholders,” he said at a recent event in Delhi to launch new services to India. “They do not manage us.”
The U.S. might struggle to find any reasonable grounds to stop these flights. In January, Qatar and the U.S. held discussions over civil aviation links and reached a set of understandings to address the concerns that U.S. carriers said they had about unfair competition. According to that political agreement, Qatar Airways committed to issuing audited financial statements and, within two years, to start disclosing any significant transactions with state-owned enterprises and “take steps to ensure that such transactions are based on commercial terms.”
On the issue of additional flights, the wording of the agreement was particularly vague. Qatar merely made an assurance that it had “no current plans” for Qatar Airways to operate fifth freedom flights to the U.S. At the time, both sides were able to claim victory. Now, however, the weakness of the pledges is becoming all too apparent to the U.S. airlines.
A follow-up meeting between U.S. and Qatari officials was penciled in for early 2019, although it is unclear at this stage if that will go ahead.
Air Italy will have gained some useful publicity from the episode, which will do it no harm at all as it pushes ahead with a significant overhaul of its operations. In March 2018 it changed its name from Meridiana as part of its revamp. Since then it has added new domestic and international routes, including long-haul services to Bangkok, Delhi and Mumbai, as well as the U.S. destinations.
The airline has a small fleet of ten Boeing 737s, one Boeing 767 and five Airbus A330s, but is aiming to operate 50 aircraft by 2022. The new long-haul routes are being served by the A330. The fleet expansion program is being aided by Qatar Airways, which has given Air Italy the five A330 jets from its own fleet.
Qatar Airways’ investment in the Italian airline also plays into its fierce rivalry with the two UAE carriers. Emirates already operates a fifth freedom service between Milan and New York with one of its own planes. Etihad had previously invested heavily in Alitalia, the national carrier of Italy, although it could not prevent it slipping into administration in May 2017
Originally Published on Forbes.
U.S. Airlines Complained About Air Italy’s New Routes Into America; It Responded By Adding Even More
A transatlantic war of words has broken out between a small Italian airline and the giants of U.S. aviation
Air Italy – a minnow in the global aviation industry with a fleet of just 16 aircraft – announced in early December that it was preparing to launch new services to Los Angeles and San Francisco from Milan Malpensa airport, starting in April next year.
It marked a doubling of the carrier’s route network into the U.S., adding to its services to New York and Miami it had launched earlier in the year.
Airlines launch new routes all the time without any fuss. But not this time. A group called the Partnership for Open & Fair Skies, a coalition that includes American Airlines, Delta Air Lines and United Airlines, issue a strongly-worded statement calling for the U.S. government to step in.
“We expect the Trump administration will take strong action and stand up for American workers in response to these violations,” the group said.
Its issue isn’t with the idea of an Italian carrier launching flights to U.S. cities though; it is with Air Italy’s second biggest shareholder.
Partnership for Open & Fair Skies was set up to campaign against what it says is unfair competition from the three big Middle East airlines: Emirates, Etihad Airways and Qatar Airways. The last of these owns 49% of Air Italy.
According to the lobby group, the Italian airline’s new services amount to a violation of the commitments made by Qatar in January 2018 that Qatar Airways would not launch any more so-called “fifth freedom” flights to the U.S. (in other words, flights between two foreign countries).
“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,” said Scott Reed, campaign manager for the Partnership for Open & Fair Skies. “Qatar has demonstrated a stunning lack of respect for President Trump and Secretary of State Pompeo.”
Some U.S. politicians have added their voice to the criticism, with a group of senators calling for an investigation into Qatar Airways.
If all that was meant to cower Air Italy, it has not worked. On December 18, Air Italy said it was going to launch a non-stop service from Milan to Chicago O’Hare International airport from mid-May. Chief operating officer Rossen Dimitrov said the new route “reflects the importance of the North American market to us.”
Dimitrov has also denied that his airline was being unfairly aided by Qatar. “We are registered in Italy and not subsidized by Qatar Airways, who are minority stakeholders,” he said at a recent event in Delhi to launch new services to India. “They do not manage us.”
The U.S. might struggle to find any reasonable grounds to stop these flights. In January, Qatar and the U.S. held discussions over civil aviation links and reached a set of understandings to address the concerns that U.S. carriers said they had about unfair competition. According to that political agreement, Qatar Airways committed to issuing audited financial statements and, within two years, to start disclosing any significant transactions with state-owned enterprises and “take steps to ensure that such transactions are based on commercial terms.”
On the issue of additional flights, the wording of the agreement was particularly vague. Qatar merely made an assurance that it had “no current plans” for Qatar Airways to operate fifth freedom flights to the U.S. At the time, both sides were able to claim victory. Now, however, the weakness of the pledges is becoming all too apparent to the U.S. airlines.
A follow-up meeting between U.S. and Qatari officials was penciled in for early 2019, although it is unclear at this stage if that will go ahead.
Air Italy will have gained some useful publicity from the episode, which will do it no harm at all as it pushes ahead with a significant overhaul of its operations. In March 2018 it changed its name from Meridiana as part of its revamp. Since then it has added new domestic and international routes, including long-haul services to Bangkok, Delhi and Mumbai, as well as the U.S. destinations.
The airline has a small fleet of ten Boeing 737s, one Boeing 767 and five Airbus A330s, but is aiming to operate 50 aircraft by 2022. The new long-haul routes are being served by the A330. The fleet expansion program is being aided by Qatar Airways, which has given Air Italy the five A330 jets from its own fleet.
Qatar Airways’ investment in the Italian airline also plays into its fierce rivalry with the two UAE carriers. Emirates already operates a fifth freedom service between Milan and New York with one of its own planes. Etihad had previously invested heavily in Alitalia, the national carrier of Italy, although it could not prevent it slipping into administration in May 2017.
Originally Published on Forbes.
Letter from Michael Lee to Trump Administration Officials Regarding Qatar’s Subsidization of Air Italy
Air Italy Announces Yet Another New North American Destination: Where to Next?
At this point, it’s becoming a little difficult to see Air Italy as little more than a Milan-based front for Qatar Airways to continue its North American expansion. Just a day after announcing it would start flying to Toronto, Air Italy says it will open up a new route between Milan and Chicago in May 2019. This all comes just two weeks after Air Italy also laid out plans to start flying to San Francisco and Los Angeles – an announcement that caused a furore over Qatar Airways’ plans for the airline.
Of course, Qatar’s investment in Air Italy, as well as the heavy involvement its had in shaping the airline’s business strategy isn’t necessarily a bad thing. The recently rebranded airline will add significant competition in the Italian aviation market where it’s sorely needed – given the fact that flag-carrier Alitalia is living off a seemingly never-ending bridge loan funded by the Italian taxpayer.
Passengers should also benefit from a much improved onboard experience although they should be forgiven if they happen to get confused about what airline they’re actually flying. Qatar Airways has loaned its own long-haul aircraft to Air Italy, complete with distinctive burgundy-coloured furnishings. On the outside, Air Italy’s branding also features the same burgundy shade that you’ll find on the Qatari national flag.
It’s probably no coincidence either that Air Italy’s cabin crew and ground staff wear a near-identical version as that worn by their Doha-based colleagues at Qatar Airways.
One theory for Air Italy’s current expansion plans is that it’s targeting the Indian diaspora. New route openings to Dehli and Mumbai will connect to metropolitan areas with some of the largest Asian Indian populations in North America – it’s a similar market that Qatar Airways has longed targeted by connecting passengers through its Doha hub.
If Air Italy continues with this strategy don’t be surprised to see the likes of Washington DC, Seattle, Houston and Dallas added as routes in the not so distant future. We’d also wager a service to Manila, and maybe even a Chinese mainland destination coming at some point in 2019 as well.
This all comes at the same time that Qatar Airways has been forced to tame its own North American expansion plans. It’s ambitions, however, don’t appear to have been diminished by a concerted campaign against competition offered by Persian Gulf airlines against their U.S.-based counterparts.
Scott Reed, a campaign manager at the Partnership for Open & Fair Skies – a lobby group funded by some of the largest airlines in the USA including American and United is far from impressed by Air Italy’s latest announcements.
“Once again, Qatar is using Air Italy as a Trojan horse built from subsidized cash to avoid its commitments to the Trump administration and launch new fifth freedom routes,” Reed said in an emailed statement.
“What’s clear now is that the writing is on the wall. Qatar Airways knows that President Trump and Secretary Pompeo won’t accept flagrant trade cheating that hurts American workers, and is quickly launching further subsidized flights before the administration takes action.”
“As we said earlier this month, faced with clear evidence that Qatar will not play fair or abide by its commitments, we expect the Trump administration will stand up for American workers in response to these violations.”
Qatar’s plan for Air Italy is novel but arguably no different than what the likes of one of its biggest critics, Delta Air Lines has done itself – in that case, buying a significant stake in Virgin Atlantic to gain a foothold at Heathrow Airport and then changing up the airline’s route network to focus on North America.
At the same time, Qatar Airways / Air Italy is actually opening up new routes that will benefit consumers in both Italy and India. It’s probably worth noting that U.S. airlines have underserved India for many years so they have the option to compete on both fronts if they choose to.
Bottom Line
Air Italy is pretty much Qatar Airways by a different name. That is by no means a bad thing although it’s understandable why competitors are getting upset about the upstarts ambitious expansion plans.
Originally Published on Paddle Your Own Kanoo.
U.S. airlines bristle at expansion of Qatar-backed Italian airline
An Italian airline is now caught in the middle of a simmering dispute over government subsidies between the largest U.S. airlines and state-owned Qatar Airways.
Qatar Airways owns a 49 percent stake in Air Italy, which is planning to serve Los Angeles and San Francisco next year from Milan. Delta Air Lines, American Airlines and United Airlines say the Doha-based airline is using the carrier to offer flights to Europe, violating an agreement the Qatar government reached with the Trump administration last year.
In January, Qatar Airways agreed to open its books and said it did not have plans to launch flights between the U.S. and destinations other than its home country, according to the Trump administration. Similar agreements were struck in May with United Arab Emirates carriers Abu Dhabi-based Etihad and Dubai-based Emirates. (Emirates currently flies from the New York area to Milan and Athens, an example of the so-called “fifth freedom” flights.)
The four-year-old international feud is over allegations from U.S. carriers Delta Air Lines, American Airlines and United Airlines that several of their Persian Gulf rivals, known for their plush upper-class cabins, have received since 2004 more than $50 billion in subsidies from their home countries that create an unfair playing field for their U.S. competitors.
“With regards to the Italian version of Qatar, we are strongly opposed, and we together — Delta, American and United — are very closely aligned on this issue,” United’s CEO Oscar Munoz said on a call with reporters last week. The expansion is an “an-in-your-face to our administration on agreements that have been reached.”
Some U.S. lawmakers are asking the Trump administration to step in. Eleven Republican senators, including Sen. Ted Cruz of Texas, earlier this month sent a letter to Transportation Secretary Elaine Chao expressing concern about Air Italy’s expansion.
“Air Italy’s entry into this crowded market appears consistent with Qatar Airways pattern of adding subsidized capacity in markets where demand is already well-served,” said the letter.
Qatar Airways and the White House did not immediately respond to a request for comment. When asked about the dispute, Air Italy emphasized that Qatar Airways owns a minority stake in the airline, but did not respond to the allegations directly.
Originally Published on CNBC.
Letter from Rand Paul to Trump Administration Officials Regarding Qatar’s Subsidization of Air Italy
Trump administration holds talks with airlines, keeps pressure on Gulf carriers
WASHINGTON (Reuters) – The Trump administration met with major airlines on Tuesday to discuss complaints that some Gulf states are unfairly subsidizing state-owned carriers, keeping up pressure on the Middle East airlines at the center of a spat with U.S. rivals.
U.S. and Gulf airlines representatives met at the U.S. State Department with administration officials to discuss the status of the government’s review of complaints about subsidies. A State Department official said there would be no announcement after the meeting, but officials plan new talks with Gulf states starting this week.
Heads of the three largest U.S. passenger carriers – American Airlines Group Inc (AAL.O), United Continental Holdings Inc UAL.N and Delta Air Lines Inc (DAL.N) – have urged the Trump administration to challenge the conduct of three major Middle Eastern carriers under “Open Skies” agreements signed in the early 2000s. The U.S. airlines contend the Gulf carriers are being unfairly subsidized by their governments.
The airlines, Qatar Airways, Etihad Airways and Emirates, have denied those accusations. The Gulf airlines operate around 200 flights per week to 12 U.S. cities.
President Donald Trump told airline executives in February he recognized they were facing pressure from foreign carriers, but added that he wanted foreign airlines also to do well.
“They come with big investments, in many cases those investments come from their governments, but they are still big investments,” he said.
In a Sept. 14 White House memo seen by Reuters on Tuesday, Trump administration officials agreed the U.S. government “should take action to address the unfair behavior of Gulf carriers.” It said the government should “seek disciplines on subsidies, transparency and state owned enterprises” and consider withdrawing from the Open Skies agreements if “sufficient progress it not made.”
The Partnership for Open & Fair Skies, which includes Delta, American, United and some major airline unions, on Tuesday applauded “the Trump administration for taking action to level the playing field with the Gulf carriers and their massive government subsidies”, spokeswoman Jill Zuckman said.
But U.S. smaller airlines grouped under the U.S. Airlines for Open Skies Coalition said their larger rivals “still cannot point to a specific violation” of the Open Skies agreements.
It said it was “confident further investigation by the Trump administration will show the claims for what they are: a political ploy to protect themselves from competition and limit choice for U.S. travelers”.
The coalition represents Atlas Air Worldwide Holdings Inc (AAWW.O), FedEx Corp (FDX.N), Hawaiian Airlines, and JetBlue Airways Corp (JBLU.O).
U.S. Travel Association President and CEO Roger Dow also said on Tuesday: “We strongly oppose any efforts to reduce secure travel, connectivity, growth and consumer choice.”
Originally Published on Reuters.
The 11 US senators against Air Italy: used by Qatar to violate the agreements
[Translated from Italian to English]
Request to Washington to investigate the expansion of the carrier to 49% of Qatar Airways. From Doha they reject the accusations: we do not use Air Italy to fly to the USA
Air Italy is a Trojan horse from Qatar Airways in the American market. Eleven US senators – all Republicans – ask the White House to investigate the airline partner born from the sundial Meridiana with 49% in the hands of the Doha carrier. In a letter sent last December 3 to Mike Pompeo (US Department of State), Elaine Chao (Transport) and Wilbur Ross (Commerce), the senators headed by Ted Cruz invite the Trump administration to shed light on the operations of Air Italy.
The agreements
Operations that, according to the representatives, seem to violate the agreement between the United States and Qatar at the beginning of this year and which establish among other things the renunciation by Qatar Airways not to have flights in fifth freedom, therefore to recur only to direct connections and not to those with a stopover in Europe, as is the case for Emirates with the Dubai-Milan-New York and Dubai-Athens-New York routes. For the eleven American senators, Qatar Airways would be circumventing that constraint by financing the routes of Air Italy between Malpensa and the US.
The reply
An accusation reminiscent of that of Doug Parker, CEO of American Airlines. “There is a Persian Gulf carrier who is using his investment in another company to fly to the US, which is something that needs to be solved,” Parker said a few weeks ago. Accusation that is rejected by the leaders of the Doha carrier. “On this point I want to be clear: Qatar Airways does not use Air Italy as an alternative way to take passengers from Doha to the US,” said Akbar Al Baker, from the Gulf company, to Corriere in a conversation in May immediately after delivery of the first Boeing 737 Max 8 at Air Italy. «We do not even have codeshare flights with them over Europe and we have not even thought about it.
The accusations
The Republican senators think otherwise. The Milan-New York flight of Air Italy is boiling as “questionable from the commercial point of view, considering that there are already five companies (United, Delta Air Lines, American Airlines, Alitalia, Emirates)”. The reason why the eleven believe that “entry into an already crowded market” is in line with the Qatar Airways strategy “to add flight seats with state aid to markets where demand is already well served”, write in the letter.
The routes
As a pet “that offered domestic flights and some international seasonal connections”, Meridiana then became Air Italy according to the American representatives went with launching regular flights to the USA. Markets in which Air Italy, they continue, “would have had no access without Qatar Airways money, as it would not have been possible for Qatar Airways without the direct support of the Qatari government”. So the request for investigation and verification of the respect of the treaties of January 2018 between Doha and Washington. Request that started two days before the announcement by Air Italy of two new direct routes , in April 2019, from Milan to Los Angeles and San Francisco.
Originally Published on Corriere della Sera.
Is Air Italy a Wolf in Sheep’s Clothing? Lobby Group Says Qatar Airways is “Disrespecting” U.S. President
Back in February, the State of Qatar announced that it had reached an important agreement with U.S. authorities over a long-running dispute involving its government-owned national airline, Qatar Airways. A little over two weeks later and a little known Italian airline going by the name of Meridiana Fly revealed a big strategic change just months after Qatar Airways had taken a 49% stake in the carrier.
Initially, the Qatari investment wasn’t entirely surprising – Qatar Airways has taken stakes in a number of airlines, including the owner of British Airways and Iberia as well as South America’s LATAM Group and Hong Kong-based Cathay Pacific. More recently, Qatar Airways even attempted to buy a stake in American Airlines although decided not to pursue that idea after its advances were rebuffed by the airline.
But it soon became clear that Qatar wasn’t merely making a passive investment in Air Italy’s parent company AQA Holding. Along with a complete rebranding (the first thing to change was the Sardinian airline’s name as it rebranded to Air Italy) came a complete change in strategy as it transformed from being a mainly regional carrier – moving its operating base from Olbia to the industrial Italian heartland of Milan.
Air Italy’s fleet would be bolstered by the addition of five Airbus A330-200 long-haul aircraft – all of which would be borrowed from Qatar Airways. The fleet would also gain the latest generation Boeing 737 MAX 8 aircraft – again, belonging to Qatar Airways but delivered new to Air Italy. With the addition of new aircraft, Air Italy would also expand its route network – to Bangkok in the East and to New York City and Miami in the United States.
By 2022, the airline wants to have grown its fleet by as many as 50 aircraft and has plans to start taking delivery of brand new Boeing 787 Dreamliner’s next year.
So far, the two events that occurred earlier this year seem fairly unrelated. Now, however, some lawmakers in the United States say Qatar’s investment in Air Italy, as well as its major shift in business strategy, is an attempt by Qatar to subvert the agreement it reached with the U.S.
For the past few years, the three biggest airlines in the United States – American, Delta and United Airlines – have been locked in a bitter dispute with the so-called Middle East Three or ME3. These are the three largest airlines in the Middle East and comprise Emirates, Etihad Airways and Qatar Airways.
These three airlines have been accused of receiving billions of dollars in illegal State-funded subsidies and in turn capacity dumping with loss-making fares in an effort to force other airlines out of the market. The U.S. carriers were unhappy with the rapid expansion of Persian Gulf airlines into the United States and wanted the government to take action. A lobby group called the Partnership for Open and Fair Skies that they funded claimed failure to act would result in the loss of thousands of American jobs.
The deal that the State Department struck with Qatar didn’t go nearly as far as the U.S. carriers had initially demanded – they basically wanted the Open Skies agreement which allows airlines like Qatar Airways to fly freely to and from the United States to be rewritten and effectively limit the number of flights the airline could operate – a little like rules imposed by the Canadian and Australian governments.
Instead, the final deal involved Qatar Airways agreeing to release fully audited financial results and within two-years publicly disclosing any significant new transactions with other state-owned enterprises. A side note of the deal, which was seized on by U.S. carriers was a statement from Qatar Airways saying that, at present, it had no plans to open any so-called fifth freedom routes to the U.S.
The agreement seemed to draw a line under the dispute – the U.S. carriers, including Atlanta-based Delta Air Lines, claimed victory while business seemingly carried on as normal for Qatar Airways. At the same time, lobbying from the Partnership for Open and Fair Skies stopped almost overnight – in fact, when we contacted the group earlier this year requesting comment about Qatar’s financial results, a spokesperson refused to be drawn on the matter.
Now, though, the bitter dispute has suddenly resurfaced and it’s been brought about by yet another route expansion by Air Italy into the United States – this time to Los Angeles and San Francisco. While some see the new routes as a boon for passengers that offer direct flights on currently underserved routes, the Partnership for Open & Fair Skies has a very different opinion.
“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,” claims Scott Reed, who’s a campaign manager at the Partnership for Open & Fair Skies.
The full statement from the lobby group continues:
“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.”
Interestingly, Air Italy has has just inaugurated a new service to Delhi and will soon begin flying direct to Mumbai. The flights will allow the Indian diaspora to travel seamlessly from these two cities to the United States via Milan. Three of Air Italy’s four U.S. destinations are in the Top Five cities of U.S. metropolitan areas with large Asian Indian populations.
The new connectivity afforded by Air Italy’s route network is likely to have infuriated Delta who only recently announced plans to restart services between the United States and Mumbai – a market it said had long been “impacted by government-subsidized Middle Eastern airlines.”
Meanwhile, one of Qatar Airway’s largest passenger markets has always been India – especially in connecting Indian citizens between their mother country and the West through its Doha hub. It’s entirely possible to think that Qatar Airways could be using Air Italy as a proxy for its own expansion plans.
Who’s in the right and who’s in the wrong pretty much depends which side of the fence you sit on. There are strong arguments and opinions on both sides and while Air Italy’s expansion is definitely a good thing for passengers, it’s not hard to understand why U.S.-based carriers are aggrieved.
What side of the fence are you on?
Originally Published on Paddle Your Own Kanoo.
Planned Milan To LAX And SFO Flights Mean Qatar Airways Violates Deal, U.S. Airlines Say
The big three U.S. airlines and most of their labor unions say that planned new flights from Milan to California’s two key airports violate a deal they made with Qatar Airways just ten months ago.
Qatar owns 49% of Air Italy, which said Wednesday that it will begin service from Milan to Los Angeles and San Francisco in April. Both flights will operate four times weekly aboard an Airbus A330-200 seating 252 passengers in two classes, according to press reports.
The long dispute over whether the subsidized big three Mideast carriers’ aggressive U.S. expansion violates Open Skies agreements had seemed to have ended this year in settlements, first with the government of Qatar in late January and then with the governments of the United Arab Emirates in May. Emirates and Etihad operate hubs in Dubai and Abu Dhabi, respectively.
The dispute has focused on two areas, opaque accounting that seems to hide the subsidies to the carriers and flights operated under the airline industry’s fifth freedom rights, which enable carriers to fly between two foreign countries.
On Monday, eleven Republican U.S. senators led by Ted Cruz (R-Texas) raised the fifth freedom issue in a letter to three cabinet members. The letter noted after Qatar Airways acquired 49% of Air Italy’s parent company last year, Air Italy began service from Milan to New York and to Miami. Also, the letter said, Qatar Airways is providing aircraft to Air Italy.
It appears that either the senators had learned of the planned California service or Qatar is responding to the letter.
“With today’s news 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,” Scott Reed, campaign manager for the Partnership for Open & Fair Skies, said Thursday in a prepared statement.
The partnership represents American, Delta, United and most of their labor unions, as well as the Southwest Airlines Pilots Association.
“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,” Reed said.
“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,” he said. “We expect the Trump administration will take strong action and stand up for American workers in response to these violations.”
Qatar Airways declined to comment. In a January letter to the U.S. government, Qatar said it had no plans to launch fifth freedom flights to the U.S.
Originally Published on Forbes.