Ed Bastian, the chief exec of Atlanta-based Delta Air Lines doesn’t appear to be feeling too much Christmas cheer right now. Instead, the longtime aviation executive is speaking out against Air Italy – a little known Italian airline that has reignited a fierce dispute between the largest U.S. carriers and Qatar Airways.
“Who is funding Air Italy’s losses?” asks Bastian in a new op-ed piece on Delta’s official website. He claims the airline produced a negative pretax margin of 18.4% last year – and that was on top of a 9.2% loss in 2016. Yet despite the losses, Air Italy has announced a slew of new long-haul routes in the last few months – the carrier has recently started flying to Dehli and Mumbai but what’s worrying Bastian is the airline’s expansion into North America.
“It doesn’t take Sherlock Holmes to solve this particular mystery,” Bastian declares. “The airline’s benefactor is Qatar Airways, the government-owned airline of Qatar, which recently acquired 49% of Air Italy,” he continues, saying Qatar Airways has gifted brand new long-haul aircraft worth billions of dollars to 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,” Bastian claims.
The Delta chief seems to have two main issues with Qatar Airways – First, it’s using its 49% stake in Air Italy to “skirt its promise to the U.S. to not add so-called “Fifth Freedom” flights to the U.S.” (as part of an agreement with the U.S. State Department earlier this year, Qatar penned a letter saying it didn’t currently have any plans to start Fifth Freedom routes between Europe and the USA). And second, Qatar has received billions of dollars in unfair government subsidies over the years which are now being pumped into Air Italy.
“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.”
In fact, some of the routes announced by Air Italy aren’t currently served by any airline in Italy and there is yet to be any proof that any American jobs have been lost because of competition from Persian Gulf carriers like Qatar Airways, as well as Emirates and Etihad Airways.
In contrast, the Middle East airlines say they contribute billions to the U.S. economy and are responsible for securing hundreds of thousands of American jobs by placing big aircraft orders with Seattle-based Boeing, as well as through business and tourism.
That being said, Bastian and his counterparts at American Airlines and United have stuck to the same rhetoric since they started campaigning against Middle East rivals so why would they stop now? They may even have a point and are getting the backing of U.S. lawmakers including Peter DeFazio who is set to take over the House transportation committee.
It’s definitely a debate that is not only worth having but is also going to keep on going and going. Competition is great and most airlines benefit from some form of subsidy or another but the concern here is that both Qatar Airways and Air Italy are receiving subsidies on a totally different scale – in turn, that makes it impossible for commercially minded airlines to compete.
Is Air Italy’s expansion a threat to U.S. jobs? Let us know what you think….