US Airlines Angry At Qatar Airways Backed Air Italy Expansion

Qatar has been doing something rather sneaky for the last few years, investing into other airlines in order to covertly expand its reach. At least, that is what some airlines would have us believe.

So far they have expanded into:

  • 20% of IAG group – British Airways, Iberia, Aer Lingus, LEVEL and Vueling – 546 planes + 291 on order
  • 49% of Air Italy – 17 planes + 47 on order
  • 10% of Latam (Group) Airlines – 287 planes + 22 orders (not including subsidiaries)
  • 10% of Cathay Pacific – 128 planes + 42 orders

By investing into these airlines they are able to promote certain routes and get past restrictions, such as competing with fellow One World members or local airlines. Especially US Airlines.

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Air Italy
Air Italy’s new US routes will be served by the A330-200. Photo: Air Italy

What’s the beef with US Airlines?

Basically, back in January 2018, Qatar and the US Airlines were clashing. The US Airlines accused Qatar of operating off government subsidies (an unfair contest when your government can use tax money to outright fix any flaws in your business model) and thus being anticompetitive. Qatar was only able to reduce this to a simmer by showing the US Airlines their books (proving no government subsidies) and promise to not run any routes from US cities to anywhere apart from Qatar (Fifth freedom flights).

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However…

Qatar is now promoting fifth freedom flights to the US through its 49% owned Air Italy.  Air Italy plans to run flights from California, Los Angeles, and San Fransico to Milan early next year.

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Air Italy
Air Italy Business Class.

Technically these are not Qatar flights and technically Qatar doesn’t own Air Italy… but at 49% you have to admit they would have significant influence. And that 49% of the profit of these flights (that are fully propped up by investment from the Qatar government) goes to Qatar, are they violating their promise?

Qatar Qsuites
Qatar Qsuites

The partnership for Open and Fair Skies, which United, American, and Delta are members, have issued this scathing statement.

“With the announcement of new routes from Air Italy to the US, 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, – Open and Fair Skies Statment

Qatar has yet to comment on the issue, but Air Italy was quick to point out that they are still an independent airline from Qatar.

“As has been stated previously, Air Italy is an Italy-based and Italy-registered independent airline owned by AQA Holding with two shareholders, Alisarda which owns 51% and Qatar Airways which owns 49%, with investment reflecting the shareholders’ respective ownership levels,” Air Italy told TPG

US Airlines have pooled their political influence together and are currently petitioning the US government to intervene and prevent Air Italy from having these direct routes.

“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,” – Statment to the US Government

Overall, I personally can see both sides of the argument. On one hand, Air Italy is an independent airline who is seeing a market opportunity to expand. And there are no rules in place to prevent one of the US Airlines from competition with Qatar in their home space, by investing in another airline like Royal Air Maroc.

Qatar
Qatar’s New Alliance.

On the other hand, its very clever what Qatar has done and it really does exploit a loophole in the agreement. It goes to show that with clever investment, they can really start to build their own alliance network.

What do you think?

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davide molinari

My comments are: a) The US3 could have developed Milan area market, instead of forming a cartel offering only New York as USA destination and raping Northern Italian passengers with insulting tickets fares to fly with airplane dismissed from other routes b) Air Italy flight are not “fifth freedom” and are not code shared with QR; Air Italy is a stand alone carrier c) Milan -Los Angeles has been for years the world’s busiest route not served with a direct flight. d) USA-India passenger traffic has been developed in the last decades by Gulf carriers and completely abandoned by US… Read more »