U.S. Major Airlines Restart Fight Over Open Skies

Madhu Unnikrishnan
U.S. Major Airlines Restart Fight Over Open Skies

After simmering on a back burner for more than a year, the fight between the U.S. major carriers and the Persian Gulf airlines is heating up again, this time over Air Italy’s new routes to San Francisco and Los Angeles from Milan.

But why should Delta Air Lines, American Airlines, and United Airlines care about a European airline flying from Italy to the U.S.?

After all, the U.S. has an “Open Skies” agreement with the EU, which allows any U.S. airline to fly anywhere in Europe, and any European airline to fly anywhere in the U.S. The U.S. airlines and their unions, through their lobbying group the Partnership for Open and Fair Skies, claim Air Italy is a proxy for Qatar Airways’ expansion in the U.S. and is not legitimately a European carrier. Qatar Airways owns a 49 percent stake in Air Italy. This is a claim Qatar vehemently denies and says its investment in Air Italy predates the 2018 agreement and is compliant with the terms of the deal.

And several U.S. carriers agree with Qatar. A coalition led by JetBlue Airways, cargo operator Atlas Air, and FedEx — which operates a large cargo hub in Dubai — say Air Italy is a “legally certified European carrier” and therefore has every right to expand in the U.S.

In 2015, the U.S. carriers launched a multi-pronged lobbying and public relations effort arguing that Emirates, Etihad and Qatar benefit from illegal subsidies from the governments of the UAE and Qatar and were dumping flights on the U.S. market, making it impossible to compete. Then, like now, the fight began when a Gulf carrier started flying between Europe and the U.S., in that case Emirates’ Milan-New York flights. These flights, called “fifth freedom” flights for the way they’re defined in the UN treaty that governs all international flights, are permitted in Open Skies agreements.

The U.S. majors pushed the Obama administration to freeze new flights by the three Gulf airlines and to amend the Open Skies agreements. This would have abrogated Open Skies, the Gulf carriers and their U.S. allies said. The Obama administration did not act on the matter.

But last year, the UAE and Qatar governments signed deals with the U.S. promising more financial transparency from their carriers and, in side notes, not to launch new fifth-freedom flights. The Trump administration has signaled that it will listen to the complaints of the U.S. major carriers, but, other than the deals signed last year, has not pushed for more change. The Partnership for Open and Fair Skies applauded the administration’s stance and the new understandings with the UAE and Qatar governments.

But Air Italy’s new routes were a march too far. In a letter published as a full-page ad in The New York Times and the New York Post—two newspapers President Donald J. Trump is known to read—the CEOs of American, Delta, and United said Qatar is “ignoring the 2018 agreement your administration signed by using massive government subsidies to launch new routes to the United States through its stake in Air Italy.”

“Simply put, Qatar Airways represents a grave threat to American jobs and the health of the airline industry,” American CEO Doug Parker, Delta CEO Edward Bastian, and United CEO Oscar Munoz said in their letter. “We respectfully encourage your administration to hold Qatar accountable for violating its agreement with the United States and affirm that we will not tolerate these continued infractions.”

This is nonsense, argue JetBlue, Atlas, and FedEx. In a letter to U.S. Secretary of State Mike Pompeo and Transportation Secretary Elaine Chao, the Robin Hayes, William Flynn, and Frederick Smith—chief executives of JetBlue, Atlas, and FedEx, respectively—note that both the Italian Civil Aviation Authority and the European Commission have certified Air Italy as a European carrier. Therefore, its new flights to the U.S. are perfectly legal per the U.S.-EU Open Skies agreement.

And the three CEOs accuse their counterparts at Delta, American, and United of hypocrisy. Delta owns a 49 percent stake in Virgin Atlantic. Does that mean Virgin Atlantic’s London-Dubai flight is similarly a proxy for Delta to serve Dubai from Europe, they ask? Delta, American, and United have many such investments and joint ventures around the world, including in China and Latin America in addition to Europe, and therefore their objections to Air Italy’s expansion are “illogical and would turn aviation law on its head,” JetBlue and the cargo carriers argue in their letter.

The three CEOs raise a point brought up in 2015 when the Open Skies fight first began: that the U.S. abrogating its agreements could result in retaliatory measures by governments worldwide. Should this scenario occur, consumers would suffer, as competition would decrease and fares would rise. JetBlue’s recently announced intention to fly to London could be imperiled if the EU retaliates against the U.S. by refusing to approve the service.

The Trump administration has not yet suggested which way it will lean on this matter other than to say it is studying the issue. But Hayes, Smith, and Flynn have a stark warning for the U.S. government. “Should the U.S. breach the U.S.-Qatar agreement by restricting Qatar Airways’ rights into the U.S., or the U.S-EU agreement by restricting Air Italy flights, we can expect to see a rapid unraveling of hard-fought aviation rights around the world when other governments take similar action to shield their state-owned airlines from competition.”

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