Delta Air Lines Inc. has fired a new salvo in an ongoing battle with Middle Eastern air carrier Qatar Airways, reigniting a conflict a year after the two sides reached a fragile ceasefire.
At issue this time is Qatar’s 49 percent stake in Italy’s Meridiana, which has been rebranded to Air Italy and is now expanding routes to U.S. cities with Qatar’s help.
Eleven U.S. senators including Republicans David Perdue and Johnny Isakson of Georgia have signed onto a letter asking the Trump administration to look into claims by Delta, the state’s largest employer, that this violates commitments Qatar’s civil aviation authority made last January with the U.S. government.
Delta has long contended that Qatar Airways and United Arab Emirates-based Emirates Airline and Etihad Airways have benefited from unfair government subsidies in violation of Open Skies agreements between the U.S. and their countries.
Along with other U.S. carriers, Delta has argued that some $42 billion worth of assistance has allowed Middle Eastern competitors to unfairly flood routes and markets with excess capacity, harming American aviation competitiveness and jobs.
After talks with aviation officials, the Trump administration reached “understandings” with the governments of Qatar last January and the UAE in May. Delta used the occasion of the UAE deal to announce plans to relaunch a direct flight from the U.S. to India, either from Atlanta or New York.
In both arrangements, the airlines agreed to more financial transparency. Qatar’s civil aviation authority stopped short of making explicit promises but told the U.S. it was not aware of any plans by Qatar Airways to begin so-called “fifth-freedom” flights in which carriers connect two destinations without a stop in their home countries. That practice runs contrary to the Open Skies agreements.
But in December Delta CEO Ed Bastian penned an op-ed saying that the Air Italy investment amounts to Qatar “thumbing its nose” at the Trump administration, since it’s contributing new aircraft to help the rebranded Italian airline compete on well-established routes like New York to Milan:
“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.”
As Delta posts record profits, Mr. Bastian had harsh words about Qatar’s financial losses in its recent fiscal year without mentioning the fact that the airline faced an aviation blockade (including the use of air space) by Saudi Arabia and three other Arab nations that serve as substantial sources of customers.
Delta’s critics, meanwhile, see hypocrisy and opportunism in the fact that the Atlanta-based carrier has investments in state-owned carriers like China Eastern and partners with other subsidized carriers through SkyTeam even as it criticizes supposed subsidies in other markets.
For eight years, Italy’s Alitalia — another money-losing Italian carrier that benefited recently from government loans and bankruptcy protection — was part of a Delta transatlantic joint venture that also includes Air France and KLM.
Qatar hasn’t been bashful about its plans to use its position in Air Italy to shake up the status quo. From the airline’s annual report:
Through our investment, the Qatar Airways Group will create a credible and sustainable alternative for the people of Italy and global travelers to and from Italy, with high quality and affordable scheduled services in the domestic, regional and intercontinental segments, under the new identity of Air Italy. Adopting the best of Qatar Airways, adapted for the Italian market environment, the group will achieve global scale in both fleet and network expansion, offering high-quality premium class products across all flights on a modern fleet. This will be facilitated by an investment in new Air Italy fleet acquisitions, including the commitment to receive 20 brand new state-ofthe-art Boeing 737 Max-8s over the next three years, alongside five Airbus A330-200 aircraft from Qatar Airways’ fleet, which will be further replaced by leased Qatar Airways Boeing 787-8 aircraft commencing May 2019.
That said, the report also makes clear that Qatar Airways does not own a controlling interest in Air Italy, noting that Qatar Airways is excited to be “supporting the current majority stakeholder” in the rebranding. It also puts the investment in context: Qatar Airways has long invested in other airlines like Cathay Pacific, International Airlines Group and LATAM Airlines Group, pursuing a diversification strategy that’s ironically similar to Delta’s: taking small stakes in major carriers and working with them to drive greater efficiency, route access and profitability.
The difference, Delta says, is that Qatar Airways is contributing massive numbers of aircraft to its partners and using backing from its home government to do so.