American Airlines is Pleased With Their Total Loss Against Gulf Airlines

When Delta, United and American began their lobbying campaign against Emirates, Etihad, and Qatar three years ago they wanted:

  • Limits on the ability of these airlines to fly to the US
  • Limits on what these airlines could charge for their flights
  • An end to flights on these airlines between the US and Europe

Their argument was that despite the US carriers being the most profitable airlines in the world, and airline employment being at a peak, and that both US and Gulf airlines (like many airlines around the world) are subsidized, the benefits these airlines receive from their government represented an existential threat to the industry.

Nevermind that there is no economic theory which supports protecting mature, profitable industries and that what the US carriers were arguing for was confiscating money from US consumers (in the form of higher fares) and redistributing it to airline shareholders.

And nevermind that the US airlines have had plenty of their own subsidies, indeed the very first large aircraft order American Airlines ever made was backed by the US federal government and Delta benefits from its investment in the most subsidized Chinese airline, Shanghai-based China Eastern (they also benefited from Etihad’s subsidies for Alitalia, with whom they had a joint venture across the Atlantic, it’s fine for Etihad to have transatlantic operations as long as they benefit Delta).

The push was always Delta’s. It was fundamentally racist. American and United simply signed on. And United became somewhat muted on the topic after their own CEO was forced to resign in a scandal over bribing an official to provide help for the airline.

Ultimately the U.S. airlines got basically nothing. The Gulf carriers agreed to greater financial transparency (Emirates, in fact, already met the conditions of the agreement as its financials are public and audited – and those have shown the carrier to be profitable for years). But they didn’t agree to reduce their flights. They simply stated that at this time they do not intend to add more flights between the U.S. and Europe.

  • Emirates is the only one of the three that flies between the US and Europe. They currently offer two flights (New York JFK – Milan and Newark – Athens) and they can keep those.

  • Etihad is scaling back its global ambitions anyway after absorbing huge losses through investments in Alitalia and air berlin.

  • Qatar only ever operated so-called ‘fifth freedom’ routes to the US a decade ago before they had aircraft that could make the Doha journey non-stop. Moreover Qatar’s US-Europe operation is simply called “Air Italy” and they’re the largest shareholder in IAG, the partner of British Airways and Iberia with which American Airlines shares revenue across the Atlantic.

Naturally it’s Delta that came out ahead in the end — not because of any concessions by Emirates, Etihad, or Qatar but because they walked away in a much stronger position than American in India, Pakistan, and the surrounding region.

  • American dropped its Etihad codeshares
  • American dropped its Qatar codeshares
  • American lost its Gulf Air partnership
  • American lost its Jet Airways partnership to Delta

American’s other partner in the Mideast is Royal Jordanian which has only 7 widebody aircraft in its fleet. Etihad and Qatar provided passengers from their own region and myriad cities in South Asia that American’s joint venture partner British Airways doesn’t serve. Since American doesn’t serve the region itself that’s traffic that simply won’t flow into American’s route network.

So American walked away from a South Asia strategy, while Delta picked one up in Jet Airways.

What does American think of all of this? According to its President Robert Isom at an employee forum last week “it is still a big issue.” Isom claims to have “made progress.. we’re pleased that there’s a recognition that when it comes to fifth freedom flights.. that that’s a problem.”

Isom concludes, “It’s still a focus area.. we’re pleased with the work we’ve been able to do with the Trump administration and we’re pleased with the results so far.”

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. So Gary interesting article especially regarding Delta which many of us never really put it all together, however, I somewhat have an issue with your statement “The push was always Delta’s. It was fundamentally racist. American and United simply signed on. And United became somewhat muted on the topic after their own CEO was forced to resign in a scandal over bribing an official to provide help for the airline.”

    Can you expand your statement about racism in regards to Delta?

  2. If American is happy throwing away money, maybe they could offer a $100 per segment discount for passengers that have to suffer through flying the new 737’s.

  3. Given Jet’s financial issues right now, I’m not so sure American losing it is as big a deal as it was previously. Jet may do a Kingfisher soon.

  4. And… Even though it was a while back, American dropped it’s mileage agreement with ELAL… The reasons might still be murky.
    Can one still use AAdvantage miles to book Etihad without a code share?

  5. It is possible that JetBlue is also a winner from AA’s folley of giving up it’s code shares. By having their codes on EY and QR flights….they probably sold a lot of overpriced tickets to the gov’t, whose employees have to buy tickets from an American carrier thanks to the Fly America Act. It would be interested to see how many of those purchases now go to JetBlue’s code shares on EK….

  6. The Open Skies Agreement is typical Trump nonsense. Raise hell – fire and fury. Sign an agreement that means nothing. Declare victory. Add another notch in the belt of the world’s greatest negotiator.

  7. funny, I just came off a Qatar flight from JFK last week and I swore seeing an AA codeshare number on the gate screens. Didn’t help when the FA announced that the flight was a codeshare with American Airlines.

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