European Union Warns that Delta, American and United are About to Start a Trade War

American Airlines, Delta, and United don’t want Air Italy flying to the U.S. They argue the small Italian airline, with 15 planes and 49% owned by oneworld member Qatar Airways, is making an end run around an agreement Qatar made last year in response to U.S. pressure.

  • Qatar said that though a treaty the US signed gives them the right to fly between the U.S. and Europe, that they didn’t have current plans to do so.
  • The big US carriers say that since Air Italy is flying to the U.S. from Italy, and Qatar is injecting funds into the carrier, that breaks the spirit of the agreement.
  • Even though Air Italy’s plans were well known to the airlines and the U.S. government (and readers of this blog) before the statement was made.

With Delta partner Alitalia a ward of the Italian government, surviving on continued subsidies and thus far unable to find a buyer (after successive failures by Air France and Etihad to turn around the airline), Air Italy sees an opportunity to grow into Italy’s major airline. That seems like a dubious investment, but so does Delta potentially infusing cash into Alitalia.

Delta of course has a 49% stake in Virgin Atlantic (combined with investments by Air France KLM taking joint control to 80%) along with stakes in Aeromexico, Gol, and other carriers.

Air Italy flies from Milan to New York, Miami and seasonally to Los Angeles and San Francisco (cities with no other non-stop service on the route).

American, Delta, and United have found a sympathetic ear in the U.S. government willing to let them pick the pockets of U.S. consumers (higher fares, fewer flight choices including requiring U.S. passengers to connect on some routes) in order to subsidize their own bottom lines. According to the Financial Times the Trump administration’s primary trade agitator Peter Navarro is interested in taking this on.

Navarro, who believes that trade wars are good and easy to win is facing pushback from the State Department which recognizes it is unwise to abrogate treaties that the U.S. has signed, especially when Europe is warning the U.S. not to do it.

The European Commission has written to the US state department warning that any action against Air Italy would constitute a violation of the US-EU Air Transport Agreement.

In the letter, seen by the Financial Times, Henrik Hololei, the director-general for transport at the Commission, warned Manisha Singh, assistant secretary at the state department, that Europe would take “all necessary steps” to defend its rights.

Mr Hololei said: “Any measure to curtail or end the rights of Air Italy to serve the US would constitute a clear and serious violation of the ATA. Such action would be unprecedented and would put into question the most fundamental principles under which our aviation relations have so successfully developed over more than 10 years.”

The campaign by U.S. airlines for trade subsidies from the federal government could backfire, because if the U.S. violates its treaty obligations and Europe then sees the treaty as non-absolute, United, Delta, and American could face their own challenges with operating rights in Europe.

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. With Trump in office, Europe warning the US not to do something only increases the odds he’ll do it.

  2. The State Department has been neutered by Trump, Trump’s son-in-law and the other White House favorites in the isolationist-or-dictator-kiss-up mold.

    And since the Trump clan is firmly in the anti-Qatar camp, Air Italy may end up facing increased odds of being a casualty to the politics involving the Middle East.

    If the EU wants to strike back by de facto ending the US3 cartel industry kingpins’ carnal relations with their EU counterparts in the TATL -flying revenue-sharing joint ventures, I would be smarting like Trump in North Korea.

  3. Soo sick of this. If domestic carriers can’t compete then that is THEIR problem. Politicians need to stay out of it and let the market sort itself out. American consumers can decide who they want to give their business to.

  4. Amazing! When the U.S. had just TWA and PanAm flying internationally, we never heard them ketch about all the government-owned airlines they competed with around their world routes.

    Today, we have 3 domestic legacy carriers that seeking richer markets rapidly expanded outside the U.S. by purchasing segments, revenue sharing joint ventures, and outright investments in foreign carriers. Yet, that does not suffice their ambition to strangulate all competition to protect their inferior business model re customer product and customer experience. As Jet Blue plans to enter the trans-Atlantic competition from BOS and JFK, what will the US3 concoct to intervene and impede its progress?

    Like a horror movie, the taste of blood and always getting their way has only encouraged the US3 to believe they are empowered to act out so anti-competitively allegedly in the name of flag and country. But in their race to the bottom, they lost their perspective-and will power-to compete; instead, seek the easier path of more federal government handouts and protection. Indeed, the US3 act as though we have already become that socialist country in the sky.

  5. “Politicians need to stay out of it and let the market sort itself out.”

    Their argument is that it’s not a free market because the ME3 are being subsidized by their governments. There’s no such thing as a free market when some participants are being subsidized. Whether their allegation is true or not is another story, but that’s their argument.

  6. But any subsidies with respect to Air Italy are fairly modest (this is a small airline) and are dwarfed by the subsidies Delta, United, and American have received from the U.S. government.

  7. There are lots of airlines that have been subsidized, in one or more ways, by their respective home country governments, but I don’t see the US3 airlines crying so much about airlines they consider to provide worse service and value to consumers.

  8. The simple fact is that US airlines are utterly uncompetitive and thats why they are whining for government protection. Anyone who has ever been on any non-US airline knows how far behind US airlines are. For domestic flights people have no choice but I am at a loss why anyone would fly a US airline internationally. The few times I made the mistake to do so I ended up feeling sad for the americans who are domestically stuck with this crap.

  9. So there’s a situation where everyone is following the law, but the US3 are whining because they don’t have even more of a clear advantage than they already possess. Cry me a river.

  10. @Ron, So anyone who has ever been on a non-US airline knows how far behind US airlines are? Well, I’ve been on flights of KLM and Air France. The transatlantic flight on Air France was okay, but the one on KLM? Well, now I know they are far behind. Now I am really glad I fly Delta and happily avoid TATL flights on KLM metal. Sometimes I need to take KLM or Air France flights within Europe … luckily, these are just short hops before (or after when returning back home) great flights with a US airline.

    It’s not that US airlines were absolutely uncompetitive, it is just that they consider potential competition as unfair. Because it is totally unfair when you can’t keep fares higher because there is some competition … well … of course not.

  11. @Ralfinho, just because KLM is bad doesn’t make the US airlines good. I’d fly Lufthansa, Air France, Austrian, Swiss, or SAS before I’d fly Delta, United, or American.

  12. Not certain how many might agree with me however that’s not the point. Personally for domestic air travel within the US my preference is to fly with Southwest Airlines even though there are times an intermediate connection is required which with a bit of research I am able to narrow down to usually no longer than one hour to one and a half hours. Domestic travel with the “Big 3” has over the past several years become more and more frustrating in just about every aspect and to be honest I have totally moved on from being “just one more FF” with all three of them. For international travel (mostly to Europe) my North American preference is the number 1 North American airline, Air Canada, who fly from a number of US cities. Although this often requires a connection in Vancouver (YVR), Calgary (YYC), Toronto (YYZ) or Montreal (YUL) usually not longer than two hours or less. The service level if not always excellent is by far much better on Air Canada than on any of the “Big 3”. In general when taking into account the exchange rate the fares are competitive if not lower than any of the “Big 3” so called “legacy” carriers. If and when Jet Blue are granted rights to Europe I will definitely consider their product although the thought of having to connect through either Boston or New York is not something I particularly would look forward to especially during the winter months.

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