AirItaly expansion challanged by major American airlines

An Italian airline is now caught in the middle of a simmering dispute over government subsidies between the largest U.S. airlines and state-owned Qatar Airways.

Qatar Airways owns a 49 percent stake in Air Italy, which is planning to serve Los Angeles and San Francisco next year from Milan. Delta Air Lines, American Airlines and United Airlines say the Doha-based airline is using the carrier to offer flights to Europe, violating an agreement the Qatar government reached with the Trump administration last year.

In January, Qatar Airways agreed to open its books and said it did not have plans to launch flights between the U.S. and destinations other than its home country, according to the Trump administration. Similar agreements were struck in May with United Arab Emirates carriers Abu Dhabi-based Etihad and Dubai-based Emirates. (Emirates currently flies from the New York area to Milan and Athens, an example of the so-called “fifth freedom” flights.)

The four-year-old international feud is over allegations from U.S. carriers Delta Air Lines, American Airlines and United Airlines that several of their Persian Gulf rivals, known for their plush upper-class cabins, have received since 2004 more than $50 billion in subsidies from their home countries that create an unfair playing field for their U.S. competitors.

“With regards to the Italian version of Qatar, we are strongly opposed, and we together — Delta, American and United — are very closely aligned on this issue,” United’s CEO Oscar Munoz said on a call with reporters last week. The expansion is an “an-in-your-face to our administration on agreements that have been reached.”

Some U.S. lawmakers are asking the Trump administration to step in. Eleven Republican senators, including Sen. Ted Cruz of Texas, earlier this month sent a letter to Transportation Secretary Elaine Chao expressing concern about Air Italy’s expansion.

Source: CNBC