Home Business Qatar Airways’ & Air Italy’s alliance: How valuable is it?

Qatar Airways’ & Air Italy’s alliance: How valuable is it?

Meridiana was rebranded as Air Italy in February 2018, after Qatar Airways acquired a 49% stake in the holding company in September 2017. Alisarda retained a 51% stake and rebranded as AQA Holding. In April 2018, Air Italy and Qatar Airways successfully launched their planned code share on selected flights

Qatar Airways

News Desk |

Qatar’s national carrier, Qatar Airways and Air Italy, a privately owned Italian airline have collectively announced their decision to strengthen ties by expanding their code-sharing agreement earlier this month.

Air Italy’s “IG” code will be added to Qatar flights between Doha and Sydney as a result of the extension of the existing agreement between the two companies.

Qatar and Air Italy have code-shared since the latter’s conception in 2018. IG flights shared with Qatar include those between Doha and Rome (Fiumicino), Pisa, Venice, Singapore and the Maldives. Qatar Airways flights shared with Air Italy include those between Milan and Fiumicino, Naples, Olbia and Lamezia.

Air Italy is a privately owned Italian airline, headquartered in Olbia. The company is the second-largest airline in Italy, following Alitalia (Italy’s flag carrier), and the 38th largest airline in Europe.

The latest addition to Air Italy’s destination portfolio represents a further shake-up of the old order by the year-old private airline.

Qatar Airways Italian Endeavor Caused Panic in the US Airline Industry Last Year

When Air Italy, the country’s second-largest airline, announced early in December 2018, its plans to launch flights to Los Angeles and San Francisco, U.S. legacy carriers responded in outrage. What they saw behind the small Italian carrier, formerly known as Meridiana, was the guiding hand of Qatar Airways, Air Italy’s current co-owner. Although Qatar has been investing into a range of foreign airlines for years now, like China Southern, its involvement in Air Italy’s activities struck a chord within U.S. industry giants reaching as far as the chambers of the U.S. Senate.

The Italian carrier’s ambitious expansion has raised concerns that the Qatari government had violated its Open Skies agreement with the U.S. through its Air Italy investment.

Read more: Qatar Airways bags world’s best airline award

On December 5, 2018, Air Italy announced it would double its destinations across the U.S. from two to four, adding Los Angeles and San Francisco on the West Coast of the U.S. on April 3 and April 10 of 2019, respectively. The new routes were an addition to the five intercontinental destinations it had already began serving in the second half of 2018 from its main hub at Milan Malpensa Airport (MXP), including Bangkok (Thailand), Delhi and Mumbai (India), as well as New York and Miami.

Qatar’s Co-ownership of Air Italy

Air Italy is a privately owned Italian airline, headquartered in Olbia. The company is the second-largest airline in Italy, following Alitalia (Italy’s flag carrier), and the 38th largest airline in Europe. It surfaced when, in February 2018, the Italian airline Meridiana merged with its subsidiary, the old Air Italy, taking up its brand. The airline is a subsidiary of AQA Holding, owned by Alisarda (51%) and Qatar Airways (49%). The airline operates a fleet of Boeing 737 Next Generation, Boeing 737 MAX 8 and Airbus A330 aircraft to over 34 scheduled domestic, European and intercontinental destinations. The airlines operate with its main hub at Milan Malpensa Airport.

Having acquired a 49% stake in Air Italy in 2018, Qatar Airways became the carrier’s second-biggest shareholder. Under its new owners, the airline stated it would seek to grow its fleet and passenger numbers fourfold by 2022, having a goal to replace Alitalia as the country’s new national carrier.

Why is Qatar Airways’ Acquisitive Investments Irking the US?

This goes back to the long-lasting bad blood between the U.S. legacy carriers and the Middle East big three. American, United, and Delta have long accused Qatar Airways (as well as Emirates and Etihad) of receiving government subsidies. According to the U.S. big three, the alleged state subsidies received by Qatar (and the UAE, where Emirates and Etihad are based) are in direct violation of the “fair competition” stipulated by the Open Skies agreements with the U.S.

This immediately cost Qatar almost all of their short-haul operations and required many flights to burn more fuel and lengthen flight times to avoid the newly laid airspace restrictions.

A thaw in the long-running feud over unfair competition was seemingly reached at the beginning of last year when in January 2018, the President Trump’s administration and the Qatari government reached an agreement to settle the dispute on air transport issues between the two countries. At the time, it was hailed as a victory for the administration and a tribute to President Trump’s goal to protect American jobs.

Under the agreement, Qatar Airways was to commit to complete financial transparency and disclose detailed financial information of its state-owned enterprise. The carrier also pledged not to launch any more “fifth freedom” flights to the U.S., settling for routes that originated only from Qatar. A similar agreement was made between the governments of the U.S. and the UAE in May.

The Partnership for Open & Fair Skies, a coalition representing Delta, United and American Airlines, among other aviation bodies, has advocated that Qatar Airways is behind the Italian carrier’s rapid expansion. United Airlines CEO Oscar Munoz has gone as far as saying that Air Italy is “The Italian version of Qatar,” during a conference call with reporters earlier in December 2018.

Trump Ditches U.S. Airline Workers, Sides with Qatar Airways/Air Italy

US President Donald Trump has consistently expressed support for protecting American jobs. But four top airline industry labor leaders say that support seemed to waver at a White House meeting last month. The July 18th White House meeting was expected to help resolve the continuing controversy over subsidized Qatar Airways’ investment in Air Italy.

Read more: The Transactional Partnership of the US and Qatar

Instead, the president appeared to be more closely aligned with Qatar CEO Akbar Al Baker then with the CEOs of American Airlines and United Airlines, which jointly employ about 200,000 workers, the vast majority of them in the United States.

The meeting “was disrespectful to U.S. workers who have been pleading for our government to enforce agreements (with Mideast carriers) so that we can compete on a level playing field,” said Sara Nelson president of the Association of Flight Attendants, which represents about 50,000 flight attendants including about 25,000 at United.

However, in a prepared statement in April, Qatar Airways said its 49% investment in Air Italy, as well as its operations to the United States, are fully compliant with the U.S.-Qatar Open Skies agreement, the January 2018 U.S.-Qatar understandings, and a side letter that accompanied the discussions.

A Proxy Airline War in the Gulf?

Another significant aspect of Qatar’s ownership cum alliance with Air Italy is its impact on the Saudi-Emirati axis.

Air Italy is Qatar Airways big swing at Etihad. The debt pile is stacked against Etihad, the cuts are rampant and an Alitalia failure would mean further doom for both airlines.

Last year Emirates, Etihad and neighbors Saudi Arabia announced a blockade against Qatar. With immediate effect, flights ceased between the nations and airspace for Qatari planes was restricted. This immediately cost Qatar almost all of their short-haul operations and required many flights to burn more fuel and lengthen flight times to avoid the newly laid airspace restrictions. In short: this was a move to decapitate Qatar. Qatar now faces an operating loss, due in part to these added near term challenges – but remains very resilient.

Etihad’s investment in both Airberlin and Alitalia were aggressive moves, aimed at diversifying the airlines investments and gaining partial control over lucrative European travel markets. But both airlines have been long plagued by headwind issues. Seeing the growing financial woes of Alitalia and Airberlin, Qatar seized an opportunity to take out two birds with one stone.

Take out Alitalia to crush Etihad. When Airberlin became insolvent and non-operational, Qatar Airways pounced on an opportunity to worsen Etihad’s deepening financial troubles. Etihad badly needs their Alitalia investment to pan out, and by arming a competitor, Qatar could not only hurt Alitalia but deliver a stifling blow to Etihad, while picking up European market share.

Read more: Qatar-Russia investment partnership bolster to $13bn

Air Italy is Qatar Airways big swing at Etihad. The debt pile is stacked against Etihad, the cuts are rampant and an Alitalia failure would mean further doom for both airlines. Armed with wide open pockets, Qatar is re-launching Air Italy with the goal of creating a five-star airline for Italy.

Qatar is taking a hands on approach, equipping Air Italy with state of the art planes, revolutionary seats and Qatar Airways exacting food, beverage and service standards. When Alitalia was alone, the Italian government faced little choice but to prop the airline up. But with a new contender in play, anything goes. Anything that hurts Alitalia hurts Etihad – and there’s no airline who would like to see Etihad suffer more than Qatar.

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