American Airlines CEO reveals why a small Italian airline is the focus of the nastiest feud in the airline industry

American Airlines CEO Doug ParkerAP Photo/Tony Gutierrez

  • Air Italy is a small Italian airline and yet, it's playing a central role in a feud between America's three largest air carriers and their rivals from the Persian Gulf.
  • American, Delta, and United Airlines have long accused Emirates, Etihad, and Qatar Airways of unfairly benefiting from as much as $50 billion in government subsidies.
  • In January 2018, the Qatari government agreed to not launch flights from outside of the Persian Gulf to the US.
  • Weeks after that agreement, Air Italy with financial backing from Qatar Airways, announced new routes to the US.
  • "That didn't seem within the spirit of the agreement, it seems like an absolute violation of the intent of the agreement," the American Airlines CEO Doug Parker said.
  • Visit Business Insider's homepage for more stories.

Air Italy is a small Italian airline with a fleet of 13 planes and yet, it's playing a central role in a feud between some of the world's great aviation powers.

Here's why.

For much of the past decade, America's three largest airlines (US3) - American, Delta, and United - have been embroiled in a heated feud with their rivals from the Persian Gulf (ME3)- Emirates, Etihad, and Qatar Airways.

The US3 have long accused the ME3 of tilting the playing field in their favor by using more than $50 billion in government subsidies to fuel their international expansion. As a result, the US3 alleges that the Middle Eastern carriers violated the OpenSkies agreements that govern air travel between the US and the United Arab Emirates and Qatar.

"The facts are those two countries, the UAE and Qatar have put subsidies into the three airlines, unlike anything we've ever seen before," American Airlines CEO Doug Parker told us. "The result of that is those three carriers fly routes without any regard to profitability and that's a concern for those of us who do have to produce profits on our flying."

Air Italy Airbus A330 200Air Italy

Parker added, "that's an enormous threat to commercial aviation and the United States. And therefore we're really concerned about it and we've expressed that for quite some time now."

The ME3 have long disputed these allegations.

In January 2018, the Trump administration brokered a deal with the Qatari Government in which Qatar's airlines would release more detailed financial reports. A side letter deal between the two parties also included an agreement that Qatari airlines would not launch new flight routes into the US from outside of the Persian Gulf. The UAE agreed to a similar deal in May.

Read more: American Airlines CEO reveals when he would feel safe flying on the Boeing 737 Max again.

The agreements seemingly put the feud to rest. However, the truce wouldn't last very long.

A few weeks after the Qatari government's deal with the Trump administration was announced, Italy's Meridiana Airlines was rebranded as Air Italy with new flights to the US was announced. Qatar Airways acquired a 49% stake in the financially challenged carrier several months earlier.

"Those side letters were important, it gave the US government the comfort it needed to move forward, only to find out that Qatar had gone and acquired a certificate of some bankrupt Italian airline and it acquired 49% share but was clearly in control and was going to take its airplanes and put them into that airline and have them fly from Europe to the United States," Parker said.

American AirlinesMike Blake / Reuters

Air Italy's entire Airbus A330 fleet, the aircraft used for its US flights, had previously served with the Qatar Airways. One of Air Italy's Boeing 737 Max airliners is leased directly from Qatar Airways.

"That didn't seem within the spirit of the agreement, it seems like an absolute violation of the intent of the agreement," the American Airlines CEO added. "Yeah, we don't think that's right."

In December, Delta Air Lines CEO Ed Bastian published a scathing op-ed echoing Parker's sentiments.

Read more: Delta Air Lines just made it much easier for passengers to keep their frequent-flyer status.

Air Italy issued a statement in response to these allegations:

"Air Italy is an Italian-registered and Italy-based airline. We are 56 years old (we previously were known as Meridiana), and we have served the United States for many years. Our shareholders are Alisarda, which holds 51% of our shares, and Qatar Airways, with a 49% shareholding. Our ownership structure has been reviewed and approved by the Italian Civil Aviation Authority, ENAC, and by the European Commission.

"As of today, we have a fleet of 13 aircraft, five of which are capable of operating long-haul service. While we pride ourselves on our flair and world-class service, we are puzzled (but slightly flattered) that the three very largest US carriers - which between themselves operate a fleet of more 2,500 aircraft - claim to be threatened by us."

So where does this dispute end? According to Parker, it ends with Qatar Airways-backed Air Italy ceasing its US operations.

"Where it should end is with everyone participating in the spirit of what they agreed to and that would be that airline also doesn't have any flights from outside the Gulf to the United States," the American Airlines CEO said.

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