American Airlines' intense dispute with Etihad and Qatar just got worse

On Wednesday, American Airlines announced that it has decided to sever its codeshare agreements with Etihad and Qatar Airways.

According to the Fort Worth, Texas-based airline, Etihad and Qatar were both given notice of its decision on June 29 with codeshare flights ending at the close of business on March 24, 2018.

The cancellation of the agreements, which allow the airlines to sell tickets on one another's flights as if it were its own, comes amid a tense dispute between US airlines and their Middle Eastern rivals over allegations of illegal subsidies.

On the same day, American confirmed that Qatar Airways intends to continue with its plan to acquire an unsolicited equity stake in the airline.

In a statement, American Airlines wrote:

"In light of our ongoing dispute over the Open Skies agreements, American Airlines notified Etihad Airways and Qatar Airways on June 29 of our decision to terminate our codeshare relationships. Given the extremely strong public stance that American has taken on the ME3 issue, we have reached the conclusion that the codesharing relationships between American and these carriers no longer make sense for us. This decision has no material financial impact on American and is an extension of our stance against the illegal subsidies that these carriers receive from their governments. We are committed to doing everything we can to continue to support our team members and ensure that there is fair competition between American and the Gulf carriers."

Qatar Airways declined to comment on the matter. However, an Etihad spokesman called the American's decision to end the codeshare which has been in place since 2009 "anticompetitive and anti-consumer" in an email to Business Insider.

In addition, the Etihad spokesman maintains that the airline's six daily flights to the US "in no way threaten American Airlines, which together with its regional partner American Eagle, operates 6,700 flights daily to 350 destinations in 50 countries."

Finally, the Abu Dhabi, United Arab Emirates-based airline stated that it is "committed to the US market and American consumers and are taking all possible measures to ensure that the flying public is not harmed by this decision."

However, American's decision to end the codeshare agreement with Etihad and Qatar doesn't mean an end to their business relationship.

In fact, Airways senior business analyst Vinay Bhaskara believes the decision is mostly posturing by American Airlines in support of its employees.

According to Etihad, its interline relationship with American remains intact which means their passengers will continue to fly on one another's aircraft. Qatar Airways and American's relationship is far closer and more contentious.

The American/Qatari interline agreement is also firmly in place through their membership in the Oneworld airline alliance. On top of its impending equity stake in America, Qatar Airways owns 20% of IAG - the parent company of British Airways and one of American's closest partners.

Codeshares allow American to sell tickets on board flights operated by another airline using an AA flight number. This allows American's passengers to enjoy the same frequent fliers miles and perks such as priority boarding as if they were on one of the airline's own flights.

On the other hand, an interline relationship allows passengers and luggage from one airline to flow seamlessly between another. For instance, this allows Qatar Airways to sell flights fly from Doha, Qatar to Charlotte, North Carolina by transferring its passenger to an American Airlines flight in Philadelphia or Chicago.