Air Italy’s USA expansion has caused a stir amongst U.S. legacy carriers. But Delta CEO Ed Bastian’s op-ed response is riddled with deception and outright mistruth.
Feel free to start by reading Ed Bastian’s op-ed without my commentary. I’m going to jump right into his op-ed and provide a line-by-line deconstruction and analysis. In doing so, I will explain the context of this issue if you are not previously familiar with it.
A Deutsche Bank airline analyst asked a question recently: “Who is funding Air Italy’s losses?”
Bastian starts with the premise that Air Italy is not a viable airline. He notes that the carrier has lost money the last two years:
In a Dec. 7 report, the firm noted the obscure Italian carrier produced a negative pretax margin – i.e., a loss – of 18.4 percent last year, on top of a negative margin of 9.2 percent in 2016, representing losses of hundreds of millions of euros. Yet despite its financial hemorrhaging, the airline suddenly has a fleet of brand new jets, and has announced a major global expansion of flights between Milan and North American cities including New York, Miami, Chicago, Los Angeles, San Francisco and Toronto.
Think about that for a moment. Isn’t an airline that is losing money ripe for acquisition and restructure? With flag-carrier Alitalia performing even more poorly, Air Italy did not look too bad in context.
It doesn’t take Sherlock Holmes to solve this particular mystery. The airline’s benefactor is Qatar Airways, the government-owned airline of Qatar, which recently acquired 49 percent of Air Italy.
For good reason, right? Etihad failed to cultivate Alitalia, leaving a bankrupt airline propped up by government bailouts. Qatar wisely saw an opportunity to capitalize on the Italian market, where air travel remains a necessity. That’s what investors do.
Even though Qatar’s recent financial statements (which remain opaque) show that it is one of the worst performing airlines in the history of the airline industry with over $2 billion of operating losses over the past three years, Qatar has been giving its new acquisition billions of dollars’ worth of new airplanes, including Boeing 787 and 737 jets, with plans to deploy larger Boeing 777 and A350s as well.
First, Bastian fails to point out that Qatar has suffered from a blockade form its Arab neighbors, severely harming traffic and leading to higher-than-expected loss. Geopolitics matters greatly and they matter here. Second, Bastian outright lies: Qatar Airways has no specific plans to give Air Italy any Boeing 777s or Airbus A350s – the idea was merely spitballed by Qatar’s CEO in April. Why mischaracterize unless your position is weak?
Qatar is using the tiny, close-to-defunct Air Italy to skirt its promise to the U.S. to not add so-called “Fifth Freedom” flights to the U.S., which are routes that operate outside of a carrier’s home country – such as nonstop flights between the U.S. and Europe.
No it is not. Does Basitan even know what a Fifth Freedom flight is? Air Italy is an Italian carrier. Flights to/from Italy are by definition not Fifth Freedom.
Qatar’s promise was part of an agreement with the U.S. in which Qatar said it would finally take steps toward fair competition in aviation, after it had enjoyed the benefits of billions of dollars in government subsidies. These subsidies drove U.S airlines out of the Mideast and India, and threatened thousands of airline jobs in the U.S.
No, these Gulf subsidies bring jobs to Americans. Qatar buys Boeing jets. Qatar hires staff at its U.S. stations. Qatar and Air Italy bring airline and airport jobs to the USA.
Only months later, Qatar is back to their old tricks, thumbing its nose at the Trump Administration with its clumsy scheme to get around its promises.
What a pathetic attempt to pander to the egocentric president.
These Italian routes, already highly competitive and well-served by existing carriers, are simply not economically viable without Qatari subsidies.
Already highly competitive? Who else will offer nonstop service from Milan to Chicago, Los Angeles, and San Francisco? Who is Bastian to say whether a route is well-served or not? Let’s not forget his interests: put competition in retreat so that Delta can raise prices.
By flooding these markets with subsidized capacity and dropping prices far below cost, Qatar is launching another assault on U.S. airline employees and travelers, and disrespecting the Administration.
Let me rephrase: By adding capacity to these markets and offering attractive introductory fares, Air Italy is creating U.S. jobs and offering consumers more choice and competition. Consumers win. Boeing wins. Airports win. Local governments win. The economy wins. And therefore, even the Administration wins.
We shouldn’t be surprised, given that if it played by the same rules as everyone else, Qatar Airways simply wouldn’t exist.
Says the airline that has been bailed out by the U.S government and shed all of its pensions onto U.S. taxpayers…
It’s remarkable that in an era when global aviation is thriving, Qatar must keep its state-owned airline aloft with a massive infusion of subsidy dollars. The airline lost $1.3 billion in its most recent fiscal year, flew fewer passengers, and has said it may ask its government for another capital injection.
Just like Delta once did. A successful business thinks long-term, not short-term.
Thankfully, these concerns have gotten the attention of Congress. More than a dozen U.S. senators recently sent letters to the administration raising their concerns about the Air Italy-Qatar connection and its impact on U.S. jobs.
Yes, 12 lackeys in the U.S. Senate composed an equally nonsensical letter to the Administration, probably provided by Delta in the first place. It’s nice to know whose interests those members of Congress are looking out for.
> Read More: As Air Italy Looks To California, Congress Looks To Block
As the CEO of Delta, my No. 1 job is taking care of our 80,000 employees, who are the best in the business and work hard every day to ensure all of our flights are safe and reliable.
The only sentence I can agree with.
On their behalf, I join those Senators in asking the Trump Administration to examine this situation and send a strong message to the Qatari government that these actions simply won’t be tolerated.
Open Skies, it’s a wonderful thing.
We should demand an answer to the Deutsche Bank question: Who is funding Air Italy’s losses?
Air Italy’s owners, just like any other business.
CONCLUSION
I hope you can appreciate the utter absurdity of Bastian’s arguments. The man is smart: I’ve met him. I cannot believe he would pen this letter of his own volition.
Meanwhile, Bastian says nothing about Alitalia, JET Airways, or China Eastern. Or even about the Air India problem I wrote about earlier today.
Talk about a double standard…
While Delta arguably offers the best economy hard product for passengers — if you’re not flying its ancient MD-8Os — I find Delta to be a toxic actor. Atlanta, a metro area of almost $6 million people, never has affordable international flights, because Delta’s grip on ATL — the routine sub-$500 RT flights to Europe from almost every other large metro area in the United States just don’t exist for people in Atlanta. Also, at ATL, if you’re not flying Delta, your passenger experience is impoverished: for example, Spirit and Frontier are put at the end of its long concourses, and departure and arrival boards are segregated by airline.
Delta needs to show some serious humility.
Airfares out of ATL is a known problem to people who live in ATL and is indeed a mystery to me. I often cheaper transatlantic fares out of JFK, ORD, EWR, and sometimes LAX! With an excellent fare from ATL to either, the total is still hundreds less that booking with ATL as the fare original.
There needs to be a drastic change to this oppression.
The problem is that Delta hates competition and loves government subsidies. That’s why it’s so hypocritical to attack Air Italy.
I second that – I always have to fly out of other markets for competitive international fares rather than my home market of ATL.
Being in the T gates, with separate security and lounges for both now, serves UA and AA quite well
*6 million people
Why not just say liar?
I wondered this too. I presume it’s to avoid potential libel lawsuits. I mean, those of use who are educated realize he, among several other people it high positions in the country at the moment, are ridiculous liars, but in a litigious society like ours, we can’t just outright call someone a liar anymore.
“Yes, 12 lackeys in the U.S. Senate composed an equally nonsensical letter to the Administration. ”
Let’s rephrase Bastian, “Our lobbyists wrote a letter we got 12 Senators to sign on to.”
“No it is not. Does Basitan even know what a Fifth Freedom flight is? Air Italy is an Italian carrier. Flights to/from Italy are by definition not Fifth Freedom.”
This author is so off. Is this even a real blog? Yes, by definition, Air Italy is not violating 5th freedom rights. But who is “Air Italy”? They are Qatar airways in disguise. Instead of flying a Qatar airplane from Milan to JFK, now Air Italy (Qatar) flies it full of Qatar passengers. He never said Air Italy is violating 5th freedom, he simply said Qatar is using Air Italy to “skirt” around it.
RT: DOH-JFK Jan 17th to Jan 30th in economy
Qatar airways nonstop: $1408
Qatar/Air Italy stop in MXP: $1798
RT: DOH-JFK Feb 10th to Feb 15th in business
Qatar airways nonstop: $6607
Qatar/Air Italy stop in MXP: $7585
For funsies: $6181 to connect on to Delta or Alitalia
Qatar doesn’t want their passenger to connect on Air Italy, Hell much rather have them fly non partners
If we are to go by what was said in the referred to article, DL is doing the same with Aeromexico and especially Virgin Atlantic Airways (ironically, they also own 49% of Virgin Atlantic).
It’s refreshing to finally see someone call out delta on their bullshit. Thank you!
I think the next time the airlines come before Congress kooi for financial assistance, they should be told it will be a loan from the American people. For each loan, there will be a loan origination fee. For each additional loan above the first, the fees increase. CEOs will be required to appear before Congress quarterly to report on the airline’s status. When they appear to testify, there will be a fee if they wish to sit in a chair, a higher fee for one that is comfortable. Water will be provided, but you only get a small cup of ice and only a part of the water in the bottle. Anything more, you will assessed a fee. If you wish to speak in a certain order, you will be charged a fee and a preferred speaking slot will a higher fee. You may bring a short introductory statement. It can be no longer than 5 minutes long. Any longer, will cost a fee. Just like your airline cannot withstand operating in higher fuel prices with so much baggage weight, our country cannot shoulder the high cost of such a legal proceeding caused by your financial incompetence needing taxpayer assistance and therefore said fees will offset such losses. Needless dodging a question will result in fees. You get a question asked for free. If the question must be repeated due to a non-answer, the first repeat will cost $25 and a second will cost $35. From there, the repeats increase to $100 and continue upward. For each committebgearing, your airline must provide a sign which has it name and logo at the top, the names of each committee member to whose campaign you have donated, and the amount for the current election cycle that has been donated to-date. Any omissions discovered must be corrected prior to the committee hearing and there will be change fee for each correction. Of course, you will be asked how you like the Congressional process and if it was as easy as dealing with your policies and fee structures in order to get financing to keep you flying with the downturn in ticket revenue, which of course does not account for such fees. We will be happy to accept your comments and suggestions, but vear in mind that we reserve the right ignore any feedback and there is the possibility that your scheduled hearing date may be overbooked and moved to a different time or even a different date. In rare cases, the locale may be changed. Thank for dealing with Congress: willing to butt surf as much as you butt surf the American populace!!!
Womp, womp. Who funded his airline’s losses on multiple times since 9/11? Oh yea, the american tax payers subsidized Delta. Who took the haircuts when Delta filed bk? That is another US subsidy. What a whining wanker hypocrite.
I will say in response to job creation, when a US carrier expands international routes it provides more jobs, (usually higher salaried) than when a foreign airline enters the US segment. You need more US crews to staff the equipment and usually airport staffing and crew base management as well. These jobs bring revenue into the US communities where they live through general as well as discretionary spending and state income taxes where applicable. So it’s far more ginabially financially beneficial to the US to do the expansion.
But the US airlines aren’t adding those flights, so some jobs are better than none
You do realize you are champinging a STATE run airline whose country currently ranks 113 out of 152 in women’s rights? Delta is not a state run airline yet it must compete globally in a highly taxed highly regulated environment. If you think the natural laws of capitalism are in play in the global arena you are a fool so don’t act like these Qatar want to be business men are smart. Any fool can run a business backed by a government. It takes extreme business savy to run an airline that must compete in the highly unforgiving world of natural law domestically yet on the world stage compete with the highly subsided state run airlines. I also should add that these Middle Eastern state run airlines are receiving a competitive advantage from our own government in the form of the import export bank. Yes you are subsidizing more favorable deals on Boeing jets for Qatar and Emirates than our own US carriers can get. I don’t think you can fathom the complexity of the business environment that Mr. Bastion faces. Your languages against him is strong and your article is weak.
I’m not championing any airline, only pointing out Delta’s hypocrisy.
Erik gets it. Yeah there’s some hypocrisy in Delta’s argument due to the government sorted bankruptcies, but the truth is that these kind of operations (including NAI) take high paying American jobs. Someone replied earlier that the airlines aren’t flying these routes so someone has to… Well they used to until they couldn’t make money on them anymore. There are international markets every year that Delta and other legacy carriers are forced out of my cheaper international competition, and that costs jobs. The Joint Ventures that Delta is pass m rapidly expanding are the result. They have to find a way to continue to expand their international offerings. I’m sure they would much rather do it on their own metal, but it’s becoming harder to compete in markets where they’re the only ones paying decent wages, performing top notch maintenance, and following international law to the letter and spirit.
Delta has never flown nonstop to Milan from Chicago, Los Angeles, and San Francisco.
So how much is Qatar paying you?
Nothing. They don’t have to pay me to write common sense.
I’ve always wondered whether people like Bastian climb up the ladder despite being liars, or BECAUSE they are liars.
Ah, always room for a jab at President Trump. Is there some kind of quota you people have to meet?
Our pimps got 12 of their best hoes to sign on to it.