The case the US legacy carriers have made against their Arab competitors is that under the bilateral air services agreements no government subsidies are permitted in order to maintain a free market. The agreement, known as Open Skies, states no such thing and the case has largely failed with the exception of President Trump’s intervention in May which resulted in the Arab carriers temporarily halting their plans for the US market. It can be argued that any airline has a received a subsidy in one form or another. In 2014 it was revealed that US carriers received approximately US$1 billion in tax breaks for aircraft fuel. In other countries such as Australia, such perceived subsidies come in the form of tax cuts if airlines have undergone financial losses, whether they be asset write-offs or operating losses. By February 2018 Qantas had not paid the corporate tax since 2009, a perfectly legal action under Australian law given their write-off of approximately AUD$2.1 billion in aircraft and AUD$700 million in cost-cutting measures.
The hill that they have chosen to stand off against their rivals is Italy’s fashion capital Milan and its New York destination, despite it only accounting for 1.6% of the US-Europe travel market. United Airlines claimed that extra flights on that sector were not needed since there was no demand and was not benefitting Italy, also adding that yields for those flights were weak. The evidence seems to paint a different picture with the traffic from Italy’s wealthiest province growing by approximately two thirds and the US legacy carriers generating considerable profits on trans-Atlantic flights.
New competition in the American and trans-Atlantic market is emerging in the wake of Qatar Airway’s investment in airlines and airline ownership companies. Qatar purchased a 49% stake in Meridian, rebranding it to Air Italy and leasing it 5 Airbus A330 aircraft. With Air Italy already flying from Milan to Miami and New York from Milan, further expansion is planned when they receive their Boeing 787s. Adding to this, Qatar is the single largest shareholder of the International Airlines Group with just over a 20% stake. IAG owns British Airways as well as the low cost carrier Norwegian Air, although they may sell their shares rather than remain as investors after failing to negotiate a takeover. Qatar has also established a foothold in south-Central USA with a 10% stake in JetSuite Inc. based in Fort Worth, Texas which also offers chartered flights in the south-West.