On July 12, American Airlines officially confirmed that it has notified both Etihad Airways and Qatar Airways that it will terminate the codeshare agreements between the airlines. The two Gulf carriers were notified of the change in June of this year, and agreements are set to expire on March 25, 2018.

The announcement comes amid a tense dispute between US airlines and their Gulf rivals over allegations of illegal subsidies. American, United Airlines, and Delta Airlines argue that Gulf governments are subsidizing state-owned carriers in order to drive down prices, effectively eliminating competition on certain key, high-demand routes. Gulf carriers deny these claims.

“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,” said a statement released by AA. “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.”

Etihad called American’s move “anticompetitive and anti-consumer”.
Photo Source: Etihad Airways

Etihad called the decision “anticompetitive and anti-consumer”. In an email to a source, an Etihad spokesman said that its daily flights to the United States “in no way threaten American Airlines, which, together with its regional partner American Eagle, operates 6700 flights daily to 350 destinations in 50 countries”.

An American Eagle E175. Etihad Airways said that the airline shouldn’t have to worry about competition from Gulf Carriers.
Photo Source: YouTube / New York Planespotting

Despite this statement, Etihad says that its interline relationship with American remains intact.

Qatar says that the move doesn’t affect its stance in the Oneworld alliance, which American is a part of. Qatar also says that the decision doesn’t affect its proposal to buy 10% of American’s stock.

“Our stock purchase request and filing is going ahead as normal,” said Al Baker, CEO of Qatar Airways. “We had to clarify certain questions of the regulator, which we complied with.”

Qatar also owns 20% of the International Airlines Group (IAG), which is one of American’s closest partners.

A Qatar Airways 777. The airline says that American’s decision to drop the codeshare agreement between the two airlines won’t affect the Gulf carrier’s purchase of AA stock.
Photo Source: Bangalore Aviation

Codeshare agreements allow airlines to share flights and passengers. If, for example, a passenger wanted to fly from Seattle, US to Cairo, Egypt for September 2017, they could buy a ticket on American’s website. They would then fly on a flight operated by American to Hamad International Airport (DOH), where Qatar has a hub. They would then fly from DOH to Cairo on a flight operated by Qatar.

In more simple terms, codeshare agreements allow American to sell tickets on flights that, though operated by different carriers, fly using an American flight number. The agreement allows American’s passengers to use frequent-flyer perks on flights that an airline such as Qatar operates. Qatar and Etihad passengers have the same perks on flights operated by American that have flight numbers of their home carrier.

“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,” said American in response to statements made by Etihad and American. The carrier said that it will try to rebook or reimburse passengers already booked on codeshare flights after March of 2018.

Categories: Industry Talk