What Are The Odds That American Completely Cuts Ties With Etihad & Qatar?

A couple of days ago I wrote about how American is cutting their codeshare agreement with both Etihad & Qatar. It’s interesting that American will no longer codeshare with either of these airlines, though is continuing their frequent flyer partnership, meaning you can continue to earn and redeem AAdvantage miles for travel on those two carriers.

With that in mind, I’ve been asked by several readers about the odds of American cutting ties with Etihad and Qatar altogether. Is there a possibility that will happen? Or could Etihad and Qatar be the ones to cut ties?

Here are my thoughts on this:

American is grandstanding to the max here

For a couple of years now the “big three” US carriers and the “big three” Gulf carriers have been in a dispute over Open Skies, and about the role of government subsidized airlines in such an agreement. The lobbying groups for the US carriers have shamed any business that dares to do business with the Gulf carriers, while not mentioning American, which partners with both Etihad and Qatar (and of course they ignored that, since the lobbying group is partly funded by American).

Here’s how American justified this decision, in part:

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.

On one hand I respect American for sort of putting their money where their mouth is… but not really.

American says they’re doing this because of the “extremely strong public stance” they have against these airlines, and at the same time say that it has no “material financial impact on American.” So they’re making a point without taking a big hit on it.

However, if American were so strongly opposed to these airlines, shouldn’t they cut ties altogether? If this is in fact an “extension of [their] stance against the illegal subsidies,” then shouldn’t American do everything they can to disrupt them and completely cut ties, even if it does have a short term financial impact that’s “material?” After all, the lobbying group of American, Delta, and United, says that the entire US aviation industry is at risk, and we might not be able to get our military where they need to go if this is allowed to continue!

Isn’t it unethical for an airline to partner with an airline that they consider to be acting illegally?

Codeshares being cut is a big hit for Etihad & Qatar

The impact of codeshares being cut is a much bigger hit for Etihad and Qatar than it is for American. Both of the airlines have operated flights that very clearly rely on American to provide feed in a mutually beneficial manner. For example, I doubt Qatar Airways would be flying to Dallas or Philadelphia, or that Etihad would be flying to Dallas, if it weren’t for the feed from American.

What American is losing here is some amount of domestic traffic for passengers who were connecting to flights on these airlines. This is largely pretty low yield traffic, and given how full domestic flights are nowadays, the impact on American is minimal.

So Etihad and Qatar are much more hurt by this move than American is, as this makes it more difficult for them to get connectivity to their North American gateways.

Now American has more to lose

The reason American didn’t completely cut ties with Etihad and Qatar is obvious, at least in part — the impact on the AAdvantage program would be huge if American miles couldn’t be redeemed on Etihad or Qatar. These airlines offer one stop service from the US to so many cities that couldn’t otherwise easily be reached.

If American lost Etihad and Qatar as partners in the AAdvantage program, I’d say AAdvantage miles might be worth less than MileagePlus miles and SkyMiles. Given the hefty carrier imposed surcharges on British Airways, this would destroy so many redemption opportunities, and make it tough to travel east to so many places.

So could we see the Gulf carriers take a “tit-for-tat” approach and cut ties with American, given that American presumably has more to lose at this point?

  • I don’t think Etihad has all that much to lose in cutting their frequent flyer partnership with American; I suspect the partnership consists mostly of AAdvantage members redeeming miles on Etihad, and now that you can no longer earn elite qualifying miles for travel on Etihad, I doubt that many people are choosing to fly Etihad for the ability to credit miles to AAdvantage
  • Qatar Airways might be trickier, as I’m not sure there’s much that can be done, as both airlines belong to oneworld; presumably this will require at least some amount of cooperation, though Qatar could block award space for American members, the airlines could cut mileage earning rates, etc.

I don’t think the Gulf carriers will stoop to American’s level

I would be surprised if Etihad stooped to American’s level, and while I’m sure Qatar would love to (given who their CEO is), I’m not sure they could, due to their participation in oneworld. Qatar has more to lose than American here, in my opinion.

Now that American has cut codeshares, it seems to me like American would have more to lose than either of the Gulf carriers if the partnerships were further scaled back.

As much as on principle I wouldn’t blame Etihad or Qatar for cutting back their partnership (and I’d almost support it, except for the fact that it would negatively impact us), I don’t think they have much to gain by doing so. They’re actually the ones trying to generate goodwill here, and I’m sure if they cut anything further, it would be turned around on them as them trying to destroy competition, harm American consumers, etc.

So I’m not convinced we’ll see further cuts, even though American sort of deserves a taste of their own medicine. What I’m most curious about is whether Etihad or Qatar cut any of their US routes on which they were somewhat reliant on American for traffic.

What do you think — will we see further cuts to American’s partnerships with Etihad and Qatar? Will this cause either of the Gulf carriers to cut any US routes?

Comments

  1. @Lucky If there any additional cuts would you expect EY and QR to give the same notice to travelers or could it be immediate?

  2. Lucky, would OneWorld even allow them to cut FF ties with QR? I see what you’re saying about mileage rates, and it would be pretty easy to cut ties with Etihad, but I think you’re right that this is AA trying to do something that makes headlines without having much impact on them. I for one wouldn’t be too happy if redemption options on QR went away, but I’m not sure whether it would have too much impact on the broader AA flying community.

    Either way, as long as they don’t cancel my award ticket on QR next week I’ll manage 🙂

  3. “The reason American didn’t completely cut ties with Etihad and Qatar is obvious, at least in part — the impact on the AAdvantage program would be huge if American miles couldn’t be redeemed on Etihad or Qatar. These airlines offer one stop service from the US to so many cities that couldn’t otherwise easily be reached.”

    If you think this is the real reason, you know very little of what’s going on Ben. Believe it or not, FFP considerations are the least important ones in this type of situations…

  4. So, with the ‘cutting of code shares’, the only one getting impacted here is American.

    Qatar is still coding AA flights (and AA getting revenue from this – so how much are they cutting ties?).

    It just means that AA no longer is coding flights to india, pakistan, africa. They’re going to lose revenue in selling those flights.

  5. One thing that you haven’t considered here is the impact on corporate traffic flying these routes, particularly corporate traffic that comes under the “Fly America Act”. This allowed both US government traffic and corporations working on projects that have funding contributed by the government to book on the EY and QR services on AA code in order to fulfill the requirements of the act. In a way, it’s a big win for EK, as they continue to hold B6 code on their flights to the US. This would have a more significant impact on the viability of many of their flights than the feed generated by AA connecting services, particularly as AA could generate more revenue on these domestic flights when sold as part of their own domestic network.

  6. I’d LOVE to see Alaska Airlines step in and code share with both Qatar and Etihad! Plus offer redemption opportunities as-well!

  7. Etihad will cut their flight to Dallas, everything else will go on as normal due to the OneWorld relationship between AA and Qatar.

    I agree with Roberto that FFP is probably at the very bottom of the list of concerns.

  8. @ Roberto – If you know the real reason, why not enlighten the rest of us? Nothing more annoyingly smug than a person who claims others don’t know what they are talking about but won’t bother to say what that is.

  9. @chancer, the real reason is that Qatar wants to buy part of AA and AA is trying to push back.

  10. @Roberto

    Exactly right! Ben is betraying the fact that he is a miles-and-points blogger, not someone with any experience or knowledge of the business of running an airline. The number of AAdvantage members that especially care about being able to redeem miles on Qatar or Etihad has to be tiny.

  11. As I sit in the FC lounge in AUH I wonder what this means for US based folks who travel to and through Abu Dhabi.

  12. My QR flight PHL-DOH on 7/12 was full. A small group from YYZ connected at PHL and I’m sure there were others connecting as well. I’m not at all convinced that the code share is the reason QR does so well at PHL, it might be the ability to go to places like BKK or KUL in one stop on nice aircraft with excellent service. My international travel has changed significantly in favor of QR over AA at PHL….sometimes all it takes is a smile. BTW I was allowed to pay cash to upgrade out of PHL (my fare was one of the three codes that are not supposed to be upgradeable) and we were given a complimentary upgrade on our DOH-KUL segment. That NEVER happens on AA even for an EXP.

  13. @Abe. I was on a $699 r/t PHL-KUL via DOH. I paid $850 for the upgrade to DOH (was first told it was $940 but then only charged $850) The upgrade DOH-KUL was complementary due to an oversold economy.

  14. Etihad should probably consider partnering with JetBlue to feed their A380s out of JFK. But I’m gonna be a joker here and suggest that Etihad makes a quid pro quo deal with Delta if they were to allow Delta’s money be invested in 9W..

  15. Bit of a stretch but maybe, just maybe if this all fell apart AA would return to flying the direct ORD-DEL route which when discontinued Etihad and Qatar took up the slack

  16. It would be poetic justice if EY & QR open the floodgates of premium award space to AA members. I would laugh uncontrollably and grab the popcorn to watch AA’s response…

  17. How is this going to affect domestic feed? Surely American isn’t refusing to allow people to connect onto Qatar and Etihad – they just will be flying on an AA coded flight not EY/QR any more?

  18. I think ME3 should ignore the big 3 and code share with Alaska, JetBlue and even Southwest. I am trying to avoid the big 3 anyway.

  19. @iv~ Alaska taking Etihad and/or Qatar onboard as partners at some point is not impossible given their eclectic grab-bag of partners. It might go some way towards placating those MileagePlan members still smarting at the infamous Emirates debacle Alaska perpetrated on its loyal following a while back. #shooting-oneself_in_the-_foot.

  20. @Rob, fully agree with you. In fact, you would have been denied boarding in case of oversold economy if you were flying AA (if not dragged through the aisle with facial fractures.) I myself flew from ATL on both QR and TK recently, avoiding connecting domestic flight and driving to ATL instead. I live 3.5 hrs away and found the drive not to be very difficult. ME3 and TK service is way better and AA will be the loser in the long run. I have been very loyal to AA until recently but now I don’t care anymore. And yes, @Roberto, I don’t care about FFP anymore 😉

  21. “and is an extension of our stance against the illegal subsidies that these carriers receive from their governments.”

    Illegal by what law would be my question? I lived 5 years in ME and both labor law and fuel pricing/taxes is very different. To me that statement is just a way to sway the ignorant average Joe’s out there by referring to US law. Do they maintain that at Guantanamo too? At the end of the day ME is in the middle of the world, which also makes it a great connecting hub. Get in the ring and up your game I would say to any US carrier I ever flown with, as they are consistently worse than European carriers (I’ll just leave Asian and ME carriers out of that comparision for fairness).

  22. Typically shallow post from our self appointed aviation and geopolitical expert.

    To him, the world revolves around award space and earning charts and nothing else.

  23. Come on Ben, this is a really shallow analysis of the situation. There are far more complex geopolitical and economic variables at play, compared to which the ability to use AAdvantage miles is insignificant.

  24. they still have the interline agreements and their prorate agreements. EY and QR will still get all the feed they need in the US to make most of their routes viable. If AA were to take THOSE away, then that would be very serious for the h3 carriers and really make a point.

  25. Was just chatting with a friend from Emirates yesterday. He told me that the cuts will come nxt year. Should redeem all my AA miles before that.

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