They are required to continue, as they have no retreat option.
Can you scramble friendly planes?
Let’s say a seazone adjacent to Southern Italy was being attacked and let’s say you had german planes in southern Italy. If an Italian ship was being attacked could you scramble a German plane?
If you’re in a group game, proper etiquette suggests that you ask your teammate for permission, but yes… it’s allowed.
It’s not a matter of etiquette. The owner of the air unit makes the decision whether or not to scramble it, regardless of the controller of the territory it’s in or the owner of the attacked fleet.