Emirates is a big airline, and it’s only going to keep getting bigger. But while Dubai is a large and growing hub, Emirates has been looking for ways to expand beyond its home base because of the tremendous capacity it is bringing online. The answer seems to be the use of fifth freedom rights bringing passengers from one country to another outside the United Arab Emirates. (I told you yesterday we’d be talking about this shortly.) This naturally scares the heck out of other airlines, so they’ve been fighting it vigorously. Right now, the spotlight is on one single route, the one between New York/JFK and Milan/Malpensa. But this is just one of the battlegrounds in a future world war.
Of the roughly 300 or so A380s that have been ordered, Emirates is responsible for just under half. Last November, it added 50 orders for the airplane to bring its eventual total up to an incredible 140. That doesn’t include the more than 100 777s it operates or the order for 150 of the new 777X aircraft that’s on the books. This airline is already huge but it’s going to get way bigger.
Dubai is an incredible crossroads and Emirates has made its living almost entirely on shuffling people into and through that hub. It has ventured out, on occasion. It flies Trans-Tasman routes between Australia and New Zealand. It also runs a flight from Hong Kong to Bangkok and does other similar ones in Asia. In the Americas, it briefly operated a flight from JFK to Hamburg but that disappeared in 2008. Now, however, times are different. And when Emirates started flying from New York/JFK to Milan/Malpensa on October 1, other airlines (notably Delta and the Air Line Pilots Association) freaked out.
It’s no surprise that this route would be contentious. After all, Delta, American, and Alitalia all fly from JFK to Milan, and United flies from Newark. It’s already a competitive route, but now it’s become even more competitive. And it’s proving to be the so-called line in the sand that many airlines hope will prevent Emirates (and other Gulf carriers) from expanding further.
US/Canada and EU-based airlines don’t like Emirates encroaching on their turf. There have been accusations for years that Emirates has an unfair cost advantage. The reality is that it does have an advantage because it operates in a country that wants to promote aviation instead of penalize it. But it’s not getting a discount on fuel or anything like that. It’s just able to avoid the stifling taxes that others face. It also has an advantage in some areas of labor (particularly the lower skilled areas) but really, it is an airline that’s competing under the law and making money doing it. That scares a lot of airlines because they don’t like the idea of competing against someone with a structural advantage that can’t be matched. I can’t blame them, but that doesn’t mean it should be illegal.
The details of why this particular move is or isn’t allowed remains murky to me, so maybe someone else knows this better. Emirates received permission from Italy’s Civil Aviation Authority (ENAC) to start the flight and it did just that. Assaereo, the trade group that represents Italian airlines, went to the courts to say Emirates shouldn’t have been given permission according to the agreement between the two countries. The courts agreed and ruled that Emirates should not have been given permission, but that has been appealed. In the meantime, Emirates is allowed to continue flying the route.
I’m not sure why Italy is even involved since it seems to me that it should be a European Union issue, but if Italy is the problem, then this is an isolated case. (Attempts to get any information from ENAC predictably resulted in no response.) Emirates will still find plenty of opportunities elsewhere, even if it is forced to stop the Milan flight at some point.
The big question is, however, whether it should be illegal. Emirates runs three 777s a day between Dubai and Milan. One of those continues on to New York, and I’m guessing that’s what allows Emirates to operate as many flights as it does in the Milan market. For Emirates, it’s great because it keeps an airplane in the air, flying profitably and providing options to travelers. For travelers, it’s another option in an already busy market, but more competition is generally good, right? Not always.
If Emirates has a structural advantage that can’t be matched by carriers in other countries, then there is risk of real financial harm to the airlines in those countries. There are possible regulatory moves that could help level the playing field (such as employment rules), but even without that happening, is it bad? Quite honestly is very hard for me to wrap my head around completely. I can see arguments for both sides, and it’s not crystal clear to me that one is absolutely right.
The only thing I do know is that this isn’t a problem that’s going to go away. For Emirates, what this is really about is finding a place to put all those airplanes. The airline has already butted heads with European carriers for years, but thanks to geography, US carriers have been mostly isolated. Now if Emirates can start operating from the US to Europe, South America, or Asia, it’s going to cause all kinds of friction here in the US. And that’s why we see this line being drawn now. It’s going to be a fight that goes on for a long time. And I can’t say I know who should win.
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48 Comments on "Emirates Tries to Grow Beyond Its Home Market, Others Freak Out"
If Emirates decides to make a major move on the US market I wouldn’t be surprised to see US airlines
go to the Dept. of Transportation or the US Congress to try and stop them some way.
Bingo! You called it. It is the same reason US airlines didn’t want Virgin America to get off the ground. They don’t like the fact there are other airlines out there with a much better product with lower costs. It is a free market, and consumers should be allowed to shop around for the cheapest airfare (or shop for the amenities they value), regardless of where that airline is based or the cost structure of the propped up state-run airline.
I didn’t realize that the 85% of the passengers on an EK 777 who sit in Y got limo service on both ends and lounge access. Sounds like I’ll have to start flying them.
Have to disagree with you on EK’s Y class seating – I found the experience downright miserable, though granted, what constitutes “miserable” is in the eye of the beholder. My biggest disappointment with EK, though, was the level of onboard service. Frankly, I found the FAs disinterested, doing only the bare minimum required before hiding in the galley for the rest of the flight. In other words, really no different than AA/DL/UA. QR was far superior, and provided a more comfy 3-3-3 config in Y to boot.
kt74 – You seem to be only comparing to Alitalia and not to Delta, because striking isn’t an issue at Delta. If you care about your amenity kit, then Emirates may be better for you. My point is that it’s hard to argue that Emirates is an outright king of product when it’s hard product is vastly inferior. And that applies to both Delta and Alitalia in business. The Alitalia business seat is very nice. Mess of an airline, but the onboard offering isn’t bad.
wow if Brett is saying something nice about AZ, then it must be good :-)
I just looked outside. There aren’t any pigs flying. Someone get CF to the hospital stat! something is wrong.
David and Nick – But that’s all part of the fun with Alitalia. This disaster of a business probably spends too much money on the product it offers. That makes the business lose even more money, so it’s great! But I really wouldn’t hesitate to fly them because the product isn’t bad.
Though I should compensate for this by writing about my awful experience dealing with an Alitalia schedule change the other day. Because they refuse to do what makes sense, they ended up losing $75 on the transaction. It was brilliant.
Someone get CF to the hospital stat! something is wrong.
CF, Breathe deeply, exhale – now repeat – don’t you feel better? LOL
Pinky – Hey Brain, what are we going to do tonight?
Brain – The same thing we do every night Pinky, try to take over the world!
Even Emirates has done similar routes (i.e. serving the US via Europe) before. I seem to remember that an EK 777 went DXB-HAM-JFK up to about 5 years ago. What’s the fuss all about?
I think the fuss is whether Emirates is going to increase by a significant margin the number of flights to the US in the future, it looks like that is a real possibility considering the number of new
planes they have on order. Look for US airlines to try and put up as many roadblocks as they can to protect their turf.
I can talk about how uncomfortable the 10 abreast 777 is and how they don’t have flat beds in business and that their hard product isn’t as good as UA or DL, but they should still have the 5th freedom right to do this flight. It looks like Italy is just protecting their airline who would be unable to compete on an open market.
As was said before, EK isn’t doing anything that other carriers haven’t done or are doing now, so what’s the big deal. Look at the nonstops between LAX and LHR, are US and British carriers protesting NZ flying the route, no and they’ve been doing it for decades.
If it was say Kenya Airlines flying it no one would give a hoot, but since it’s EK that is the only reason.
You’re right … unless KQ suddenly ordered 300 modern widebody aircraft …
If you think the EK A380 is cramped now, just wait. Airbus is talking about an 11-abreast A380, and EK is thought to be the prime customer.
And just as ironic that the U.S. Airlines and labor unions are complaining about it given that U.S. tax payers are now backing most of their pension plans through the PBGC.
Of course the other irony is that all of those Boeing 777 that were sold to Emirates at deep discounts were directly subsidized by U.S. tax payers….
“Boeing’s federal tax rate works out to negative 3.3 percent.”
http://seattletimes.com/html/businesstechnology/2023026545_boeingtaxesxml.html
MeanMeosh – I think it’s unfair to lump Emirates/Etihad/Qatar into the same bucket when it comes to subsidies. Emirates is pretty clear that it isn’t subsidized. It publishes a ton of financial data and has an independent auditor (pwc). That doesn’t mean it doesn’t operate in an advantageous environment, but it doesn’t receive direct subsidies.
I don’t know anyone who would say the same for Etihad.
BOS Flyer – Yes, those rights are negotiated and that’s the crux of the lawsuit. They say that it wasn’t done per the rules of the agreement. But I still have no idea why Italy is even involved. Seems to me that it should be subject to the EU agreements that are out there, but that’s an area I just don’t know well enough.
As for Emirates, the facility isn’t the issue in Dubai. It has to be the demand.
In the EU, the permissions for commercial aviation are still being granted by the national civil aviation authorities of the member states. Because these are part of the national governments, their decisions can then be contested according to the regular procedures of that state which will involve a court of that nation. European courts only join the fun when the national court isn’t sure how to interpret EU legislation.
The CAPA website did a great analysis of Middle East carriers to see if they had unfair advantages.
They concluded that, no they don’t. They are just more fuel efficient and provide a service people want.
Why did the DOT approve this? I assume EK needed both EU/Italy and US approval. In general, what are the criteria for approving 5th freedom routes like this?
Oliver – Well, the US and UAE have an open skies agreement so I’m not sure that further approval was necessary. I’m assuming that was built into the agreement but I don’t know for sure. Either way, that doesn’t seem to have been a hurdle.
Thanks. I didn’t expect that Open Skies meant fly to the respective countries from anywhere on the planet as long as the 3rd country agrees. Never stop learning :)
Jim, sounds like Emerate is run by Walmart. Yup, you have brought up an excellent point and I like your suggestion. It makes total sense and I agree. You should write your congressman and senators about this. Hell, you might even get some horse power behind you from the American airlines and their unions!
I’ve heard EK conditions are on-par to what we have here in the US. Take a look at some of the crashpads outside our airports, and take a look at all the flight attendants who have second jobs. It’s a tough industry to work in.
EY is little more restrictive, but nothing compares to QR who are responsible for much of the backlash on cheap, ill-treated labor.
Jim,
How do the pay rates and living conditions of an EK flight attendant or pilot compare to a typical Mesa or Trans States crew, or to the likes of a new f/a at a mainline US carrier?
I love shopping in Milan!!
[…] Crankyflier explores why major international airlines are so concerned about the fact that Emirates has been flying between Milan and New York. […]
If the EU has an air service agreement with the UAE that is fully enforceable (ie ratified or explicitly to be honored pending ratification), then it’s the EU agreement that should apply. Otherwise, the default would be Italy’s earlier bilateral with the UAE. Either way, if fifth freedoms are allowed under whatever agreements are in place between the UAE, the U.S. and EU/Italy, nuff said. It should be cut and dry, whether Italy likes it or not.