You might think that with a new, anti-globalist administration in the US, foreign airlines might want to tiptoe carefully until they figure out the lay of the land. Emirates apparently didn’t get that memo. It has just announced that it will begin flying between Newark and Athens less than two months from now. Either Emirates is incredibly stupid or it’s decided to play mind games. Either way, the airline is most certainly playing with fire.
It’s been nearly two years since the big three US airlines laid out their case against the Middle East carriers. The airlines used forensic accounting to prove massive subsidies which, in their eyes, created unfair competition. The three airlines asked the US government to act and stop these Middle East carriers from having an unfair advantage.
Though there was a lot of talk about how this was hurting competition between the US and India or the Eastern US and Southeast Asia, my early assumption was that this was really about fifth freedom flights. A fifth freedom flight is where an airline has a flight start in its own country, go to a second country and then continue on to a third country carrying local traffic between the second and third country.
Until yesterday, Emirates had done this on only one route into the US: Dubai-Milan-New York/JFK, but that has been considered the canary in the coal mine with more expected to follow. It was possible to consider a future where Emirates would route aircraft from Dubai via many Asian and European destinations into the US. The much lower Emirates cost structure combined with relative regulatory freedom meant that it was a seemingly real threat. And it’s the only thing about the Middle East carriers that would truly terrify me were I running a US airline.
There has been plenty of jockeying since that time, trying to push the US government into action. But short of a tepid decision to enter into talks, nothing really happened. The US carriers received a cool reception at best. But that was under the last administration. Now we have Trump.
Though nobody knows what Trump is going to do or what he truly believes, this fight against the Middle East carriers seems like something he might like. After all, he has professed to be a huge fan of protectionism and isolationism. This fight would be right up his alley, if it can be considered important enough to attract his attention.
If you’re Emirates and you understand the situation, how would you proceed? Would you stay quiet and try to avoid upsetting the apple cart? Or would you go Putin-style. Take your shirt off, jump on a horse, and try to combat strength with strength of your own. Emirates says…
This new route between Newark and Athens comes only days after Trump was sworn in. The timing seems really odd.
The new route will start in less than 2 months on March 12, not even close to high season. Delta begins seasonal service from JFK on April 14 while United’s flight from Newark doesn’t begin until May 24. Why? Because Athens is a huge leisure market and does well in the summer, but the rest of the year it is not a good market. Now Emirates is going to come in and launch a year-round flight with absolutely no feed on either end despite what Emirates claims.
According to the travel agent note the airline sent out, “This flight will be facilitating convenient onward connections beyond Athens to the Greek islands, including Corfu, Santorini and Mykonos as well as select European destinations such as Bucharest, Sofia and Tirana.” I tried to look up connections into Santorini and Mykonos, and while there are Aegean flights that connect, they didn’t price for me on a single ticket. So… no feed. And even if they do get some, it’s still highly seasonal.
Further, the times aren’t great (it gets into Newark at 10pm with a return leaving for Athens near midnight). And then there’s Newark itself. Emirates doesn’t fly there today, so it has to open a whole new station to support this flight.
I can’t imagine any scenario where this flight is profitable on its own year-round. It seems likely that there will be additional assistance here somewhere, maybe from the Greeks? The President of Emirates, Tim Clark, started his statement with “The Greek Government and Athens International Airport approached Emirates some time ago to consider serving the route between Athens and New York. After careful review, Emirates concluded that extending one of our Dubai-Athens flights to Newark would be commercially and operationally feasible.”
By making this move, Emirates is giving the US airlines fresh blood in the fight, and it’s challenging Trump to step up. Maybe Trump will respect this kind of strength. We know he likes it in Putin. Or maybe this will be the spark to encourage him to shut down the long term plans of the Middle East carriers. It could go well or it could go very poorly. Apparently Emirates thinks this is a wise gamble.
113 comments on “Emirates Plays With Fire, Announces Newark to Athens Flight”
If you don’t like it, don’t fly it. Really simple.
Honestly, what is it with you people. For years UA/DL/AA have been ripping us off. High fares, dirty old aircraft, appalling service.
And Americans complain and complain. So along comes a carrier(s) with amazing fares, amazing aircraft, amazing service, giving the folk in the Land of the Free a competitive choice and all you can do is knock it down.
“Oh, waah waah waah but they are subsidised! Waah Waah Waah”.
Who the hell cares how they run their business ( And I note, none of the US carriers were able to prove they are subsidised anyway ). But didn’t the US Government subsidise the hell out of UA and DL? I think they did sunshine.
As long as they don’t break the law ( and they are not ), offer us amazing fares, amazing aircraft and amazing service, I’ll support them.
Sooner or later, the tired old legacy carriers like UA, AA DL will catch up with the rest of the world. And with their massive profits over the past few years, in the Billions and Billions, maybe the poor petals can give up a Billion or two and br competitive with the rest of the world.
Next…..
“So along comes a carrier(s) with amazing fares, amazing aircraft, amazing service, giving the folk in the Land of the Free a competitive choice and all you can do is knock it down.”
Have you flown Emirates in “cattle class” with their 10 across seating on a 777. I’m sorry but if I’m not business class I’ll take a DELTA flight with 9 across seating anytime over Emirates. I’ve heard excellent things about the ME3 for their premium product, which comes with a hefty price and why I have yet to share in that experience. When it comes to economy they aren’t any better than the rest of the lot.
Foreign carriers do some thing better, sure, but they are not the panacea (amazing this that & everything) many assume them to be. I think there is a lot of bias against US legacy carriers because of past experiences with often little to no outside experiences to compare against.
I have flown EK in cattle car 10 across and none of the US carriers could match the service and on board product I got on that flight…even in Economy. It’s actually a bit more level playing field in the upper classes.
I’ve seen a 10 across cabin on a 777 and I will never, ever, ever consider flying in that seat. That’s one reason why I would never consider EK
I guess ones perception of the economy product on EK is more qualitative but my opinion is they don’t beat DL at the overall on board product in Y class on a 777.
Seat width, pitch, overall comfort was a clear DL advantage and wins over having a gorgeous flight attendants. All the soft products in Y are a wash between the two and personal preference. Honestly I want to know what the real tangible edge that EK has outside of offering money losing fares. Seeing the Dubai airport. Meh…
Believe it or not US legacy carriers are not what they were 15 years ago bleeding money and dealing with labor strife. Drop your bias and you might be surprised.
A
Before you critize EK’s “money losing fares”, you might want to research. They have been profitable since the 2nd year of business almost 30 years ago and contrary to the rhetoric from the US airlines (of which I flew for one for 20 years), EK does not receive government support.
A few years ago, QANTAS accused EK of the government support and EK invited QF to come “examine the books”. In exchange, EK wanted to see the QF books. QF declined and backed off.
As for the subsidy argument, ALL US airlines have received gov’t subsidies too. It’s call debt removal through bankruptcy……..
And finally, AA has gone 10 across as are the other US carriers. I’m glad you enjoyed the DL service but I’m guessing that was an exception. I’m also guessing you have never experienced EK service so you can make an honest comparison.
Ben
Ben – Bankruptcy is not a government subsidy. I do, however, think that Emirates is the hardest one to pin in the subsidy argument? Qatar and Etihad? That’s easy and the subsidies are enormous. Emirates is tougher.
But on your other point about Emirates not flying a route it expects to lose money on – that’s going to be harder and harder to do as it runs out of places to put all those massive airplanes. It’s going to be stretched thin and it’s going to have to take more chances than it otherwise would have.
Brett,
While you are technically correct, any government action that eliminates debt is a subsidy in my opinion. I was PROUD that AA hung in there for so long before declaring but in the end, they had to level the playing field and filed.
In the end, “government” action eliminated the debt. I also agree with you on QATAR and Ethiad. The funds are free flowing into their accounts but EK is the exception.
I loved your post on the Athens service. Having lived with that company (literally) for 2.5 years and watched the operation from the front left seat of the 777, I honestly believe they would not have announced the EWR-ATH-DXB service for any reason but profits. If there were better city pairs to fly, they would be there instead.
While I think some of their operational decisions were just STUPID (and we can discuss that later), their marketing decisions were “spot on”. When Houston opened, my first thought was OIL MONEY…. NO!!! Every flight I Captained was 75% Indians going back and forth. The Indian market is amazing and they travel in families with tons of luggage ($$$). I have no idea about the New Jersey Indian population, but those comments caught my attention. They could be right.
As for the 5th Freedom routes, one of the writers was exactly right. We flew DXB-BKK-SYD, DXB-SIN-MLB, DXB-SYD-ACK, DXB-SIN-BNE and on and on…. EK is not new to 5th Freedom routes and they do it for a reason. $$$$$…
One interesting note, the DXB-BKK-SYD aircraft burned only a little more fuel than the BKK-SYD non stops because of the cost of carrying fuel. When I flew DXB-IAH or SFO or LAX, if I decided I wanted an extra 5 tons of fuel upon arrival because of weather (like Texas thunder storms), I had to actually upload an extra 10 tons because it would cost me 5 tons just to carry it over 15 hours…… The BKK flights go with much less fuel per leg without that penalty and the extra landing makes up the difference. Very interesting.
Keep up the great work.
Ben
dcasafety – Without bankruptcy, the same type of thing would still happen.
You’d just have entities go out of business, to be replaced by other entities with a clean balance sheet. Bankruptcy really isn’t a government subsidy. The government sets the rules, but no money comes from the government in the process.
Bankruptcy doesn’t necessarily allow you to remove debt. It allows you to reorganize debts and obligations and in many cases the debt holders ended up with equity in the airline–the investors get hosed. Oh and your cost of capital goes up–so if anything Bankruptcy hurts the cost process compared to what a new airline would have to pay for debt service. Its only been in the last 18 months that Delta got its debt to “investment grade” while UA and AA are still paying more.
To the extent that bankruptcy helped any of the US airlines, it was in reducing (or in the pre-merger UA, removing) their pension liabilities but I’m pretty sure, but reserve the right to be proven wrong, that EK et al do not offer defined benefit pensions to their rank-and-file flight attendant, ramp, MRO or customer-facing ground employees.
“Who the hell cares how they run their busines”
I the hell do.
“Who the hell cares how they run their business…”
As a liberal, I care very much and try to be conscientious how I spend my money to make sure I support corporations that treat their people fairly. There is well documented concerns about the working conditions faced by employees of ME3 carriers, as well as documented human rights abuses by the countries they are based in.
So @Robbo what you perceive as American whining might better be characterized as trying to be an enlightened consumer who spends appropriately based on individual values.
None of the US Airlines are going to go to war with the ME3 over their working conditions in their country.
I don’t understand why. Those labor conditions would be absolutely unacceptable in the US and EU. It would be a good way to drum up support against the ME3.
why? because some of their work rules are reflective of U.S. Airlines work rules in the 1960s?
Yeah. Pretty much. Plus, the flight attendants live in closely guarded quarters and are really not allowed to go out even on their off days.
If you’d rather pay a lot more for a lot less because your feelings are hurt, that’s your choice mate. I choose to pay less for better service, newer aircraft and brilliant service. On top of all that, let me feel safer in he ME carriers than I do on the US based carriers. Waaah, Waaah , Waaah
+1 for Robbo. Consumers have the choice and as Spirit has proven, price will win.
Further, with the current globalization of airlines this was bound to happen. I fail to see how this is much different than Etihad taking over Alitalia. The plane may say Alitalia, but it’s Etihad pulling the strings. Same with Norwegian. The plane says Norwegian, but its Norwegian Long Haul (based in Ireland).
The way the open skies agreement is written these type of airlines and routes are permitted despite the objections of unions (saying this as a union member, too).
It’s time to decide as a nation how to proceed and stop muddying the waters. We can try to back out of open skies, but the risk is significant, or American airlines work to get creative. This is no different than battles faced by the European, Asian and Oceanic airlines.
So Etihad is pulling Alitalia’s strings (or as Cranky might say, sinks money into the bottomless pit of the worst airline ever). Worked out not so great in the case of Air Berlin, by the way.
But Delta is pulling the or at least some strings at Virgin Atlantic. And there are other similar examples that escape me and I am too lazy to google right now.
You don’t know what you are talking about. When has the government subsidized ual?? When specifically and how??
In 2003 when Ual was well and truly in the shit the govt rejected a loan deal. Maybe if you spout it enough it will be true.
That response was to Robb btw. Don’t know why it showed up down here.
Why not run the route from JFK? Why Newark?
EWR is a DL hub…and DL is leading the charge against the ME 3. They are by far the most vocal and adversarial of the domestic carriers.
Could this be vindictive? It doesn’t make any sense on its own right, so why not?
EWR is a United hub, acquired when they merged with CO. I would argue this is a slap at all 3 US legacy carriers since they all serve Europe out of NYC area airports.
EWR is far from a DL hub. Try United.
34 miles as the car drives. Not that far :)
Obviously you’ve never driven in NYC traffic.
LOL. I actually once had a change of airport, arriving into JFK from Europe and departing from EWR. Smart idea. not!
Yeah but it takes you 2 hours and $15 in tools to do it!!! Ewr is a joke if you live on the wrong side of manhattan.
Should be tolls. Damned auto correct.
my guess is that this is a way for them to form a beach-head. Do it from JFK, and it looks like you are abusing 5th freedom. Delta could argue not needed given MXP and non-stop options. Do it from EWR with no other service, and you can claim you need ATH to feed DXB which gives more choice to consumers by opening routes and creating competition. Once you do this from a few cities, then you have enough 5th freedom precedent to expand it. It also lets Emirates go after the EWR-based india traffic which currently connects in europe or drives to JFK.
Hard to see how the Trump administration will do something that protects the (hated by the public) domestic airlines and hurts consumers (less access to low fares). I think the desire for populism and good headlines will keep them away from this fight. But who knows?
by that logic, the US automakers should garner none of Trump’s favor but that is not what is happening. American jobs are American jobs and airline industry jobs are above-average in compensation.
Trump’s administration needs to put to rest the notion that the ME3 keep throwing out that they are free to abuse US markets and violate free trade because they buy Boeing jets with GE engines. Guess what, so do a whole lot of other airlines including in Europe and Asia and they don’t see buying American as giving them license to run roughshod over their American competitors.
Further, AS, B6 and other low cost carriers need to be told that they codeshare with plenty of airlines that are not subsidized by their governments. There is nothing in US policy that gives preference to one company because it can gain from a foreign carrier’s market abuses while someone else suffers and other US carriers, including US cargo carriers, need to be told that they cannot gain when someone else loses if subsidies are involved.
The simple issue is whether ME3 airlines have received subsidies or not- and those subsidies have to include whether they are paying market rates for the services and airports they use.
For years, Americans have argued that job losses are someone else’s problem as long as they can get cheap products and services provided by foreign labor and subsidized by governments that want to build those industries in their home countries. It is time to end that mindset in ALL product and service industries that touch the US and I am far more willing to bet that Trump will do that, regardless of whether companies are liked or not. Either they hire Americans and pay US taxes or they don’t. Nothing else matters.
Probably for the same reason Norwegian is branching out to EWR from JFK for its upcoming BCN route. JFK is jam packed at peak hours, and more importantly, is slot controlled. The FAA recently removed the slot restrictions at EWR, and it has been a free for all of airlines moving in to EWR recently.
Jason – But this isn’t at peak hours. I’m sure there’s room at JFK for a 10p arrival and 1145p departure, no? It seems like Emirates saw something on the other side of the Hudson that made it worthwhile. Could there have been better airport incentives? Could the Greeks really, really like Northern New Jersey and wanted to pay for it? Or could it just be a way to reach the Indians in New Jersey? If the latter, that doesn’t seem great, because it’ll be really cheap fares on a two stop option to get to India. Doesn’t sound like a great way to do it.
Because no one flies that route now from EWR and it opens up New Jersey to better service. The cargo alone will probably pay for the operational costs and there is no competition unlike JFK.
imo, an intriguing study.
Emirates doesn’t do anything without foresight, so I think this is a chance to “poke the bear” early on in the new Cabinet’s administration. Especially with the changeover of DOT and DOJ leadership, maybe Chao and Rosenstein don’t know enough about the case against the Middle East 3 to think this is a shot across the bow (although as an FAA employee, we have been writing briefing papers for the incoming administration for several months now, as I suspect all other offices are doing). I think Emirates’ timing is exactly what it wants it to be, and whether this route is profitable or not, I’m pretty sure Emirates doesn’t care, and which does prove somewhat what the US carriers have been saying about government subsidies and competition.
Here, here. For years the lazy Obama administration did bugger-all. Good on EK for getting in while the tide is changing. It’s called being competitive. The USA invented it. That’s why the rest of the world looks up to it. But don’t complain when an outsider beats you, easily, at your own game. In the past 12 months I have flown QR out of ATL, BOS, JFK, LAX, all full. All flights, 100% chocca. So even the Yanks are voting with their wallets.
Full != profitable. Any fool can fill an airplane with cheap enough fares.
I think we have a new entry for CF’s top 10 photo edits.
Anyhow, this is probably illustrative of EK’s transatlantic 5th freedom strategy going forward: find EU countries with weak home carriers and/or relatively limited air links to the US and launch continuing flights from there. MXP was probably the best market fitting that strategy. ATH is one of the next best. After that, it would probably be somewhere in Eastern Europe. Romania? Hungary? The Czech Republic? It’s not like the Germans and the French will play ball with something like this.
I have no doubt they’ll burn a lot of their dirhams on this ATH flight. They’d probably lose even more flying to one of the places I just mentioned. But it’s not like the US-EU air service treaty doesn’t allow these kinds of flights.
Itami – Isn’t a frightening thought that this is the second best option it could find? It’s just not a great market. The third, fourth and beyond are only going to get thinner if that’s the strategy.
The quandary with a fifth freedom flight like this is that it’ll undoubtedly cannibalize some of EK’s existing traffic. I don’t know how large the leisure market from NYC to Dubai is, but unless they’re looking to fly less than half full planes on the ATH tag most of the year, they’ll undoubtedly have to eat into the most price sensitive segment currently using the nonstop. And then you have the most price sensitive end of their one-stop connecting passengers dropping into cheaper two-stop itineraries.
It’s a total mess. The more incremental traffic they try to pursue, the more they undermine their already weak revenues and the more ammo they arguably give to the US3.
I think the entire point is that this flight pairing makes no economic sense, and so won’t have any appreciable effect on Delta or United’s numbers for the route. Both DL and UA probably count on feeder traffic for a lot of the seats on their EWR-ATH routes, and those people won’t fly on Emirates. The fact that the timing isn’t great is just icing on the cake: this isn’t a particularly tempting flight for many people. If Emirates were serious about a New York-Athens flight, they’d do it out of JFK where at least JetBlue could send them some feeder traffic.
I think the plan is that in a year or two, Emirates can say “Listen, we’ve competed with Delta and United in Newark, and although we met our projections, Delta and United didn’t see a huge drop off at all, although we did offer service at a time of year when no one else did, which is good for the consumer. So their whole lawsuit is crazy. They’ve shown they’re more than capable of competing with us.”
Launching it now, so soon, is probably so that they can have as much “data” as possible if/when the Trump Administration takes a hard look at 5th Freedom flights from Gulf Carriers.
Agreed, TimH!
yes….only strengthens the argument that they are pro-customer / competition / new routes
TimH – Well, with a 10pm arrival into JFK, Emirates still wouldn’t be able to connect to anything except maybe that San Juan redeye. It’s just not timed for connections in the US regardless of the airport used.
Isn’t the crux of the US3’s argument that these alleged subsidies let ME3 carriers grow in ways that aren’t economically sustainable or sensible? If that’s the case, then the rationale you said would only make the US3’s case that much easier.
What’s in dispute isn’t which airline has a better product or whether consumers benefit from low fares. If a company is dumping, then they’re dumping. Simple as that. If this route isn’t financially sound either on a standalone basis or to feed the network in DXB, then EK is paying to shoot itself in the foot politically.
I’ve always respected that EK had the vision to scale and modernize GF’s old business model and that their books are handled more rigorously than QR and EY. But they’re clearly very very desperate if they thought this was even the least bad thing to do.
Hard to prove injury / harm if they fly routes no one else wants
I think in order to win legal battles against ME3 carriers, short of a “smoking gun” that proves massive subsidies, the US-based carriers will need to show that there are *likely *subsidies, and that those subsidies are causing harm. A reasonable defense on EK’s part would be “look, we don’t actually harm traffic for your precious carriers.”
I’m not saying that it’ll work, or that I don’t think that they do get illegal subsidies that distort the market, but if you’re in EK’s position you have to do what you can to win, and that this is one way of doing that.
If Emirates did launch this route at the request of the Greek government in order to increase access to the US during the winter, the new route highlights the problems with aviation in Europe. Greek aviation along with much of Greek business is a financial disaster; US airlines only want to fly to Greece in the summer when American tourists and their dollars pay for the tickets. Emirates has long built its business model around patronizing to Europeans including buying the majority of the world’s A380s.
Problem is that the route ends in the US and the US absolutely does have a right to review the routes. The US carriers have already accumulated plenty of data on the Middle East 3’s operations between the US and the Middle East as well as their more recent 5th freedom routes from Europe to the US.
While many consumer groups praise low fares, if they are obtained via subsidies as the US 3 have charged, then there has to be policy changes made in order to protect US aviation. US airlines should not and do not expect to be insulated from fair competition – and many countries including in Asia have lower costs because of lower local labor costs than in the US – but yet US airlines do successfully compete against those carriers.
The Trump administration will be forced to deal with the issue of the ME3 earlier than they probably otherwise would have liked. Emirates is counting on an early route launch to catch them off guard but there is nothing stopping the US from rolling back major parts of the US’ treaties with Qatar and the UAE esp. since the US airlines don’t even fly there anymore.
It is also worth noting that United specifically said last year that they were reducing their focus on the ME3 issue last year in order to focus on their own internal restructuring.
As for product, Delta’s economy class product is not only on par or better than most of its peers in part due to wider than industry average seats but its in-flight international economy product is very competitive with the ME3’s product as well as that of many other global carriers that are perceived to be higher rated. Overall, US carrier economy products are not near as inferior as some people might want to believe.
Having worked for TWA who flew to Athens for decades, it’s not really a money maker and mostly tourist travel as mentioned. But the U.S. carriers will act like EK is starting 20 flights a day between NY and London. If it was such an important high volumn/high dollar market, the U.S. carriers would be in there daily with a couple of flights.
And, FWIW, the trade group representing the US carriers already issued its “call to arms” on this, specifically naming Trump and calling on him to squash the existing open skies treaty. Given his willingness to kill other treaties to which the US is a signatory the risk here is real.
There are limits to what Trump can do without Congressional consent. TPP was an unusual case because it had not been ratified by the Senate, so Trump could act unilaterally. A treaty that is fully ratified will require legislative action to withdraw from or amend.
Brett,
When I was first hired by EK, we used to fly A-340s from JFK-HAM-DXB. MXP was not the first one.
dcasafety – Yep, my apologies. That went away awhile ago, of course. But Milan is the first of the current effort!
So much for “free market” principles.
I am no fan of Trump, but he is not an is not an isolationist.
Isolationism: the policy or doctrine of isolating one’s country from the affairs of other nations by declining to enter into alliances, foreign economic commitments, international agreements, etc., seeking to devote the entire efforts of one’s country to its own advancement and remain at peace by avoiding foreign entanglements and responsibilities.
Does not square with this part of his statement when withdrawing from TPP: “This action ushers in a new era of U.S. trade policy in which the Trump Administration will pursue bilateral free trade opportunities with allies around the world, wherever possible …”
Not even Trump knows what he is. Or perhaps I should say, what he is going to be today.
I agree with you.
That statement was fig leaf cover to paper over the gravity of the move he just made in blowing up the traditional economic alliances in the Pacific Rim the U.S. had enjoyed for decades. Until now.
Trump is still more of an isolationist than a free marketer and will remain so until he proves otherwise by his actions…not the windbag puffery of his rhetoric.
Eric – As others have said, I don’t think we know what Trump is. But he’s certainly MORE isolationist than anyone in recent history. Whether he’s a true isolationist remains to be seen. I know I don’t believe a word out of his mouth. I only believe actions with him.
Agreed on all points!
Can someone explain the legality of starting 5th freedom rights? Who has to approve? How can Emirates just announce it and fly it? If noone has to approve, then how can they then be “denied”.
Someone mentioned that France and Germany would not allow these types of flights. So the third party country is the one that has to approve?
How come Delta shut down Caribbean Airlines (Trinidad based) attempt to do JFK-GEO direct flights? Under what rule?
5th freedom rights are determined based on the air service treaties between entities. Between the US and the EU, the current Open Skies treaty allows for both sides’ carriers to launch 5th freedom flights from the other party’s territory. If United wanted to fly FRA-CAI for example, they could do so assuming the Egyptian government was okay with it.
However, unlike the US, the UAE doesn’t have an air services agreement with the EU as a whole as I understand it. European traffic rights for UAE carriers are thus determined at a country by country level.
Germany is particularly restrictive in terms of what kind of traffic rights UAE carriers receive, and they’d be free not to let this kind of route through. Conversely, Greece or Italy could. It’s all based on the individual country’s treaty.
IMO, the bankruptcy protections granted to US airlines are no different than the subsidies ME carriers receive. At time of lower fuel prices, US carriers should compete rather than bemoaning the situation.
The subsidies presumably benefit the owners of the ME carriers. How much did the owners (shareholders) of the bankrupt US airlines benefit?
I would point out that the alleged provider of subsidies to the ME carriers, their home governments, are also the owners of the ME carriers.
If you think about the US carriers’ owners, or shareholders, they provided a HUGE subsidy during bankruptcy by giving up or severely reducing their economic interest in the airlines.
they gained nothing in return… you can’t say that about the Middle East governments.
They gained the ability to better compete by discarding pesky pension obligations, unilaterally rewriting labor contracts, etc. Government picked up the tab on some of the pension obligations, their employees and former employees “paid” for the rest of it via reduced pay and benefits. Regardless, a massive subsidy.
And that doesn’t even begin to include state and local level subsidies and incentives (aka give aways) to airlines to locate jobs in a certain market fly in a certain market, etc.
The US3 are loaded with their own types of subsidies. In the analysis of whether competition is “fair, ” it doesn’t matter who paid the bills.
Bill – The PBGC which picked up what’s left of the pensions is funded by the airlines (and other companies) themselves. It’s an insurance program, in effect, and isn’t a government subsidy.
Good point but is that their sole source of funding?
Unfortunately the employees and retirees seem to bear the greatest burden after the general creditors. Regardless, bankruptcy restructuring under US law is a massive subsidy.
Bill – I believe that’s how it’s funded from what I know.
to add on to CF’s correct statement, lower salaries are not subsidies and if they are, then the ME3 and many other airlines subsidize their operations through lower salaries than US and European carriers pay.
It isn’t hard to see why so many East Asian carriers have very high quality products; when you allow employees to be terminated at a young age/years of service, then labor costs are going to be lower because young, fresh employees are constantly coming in at entry level wages which are already lower than what US or European pay (and a few other developed countries as well)
another word about bankruptcy… airlines didn’t just cut salaries/pensions/benefits and walk away… all of those labor groups were given bankruptcy settlements in the billions of dollars in stock in the new companies. Not one US airline labor group has failed to recoup what they lost when stock grants and pay raises since bankruptcy are factored in.
The only true subsidies that US airlines were given post 9/11 were for the emergency project to harden cockpit doors – and ALL US airlines were given those grants, not just legacy carriers.
The issue is and will be solely whether the ME3 carriers are subsidized TODAY – and given that the UAE is building a huge new airport for EK for which there is no way they will pay the full cost of operation, let alone all of the costs for DXB today, then there is very clear evidence of subsidies which the ME3 have received.
The US global 3 hired forensic accountants who documented the subsidies and presented it to the Obama administration which got only as far as opening discussions with the ME3. Why would you even open discussions if everything the US3 presented was not true?
I wonder how much this new route has to do with Emirates having too many new aircraft coming in and not enough “good” ideas for new routes.
Oliver – It seems likely. Today Emirates has 1 flight to Athens from Dubai and another 5 days a week that goes via Larnaca. This summer it’ll run two daily nonstops, one of which goes on to Newark. It goes back to a single daily flight next winter. So it’s not really increasing capacity much in Athens, but it’s adding on the extra leg over the Atlantic which requires more aircraft time. It’s certainly a way to utilize the fleet.
TWA and Pan AM did the exact same thing with there flights from the Middle and Far East through London,Paris,Frankfurt and Rome and no one ever complained. If Delta,United and American have a problem with it maybe they just need to do the same and let the service provided decide who gets the passengers. I’m sure Athens would be more than happy to receive the extra flights even if there not generating that many passengers.
Letstry2 – That was a different world back then. In many cases, there wasn’t a way to fly nonstop in those markets. Either it was too long so a stop was required or it was too thin and there just was no way to fly nonstop. The only real exceptions were the spoils of war in Japan and Europe.
Meanwhile, down the road in Abu Dhabi, the government seems to have realized that a ton of that state aid put into Etihad has been wasted, vis-a-vis Air Berlin and Alitalia and possibly Virgin Australia. CEO James Hogan has been given the boot, and there are rumors abound about a tie up with Lufthansa, possibly leading to a JV. That could play well for United, as could the new Qatar/BA JV for American. Delta and Air France/KLM are left out a bit but they’re cultivating a nice little relationship with Jet Airways at AMS, CDG and LHR.
I’m with the others that this is either a “poke the bear” and see if it growls, or a stealth push into an “under-served” TATL market (EK speak) so when they go for a major fifth freedom (Manchester, Barcelona, Berlin?) they can claim “nobody said it wasn’t okay when we did Athens”. Or it’s Tim Clark’s last role of the dice for world domination before he retires.
So the air is escaping from the Etihad balloon?
I’m sure I’m going to have people unload on me for this, but I have an honest question: Is what the ME3 are doing to the US legacies really any different than them picking on smaller airlines? Take the situation in Seattle. Delta basically stabbed a long-time partner in the back and is now cramming more and more flights into the market than it needs. Delta is probably losing money there right now, but they are a huge airline that can spread those losses out, especially if they end up wiping out a competitor who probably can’t survive if it loses there. That would eliminate a number of good paying American jobs. Is that fair? I’d say not really. But it provides travelers with really cheap flights and I’ve always been told that’s what competition is about. So how is that ok, but US airlines being challenged by some deep pocket foreign airlines is unfair? To me, it looks like the longtime bully is getting picked on, and is going to principal to complain.
In your hypothetical case (because Alaska has most certainly not been crushed) the argument can be made that that competition is based on both airlines working under the same labor laws and workers’ rights. Plus if airline B were to contract and jobs get shed, airline A would expand and would create jobs. So essentially a zero sum game. Also, an airline like DL/UA and AA couldn’t continue to lose money on too many routes because Wall Street would notice.
I never said Alaska was being crushed, I said they were being bullied by a much larger Delta. I said Alaska could eventually get wiped out, but I didn’t mean to make it sound like it was imminent. But I’d also argue that the ME3 have a long ways to go before they inflict any real harm on the big 3. To me, the talk about serious job losses is an overblown worst case scenario from 3 airlines that are enjoying recent profitability and who want to see as little competition as possible.
bullied, really?
Alaska has dropped fares in order to retain share… Delta couldn’t have done that. Do you realize that DL’s average fare in a number of markets including its marquee LAX-SEA route are higher than AS? AS has been dumping capacity into the market in order to maintain share and has pushed down its own average fares.
You do realize that AS has not lost a whole lot of share in Seattle; DL’s share has actually come from other airlines including UA and WN which decided to not get in the middle of the crossfire?
Finally please provide data to show that Delta is losing money in SEA or needs to subsidize its operations there from other parts of its system. You do realize that DL gets higher average fares on its transpacific operations from SEA than AA gets from LAX and ORD, two cities where AA’s average fares are lower than either DL or UA on directly competitive routes?
I challenge to align your opinions regarding the big 3 with facts; there are clear facts on issues than you clearly clear to admit and those facts do not support your opinions.
Ben in DC
I really like your well thought out posting but I offer one thought. I don’t really think EK can be accused of “really cheap flights”…. This is not a Norwegian or Ryan Air type of operation and their profits seem to support they receive maximum yields on the routes they fly. Otherwise, I think you are “Spot On”.
Ben in Texas
I wish them all the best. I am Australian who has taken Emirate multiple times in both the 777 and the a380 in economy. Emirates provides excellent options for getting the New Zealand via 5th freedoms. They also travel via Singapore and BKK for some flights from Sydney/Melbourne/Brisbane. They have been doing it for years and it is entirely uncontroversial here. TBH too they generally aren’t the cheapest option.
The competition will hopefully keep UA, DL and AA on their feet.
Perhaps Emirates is intentionally launching fifth freedom flights to the US with routes that are likely to have low loads and not make a lot of money, so that they can make the government think they are not much of a threat to US airlines. Once the public gets used to it, they can expand to busier routes, and it will be harder to turn back the clock at that point.
Jim, EK does not fly routes they expect a financial loss on. I fear your suggestion is more emotional than based on the faces of 28 years of constant profits. Even during the “bad times”.
dcasafety, how do you know that? Have they stated this or is it speculation?
Jim, I flew Captain for EK for 2.5 years and the route info was published within the company. When I was there, it was interesting because the most profitable routes were Moscow-Dubai and Lagos-Dubai. I can’t say every route was profitable but having watched the decisions first hand, I can assure you that profits were the major motivator for fleet decisions and routes. Before EK, I flew for a US legacy carrier for 20 years and watched that disaster first hand. I retired early (age 53) before the pensions and benefits were killed in bankruptcy court.
If the US3 want to argue about EK competing unfairly because of government subsidies, fine.
But DL operates a hub at NRT, with flights to many destinations in the pacific on DL metal with DL crew. I could very well be missing something here, but how is that any different than EK flying EWR-ATH? In these cases, neither airline touches their home country.
http://www.flyertalk.com/forum/26474880-post3.html
As Cranky called it above, spoils of war.
Good point but they are pretty much shutting down that hub, it’s already been stripped of most of its flights from NRT to other Asian destinations.
It also was a hub that aggregated passengers from various destinations that may not have had enough demand otherwise. Not the case in Athens. It also was created at a time where non-stop flights to some of the deeper Asian destinations weren’t viable (technically or economically). Not the case with Athens.
Very true.
The rights which DL and UA have used and still do are matched by similar rights which Japanese carriers have – whether they currently operate them or not. You do remember that JL operated NRT-JFK-MEX for years?
correction…. NRT-JFK-GRU
Anyone thinking EK started this flight to fill it with Greece bound tourists don’t know the demographics of the route… New Jersey has a large South Asian population, this is just a means for them to ferry a full flight to India, Pakistan and other countries via Athens. Do a quick flight search from Newark to any Indian city and see that EK has very good prices for South Asian destinations. This flight certainly will not be loss making or empty.
If they weren’t looking to rely on Greece-bound tourists, they’d have launched a nonstop to DXB a while ago. It’s not like anything was stopping them.
*Obligatory Full Flights Profitable warning*
*Full flights != Profitable*
Sure, they can launch a non-stop from Newark, or Philly or anywhere.. that wasn’t my point. My point is the decision to extend the Athens flight from Dubai to Newark was only made easier by the fact that it would provide more passengers for EK to link to India due to the high Asian population there.
Arun – I agree with others. If this were solely about India, there would be a nonstop to Dubai, not another flight going via Athens. And just look at what you said. “EK has very good prices.” Translation: they need low fares to fill those planes.
What exactly is a “low fare”? Something lesser than what the others generally offer? Having a LOWER fare is certainly a means to attract customers to use that route, and if there is reasonable demand why not fill the planes with that lower fare if its economically feasible for them? I don’t think EK would start a new long haul flight while doing cost cutting in other locations if this wasn’t feasible with these “low” fares.
Therein lies the issue. The point of a megahub like EK’s in DXB is to drive the cost of transporting a single passenger down by consolidating all of their traffic flows in one place. That’s what lets them offer such attractive prices for connections to begin with.
But a fifth freedom flight like this is disconnected from the mothership. Any cost savings they can get from letting their passengers connect anywhere from DXB in one stop is gone because their first stop is in ATH. That means that transporting those passengers becomes more expensive, whether their final destination is DXB or they’re connecting somewhere beyond. That means less breathing room for “good fares”. And they’ll need to be really good if airlines like UA/LH and KL/9W can get passengers from New Jersey to South Asia in a whole lot less time than a trip with two stops in ATH and DXB.
Fifth freedom flights make sense if there’s a big enough local market to tap into (CX’s JFK-YVR, EK’s BKK-HKG, etc) or if there’s some way to feed traffic from multiple flights to the midpoint flight (9W in AMS, DL in NRT, etc). So I doubt they’ll make it work from the local angle and I explained why it’ll struggle on the flow. Maybe this is the least bad idea EK had, but that really speaks to the kinds of headwinds they’re facing.
Not necessarily. Ultra long-haul routes are expensive to run because of fuel costs (the fuel you’re burning as you land has been carried all the way from your point of departure, and carrying that weight takes more fuel). A one-stop via Athens could thus be cheaper to operate than a non-stop to Dubai.
Ultimately, there are probably several factors at play here (NYC-ATH business travel demand, local NJ demand to Greece and India, lower fuel cost extending an Athens flight than starting a non-stop, etc.) Individually, none of them would justify the route, but together they may make it viable.
And, of course, if it helps them establish a fifth-freedom beachhead, so much the better.
So let me get this straight — You don’t think the flight is good for connections and the flight times aren’t great and yet you think this is a big enough competitive threat that U.S. carriers should be all up in arms about it?
TFG – Are you asking me? I never said that. Doesn’t matter if I think the US carriers should be up in arms about it. The point is they ARE up in arms about it.
And to make clear-which hasn’t really been said in this discussion – that the reason why the US3 are going to be as upset about this route as they are about JFK-MXP-DXB is because EK will continue to find reasons why they should be allowed to operate flights between just one more city pair between the US and Europe and the list will keep growing and will soon include the top transatlantic markets – and then will include transpacific routes and on and on it will go.
As was noted above, EK’s model is running out of steam because the Middle East 4 (which includes TK) have added too much capacity to flow even somewhat logically over the 4 Middle East hubs. Add in that political problems in Turkey are forcing TK to discount more aggressively while not pulling capacity to match their own local market, and there is an excess of capacity. On top of that, the European airlines are finally getting serious about cutting costs in long-haul ops in order to try belatedly to compete in price-sensitive markets such as to India and SE Asia and EK is looking for alternatives than its DXB hub.
Fifth freedom rights are fine if there aren’t subsidies involved. DL could choose to transform its operation in Japan to a low cost carrier operation built on 5th freedoms – but they haven’t done that. Other carriers have the potential to add extensive 5th freedom operations including AA in Latin America if it wanted. No one objects to those rights…. there is real objection to EK and its ME peers using 5th freedom rights if they are subsidizing their operations.
Hopefully the Trump administration will act – but he has business interests in that region which might provide a real test of whether he can separate those from his rhetoric about protecting American jobs.
question is…will it benefit MOST americans? answer=NO…it is another step in opening the floodgate…to let ME3 take the same paths as the cruise boat or steel industry in the USA…same goes for norweigian
But Emirates IS selling connections in ATH on a single ticket. Flights are operated by Olympic Air. Their site let’s you price out EWR-ATH-JTR for example.
What EK needs to do is to make a EWR-DXB nonstop. There is very high South Asian population in NJ and I would imagine EWR-AMD/BOM/HYD would do very well through DXB.
True, but it’s a low-margin market whose passengers tend to be price sensitive. They’ll take a two-stop on Emirates out of EWR over a non-stop on Air India from JFK or a one-stop in Europe if the price is right.
This is just another example of there being something “wrong” with the way Emirates operates. Basically, you can deny subsidies all you want (although there’s tons of evidence that they do receive billions in gov’t support) but if you keep doing things that no other airline would do, it kind of proves their opponents’ point. This route is a stone cold loser. There are only 11 million people in Greece. It’s not a business capital. The only way a nonstop route is justified is on in-bound tourism, and there’s no freakin’ reason to visit Greece when it’s not late spring/summer/early fall (the weather in the Greek islands isn’t good off season). Heck, I took one of the first AA seasonal flights from PHL to Athens last spring (in May) and the flight was 3/4 empty, in both directions. That’s why the US airlines only operate seasonally. They’re not stupid. And not subsidized. People who say “why should we care” are stupid. If Norwegian wants to do stupid things (and I think they are), that’s fine because it’s their own money. Either they’ll make it or get out of the market. Here, you’re competing against a gov’t that doesn’t care about profits. There’s no reason a US company should have to compete against that. They can’t, and it costs Americans jobs.
Oh, in my diatribe, I forgot to mention feed. AA and UA have tons of feed at PHL and EWR (most of the entire USA) and they can’t make this route work off-season. And now Emirates can make it work year-round with no feed? Yeah, right. The tooth fairy and Santa Claus are way more believable.