irishguy28

What is "artificial traffic"? The word "artificial" means false, or not real, but I can't imagine you mean that passenger numbers are overstated, or that passengers are somehow paid to fly on certain services (as sometimes happens when an airline is at risk of missing committed passenger numbers on some routes for which they received route development assistance).

I can't seriously believe that you mean transfer traffic. There is nothing artificial or unreal about transfer traffic. Airlines like KLM and airports like Schiphol rely on transfer traffic. Even LHR and BA does - without the "extra" (not "artificial") passengers arriving at LHR, to "boost" the number of O&D passengers - the number of destinations and/or the number of frequencies provided would be fewer. No airline (except the LCCs) restricts itself to purely O&D ops, as this limits their passenger numbers, their revenue, and their ability to fill seats - meaning fewer flights than when they offer connecting itineraries.

Referring to transfer pax as "artificial traffic", if that is what you mean, is therefore indicative of bias, just like the US airlines who bleated earlier about the ME3 airlines offering more seats "than the local market needs". I'm sure that the Dutch market doesn't need, say, a daily flight to Caracas, or five daily flights to Oslo, or indeed the full slate of frequencies on any of the flights offered there. But the local market benefits from the additional services that can be offered on the back of connecting-passenger demand.

There is nothing "artificial " about that.

In what way? How does Dubai Duty Free (responsible for 5% of annual global duty-free sales) resemble See Buy Fly in any way beyond the usual resemblance of all duty-free ops? I'm genuinely curious - See Buy Fly was neither the first, and never the biggest, duty-free outlet and as far as I am aware is not considered in any way exceptional or different from other such operations. I just wonder if you singled it out as the example with which you are most familiar.



Again, I feel you give KLM and Schiphol undeserved sole credit. But at least I guess it shows that you think DXB/EK is doing the right thing, afterall.

NOIR

http://www.khaleejtimes.com/kt-artic...ction=aviation

Emirates hits back at US airlines, warns of legal action

Havoc10G

Like I said I can't see this report proving any subsidies. By EK There has been a clever attempt to lump all the Middle East airlines together as one. This case may actually end up helping EK if there is proof of others using large subsidy but not them. How ironic would that be!

As for the comment about lobbyists etc. Since when did the truth get in the way of politics and lobbying in Washington for advantage !

irishguy28

From that article:

"US airlines say the system puts them at a disadvantage because their market is far bigger."


Aw. The U.S. airlines are disadvantaged by having the world's largest airline market in their backyard.

Perhaps they should carve up the US into three distinct regions, with each airline granted a monopoly in each? Or would these markets each still be too big, putting them at a commercial and competitive disadvantage?

FD1971

The term ‘artificial traffic’ dates back to the regulated era. Basically, it refers to traffic, which is not sustainable from a financial point of view. During the regulated era, airlines calculated their cost, calculated an average load factor (often between 30-60%) added their profit margin (usually 6-8%) and told the Government and/or IATA that this is the fare they have to charge in order to make a route worthwhile.

It is not surprising that the airline business model totally changed after deregulation and that the new modus operandi was completely different, however hub&spoke systems also involved a lot of artificial traffic, however with a strong hub providing enough natural demand aside from connecting pax, some airlines came up with a working business model, despite the fact that many passengers are transported below cost. Kudos to them! ^

In recent years, artificial hubs were de-hubbed, simply because there was not enough natural demand, several examples can be found easily, mostly in the US.

This is the main point Anderson is referring to, seats are offered below cost by the ME3 and all consequent losses are covered by the Government.

And he has a point.

It is a very very thin line between enough nonstop demand coupled with low yield connecting pax and the opposite, too many cheap connecting pax and not enough O&D pax, and quite often this thin line is supported by ‘regulation’ (Bermuda or the slow and gradual offering of new slots after FRA opened a new runway, experts refer to a ‘Lufthansa pace of expansion’, spring to mind)

Again, I am big fan of LHR TATL yields plus some cheap connecting pax from Germany, Budapest and Prague to fill the 744, I am not a fan of selling 350 el cheapo Y tickets ex SFO on a 8000 mile A380 to Dubai combined with some relatively cheap C and F seats and no cargo!!.

So people who claim that DXB does not offer enough natural demand (you refer to it as O&D pax) have a point. And do not get me started on Abu Dhabi or Doha.

If you really care about the concept, I suggest the cases of SR and Air Tran, after being taken over by LH and WN. The flying operations of Swissair were profitable for the last in the mid to late 1980’s according to some sources close to the action in Kloten. When SR went belly up, the new LX started with way too many long-haul flights, many were axed soon afterwards and even more were exed, when Lufty took over resulting in many many complaints from local guys.

LH always said that the mix between connecting pax and the natural demand has to be right, so LX gained a few new routes, but that’s it, roughly a dozen Widebodies in 2015 resulting in high profits compared with close to 30 in the 1990's and huge losses from ops. (covered by other parts of the SAir Group)

OS is another good example. They tried ORD about 15 times over the last 20 years, it never worked, simply because there were not enough natural pax and €400 Y tix from Germany do not really add something worthwhile mentioning.

A more recent example (you will find lots of data on the web) is AirTran at ATL. Some ‘experts’ are surprised, because WN transports less pax now than Airtran used to transport during their best days.

It is not surprising, because WN has always been known to fly routes that work, hence they rely on traffic that is financially sustainable ex ATL and not so much on connecting pax via ATL that were mostly transported below cost during the AirTran hub&spoke business model.

Under the bottom line, less pax might result in lower revenue, however not necessarily lower profits and Southwest cares about profit and not just revenue, same with LX under LH.


The Dutch Government realized looong before other Governments that the Dutch Aviation sector is of crucial importance for a nation engaged in trading, but the Dutch powers were severely limited due to a small home market and competition close to the border to the West and South, not to mention limited political power as a small country.

Hence, they came up with a combined strategy of bundling their power to provide everything possible for KLM and the Schiphol Group. Buying fighter jets for access to the US is well known, getting many European Governments into signing BASA’s that helped KLM with 5th and 6th Freedom rights were very high on the Government agenda as well.

The master piece was Schiphol.

They realized early on that relying on non aviation income could result in lower handling charges for the national airlines which resulted in lower fares and (potentially) more passengers, in other words, Schiphol pioneered the current modus operandi.

Low charges for airlines will stimulate traffic, a good shopping atmosphere while waiting in transit increases the attractiveness of the hub and here we go.

Today, See Buy Fly is nothing special, because everyone from Singapore to Dubai and Heathrow to Munich copied the system.

We all know that Schiphol is constantly reinventing itself, but that places like DXB are simply more modern, more spacious etc.

Not at all. But do not confuse poor KLM today with the leading aviation minds from the 1970-1990's.

The most important point, I am not a fan of any club or airline. As pointed out so many times, Emirates is doing everything the Government wants it to do, who cares about losses from ops?

Qatar has a 500 billion master plan for the time period until 2030, do you really think they care about a billion or two for a handball team, some soccer stadiums or operating losses, because they fly the Whale to Bangkok or from Philly to Doha. They put Doha on the map, same with Emirates and DXB.

They are doing a lot of things right, but making money from ops. is not something they have to do right. Of course, it is the exact opposite for Delta, BA or LH.

FD1971

First and foremost, you see ths usual counter-attack, we buy your aircraft, so do not listen to the airlines, listen to the manufactorers. Smart move ^

Secondly, the article you refer to seems to have a major translation error.

Usually, the US3 or Lufthansa do not complain about the size of their home market like stated in the article, they refer to the size of Dubai and one gateway compared with their home markets and x gateways. That the usual argumentation, which is not stated correctly in the article.

I just scanned it, so I might be wrong, but the usual argumentation is always the same...

FD1971

Absolutely, as mentioned before, there might a time and place, when EK breaks even. However, there is no doubt that the same moment happens half a century later for Etihad and Qatar.

Assuming that EK is closer to B/E, there is no doubt that EK suffers from all the artificial traffic the guys from Qatar and Abu Dhabi create as well.

Philly-Doha or the Whale to BKK is just great, bumping 50 pax throughout the summer on AUH-Australia, because the 345 is simply too heavy with the weather conditions prevalent in Abu Dhabi is a blueprint for burning cash.

geminidreams

Emirates has very high load factors out of Australia (or maybe it is just the through traffic to New Zealand) When I have flown to/from Perth or Brisbane the planes are pretty full.

Kiwi Flyer

No through traffic is a relative minor factor. Most EK flights to Australia do not continue to NZ. While there are some through passengers on the continuing flights, more of the passengers between Australia and NZ are only flying across the Tasman.

geminidreams

I am afraid it was a bit tongue in cheek regarding the reference to Australian thru traffic from Bangkok.

Kiwi Flyer

There is actually a flight that does DXB-BKK-SYD-CHC and vv.

FD1971

There is no doubt at all about EK being able to fill its planes.

There is doubt however whether the location of DXB and the routes they fly result in profits from operating aircraft.

Routes to OZ have a terrible reputation, just ask the good folks at Lauda Air. There is a reason why almost all European airlines do not continue to Oz anymore and there is also a reason why Qantas copied the approach from Australia to Europe.

It would actually be interesting to study in-depth what is more insane. Flying to OZ via Asia from Europe incl. all the operational hazards (aircraft utilisation, crew rest, traffic rights etc.) or flying the A345 from Abu Dhabi with significant payload restrictions. Pick your poison.

geminidreams

So Qantas copies the Emirates approach for long haul. What does that say? Emirates and Singapore Airlines both have a strong network into Australia. Qantas has tried to establish Jetstar as a low cost carrier without much success. Emirates has taken a lot of the traffic from SIA, MAS and Thai on the European runs. The reality is that Dubai is a more convenient hub for Africa, Europe and the Middle East than Singapore which often required 2 transits to a destination instead of 1.

lokijuh

You've made some good interesting arguments in your posts, but I don' think this is one of them. Lauda served only MEL & SYD, and less than daily, and had poor brand awareness at the Australian end.

Furthermore it's difficult to compare the airlines service Europe by their hubs (such as EK, SQ etc) and those with needing multiple stops from their country of origin via a non hub, which are surely more complex operationally and more costly. Also, most European carriers killed their Australian services well before EK came on the scene in a big way. They were killed by SQ, CX and to a lesser extent MH & TG. Also LH, KL, AF, AY, LX all sell flights to Australia codesharing from Asia onwards - no doubt a way of getting their passengers to Australia via partner hubs - without the cost or operational risk of remote transit points.

Also, I wouldn't underestimate the value of the EK brand in Australia, and the fares people pay travelling ex-Oz. Whilst at the European end fares can be relatively cheap , buying fares from Australia they are usually not, particularly on the carriers with strong brand equity (and I would include EK, QF, SQ & CX in that category, not so much QR & EY though).

Another two factors in debating whether EK is a "scam" or not:
1) The rise of Dubai as a financial centre. Whilst not in the top 10, it's certainly emerging and google world financial hubs and Dubai seems to pop up a bit in the next tier. Less so AUH (although it does appear) and even less so DOH. I am sure one of the reasons SQ & CX do relatively well is that they are well managed compared to say TG & MH, but another reason is the high margin O/D traffic they get because of their hubs at key global financial centres - something that KUL & BKK are most certainly not. [nb. ignoring 2014, MH was already struggling at the end of 2013]
2) Qantas - it has the longest A380 route, and have commented they are happy with it. Is it a scam too? Whilst accusations do exist that their books are less than transparent - these accusations tend to suggest that QF international is picking up the tab for some Jetstar costs.

I am sure EK does not generate the sort of return many investors would desire (very few airlines do). I am sure it has quite a few loss making routes (although it does seem to axe the bad ones fairly quickly). Also we all know it operates in a very favourable tax environment and takes full advantage of the infrastructure it has access to. Does all this make it a "scam" though?

Kiwi Flyer

Right. There's a good reason QF switched their partner on the kangaroo route from BA to EK.