Originally Posted by
iahphx
By int'l aviation standards, that would be an excellent profit (most major int'l airlines make little or no profit). Of course, the company is 100% owned by the gov't -- and as I understand it, they don't release financial details like publicly traded companies (at least as we're used to it in the USA).
So thus, you're assuming that EK's financials are falsified? You do realize these financials are audited by PWC in the UK.
Lots of folks here seem to like to mock my analysis, but I'm a very experienced int'l traveler who has been very successful in investing in USA airlines (and not many people can say that!). I know that this is an incredibly easy business to lose lots of money in. Ultra long haul flying -- with a premium product no less -- is extremely difficult to do profitably. The USA airlines are now the most profitable in the world, but it's only through ruthless cost cutting and extreme capacity discipline and route selection that this has happened. Starting a new long haul int'l route is particularly perilous and done only after exhaustive research. And no US airline has ever bought an A380 because they know of the difficulty of depressed yields from flying that many seats on one aircraft at one time.
Sorry, I don't think you elaborated on that point completely. You missed the fact that all of the US legacies have gone through Chapter 11 bankruptcy in the last 12 years, which have allowed them to write-off debts, and come back with favourable debt and creditor terms. The fact that the airlines had to file Chapter 11 demonstrates how poorly run the carriers were, and could still be. I seem to recall the fact that before the AAR group's bankruptcy, American was paying millions in leases on aircraft that were parked in the desert - that hardly seems like a sound business decision.
The rest of the world seems to play by the same rules as the USA -- without the benefit of a huge domestic route network to provide int'l feed. Europe certainly does, and most of Asia, too. Honestly, the only other routes to the USA that seem overly ambitious right now are some increased service from China (hello, Hainan Airlines). Of course, this expansion has already made much of the USA-China flying unprofitable for the moment.
Emirates and the other Middle Eastern airlines obviously don't play by this gamebook. Lots of people seem to think the economic rules of aviation are "different" in the Middle East. I think they are, too. But I'm pretty sure it's not better business acumen. I think it's subsidy. You start flying A380s willy-nilly to the USA from the Middle East, you're obviously not too worried about conventional profitability.
If you're claiming to be an aviation analyst, you should know that Chinese carriers are not even on the same playing field as US/European airlines. Chinese airlines are hugely subsidized, including both state funding and favourable terms on loans. Also Chinese airlines are allowed monopolies on their long-haul routes, because of that no competition clause which prevents more than two Chinese carriers flying the same international route. How is this playing 'by the same rules of the US'?