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Germany wants to force price hike on Emirates

Germany wants to force price hike on Emirates

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Old Nov 19, 09, 9:18 am
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Germany wants to force price hike on Emirates

more nonsense from my home country:
(in german only)

Basically Germany wants Emirates to increase prices to the standart of the competitor with the highest prices.

The Federal Office for Transportation quotes that"...because of (the low prices offered by) Emirates there was a market disturbance."

Mainly on the routes from Frankfurt to Johannesburg, Hamburg to Singapore and Berlin to Singapore.
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Old Nov 19, 09, 1:46 pm
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For English, see
http://www.reuters.com/article/rbssI...44779920091119
http://www.ft.com/cms/s/0/9dda4e50-d...44feabdc0.html

Simply outrageous!
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Old Nov 20, 09, 12:04 am
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I bet their national carriers can't compete therefore this is their only way of hurting competition. If they want to level a playing field they should drop their prices instead of forcing others to raise.
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Old Nov 20, 09, 12:30 am
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This is just crazy.
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Old Nov 20, 09, 2:45 am
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Originally Posted by eshaq786 View Post
I bet their national carriers can't compete therefore this is their only way of hurting competition. If they want to level a playing field they should drop their prices instead of forcing others to raise.
Provided of course that such fares offered by Emirates are profitable and not just dumping seats because they may have ordered far too many aircraft than commercially viable at this time.

Here, it looks like Germany is forcing prices up just because it undercuts the domestic carries which is wrong and forces the consumer to pay more....
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Old Nov 20, 09, 3:04 am
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There is no such thing the 'free market' concept.

If a carrier proposes a fare too high, no one complains (or could force the airline to drop down its prices). And if they are too low, it should equally be the same. At least that's the premise of free markets.

LH and the likes could go on denying they ever complained; but the move by the Federal Office is too utterly nonsense to oversight LH's benefit out of this.

I think passengers should vote with their feet, who could force them to fly one particular airline over another?
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Old Nov 20, 09, 4:48 am
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Originally Posted by edy4eva View Post
I think passengers should vote with their feet, who could force them to fly one particular airline over another?
Yes, but why would they?

I understand that the US CAB regulated fares before deregulation late 1970-s were fixed and therefore it was forbidden to lower/discount them - lowering it needed time-consuming permission, and if approved would be forced on all airlines flying the same route. IATA fares were similar.

Since airlines could not compete by fares, what they tried to compete with was service. This is what caused the high level of service in 1950s to 1970s.

Service levels were constrained as well. IIRC first class seat pitches over 42 inches were forbidden. Pan Am had a lot of trouble getting permission to found tourist class in 1950-s. Once it was founded, economy pitch was not allowed to exceed 34 inches. Service restrictions meant that SAS had a lot of trouble getting permission to serve free sandwiches in coach.

What is the next step? Will Germany forbid Emirates from operating A380 to Germany on grounds that the full flat business class beds on A380 are too high level of service, as LH business class is inclined flat?
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Old Nov 20, 09, 5:08 am
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Thanks chornedsnorkack for the interesting insight. Service-level restrictions.
Is there a book or document on this matter? I am quite interested in learning about the history of the aviation industry from this angle.
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Old Nov 20, 09, 7:37 am
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Originally Posted by chornedsnorkack View Post

What is the next step? Will Germany forbid Emirates from operating A380 to Germany on grounds that the full flat business class beds on A380 are too high level of service, as LH business class is inclined flat?
I live in Germany, and trust me with the amount of red tape and insane bureaucratic, mind-bending bullsh*t that controls every aspect of life here I wouldn't be surprised in the slightest!!
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Old Nov 20, 09, 10:21 am
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Originally Posted by simmflyer View Post
I live in Germany, and trust me with the amount of red tape and insane bureaucratic, mind-bending bullsh*t that controls every aspect of life here I wouldn't be surprised in the slightest!!
I've been wondering lately when once upon a time ago, QR used to have quite good fares out of most German cities including HAM which it connects with LH at either FRA or MUC. But I haven't seen any good fares for a couple of months now and when a family emergency required me to fly to SIN, I could only find KLM last minute with the best fares.

Its a pity that Germany decided to go up against EK on this. So what if EK fares are higher than LH.. does that mean people will switch to LH then?
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Old Nov 20, 09, 12:28 pm
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If anyone is interested and has access to CNN International, there is about to be a news piece on this subject in the next minute or so (20:30 CET)
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Old Nov 20, 09, 1:37 pm
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If EK is dumping seats, then there is a real concern and the German government has a right to intervene. If not then the government needs to find something better to do with its time.
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Old Nov 20, 09, 1:41 pm
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Isn't this kind of thing the reason why travel agents and consolidators still exist in the first place?

My assumption is that what would happen is that Emirates would stop selling their lower fares on publicly and easily accessable channels such as their their ticket office, website and other online booking sites and offer only the full F, J, and Y fares so that they won't undercut the EU carriers.

However, at the same time, they could offer to select travel agencies/consolidators (that do a lot of business with them) in Germany large commissions (eg. 20-40%) for selling their tickets on the assumption that they will rebate a portion of it to the passenger. In effect, the net amount of of the fare that the passenger would pay would be the same as the previous EK fares that were lower (provided the passenger knows where to look for these tickets). Note: The ticket will show the full fare as the "selling fare" even though a lower amount was paid.

In theory, while the government can control how much an airline sells a ticket for, they cannot control how much commission the airline pays to its agents as these are typically confidential commercial agreements between the airline and its agent.

Last edited by daniellam; Nov 20, 09 at 1:52 pm
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Old Nov 20, 09, 3:56 pm
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Originally Posted by colpuck View Post
If EK is dumping seats, then there is a real concern and the German government has a right to intervene. If not then the government needs to find something better to do with its time.
Disagree strongly. Antidumping laws are nothing else than protectionism with a better name. The politicians making or implementing the laws invariably claim that anti-dumping laws are good for the country. However, they are only good for a select few (shareholders and/or employees), and hurt most consumers.

In any case, what does "dumping seats" mean in an airline context? Marginal costs are close to zero, so it is hard to speak about below-cost pricing if only a few seats are sold at a low price. And the articles seem to suggest that EK's prices were only up to 20% lower than those of LH (as this is by what they increased prices) - surely it is plausible that EK's costs are 20% lower than LH's.

Shame on you, German Government!
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Old Nov 21, 09, 12:22 am
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Originally Posted by eshaq786 View Post
I bet their national carriers can't compete therefore this is their only way of hurting competition. If they want to level a playing field they should drop their prices instead of forcing others to raise.
Actually they can compete. They just think that pax should pay 2 to 3 times more for the convenience of flying business class ex-Germany.

My guess is that those business fares on German carriers would be a lot less if purchased ex-LHR many other non-German cities.

I experienced this last spring when trying to price a side trip to BLR since I was going to be in MUC on business.
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