I think EK indeed followed the logic in 1484, as just any other airline that has profit in mind has done.

Taking 1483 and 1484 together - the dispute is not over whether EK has incredibly come up with an entirely new business plan or whether EK has been the beneficiary of government policies (globally, not just at home).

It is, as you say, obvious, that EK, and the ME3, or at least, their governments, have implemented government policies to be pro-aviation. No one thinks that any airline anywhere in the world has sprung up spontaneously with all of the infrastructure required to make them a success from the start: new entrants use existing infrastructure and previous players don't call that unfair.

The spoke and wheel analogy is a good one - the more spokes you have, the more people want to use your wheel, because they can go out on another spoke on the other side. And as you say, every airline has some unprofitable spokes.

The point about EK group's side activities - aka, operating hotels etc. (it's not like QR which owns the duty free rights, but it does import alcohol), I would say everyone here would agree that there is no way that those operations on their own could support an airline.

Thus you come to conclusion that as they can't make money from operations, they have to be subsidised with cash injections (different from the all the indirect support of the economic and political environment).

However, the dispute lies herein: perhaps it is possible for them to make money flying planes around, because the thinking behind the "pretty good understanding" is rooted in perhaps out-of-date assumptions.

What assumptions underpin the idea of what routes have potential or not - clearly the evaluation of potential cannot be taken in objective isolation, but must also take into account the cost base of the operator, and any economic factors that might make one operator preferred than another - as in, will people decide not to travel unless a certain operator is on a route?

Are the economics of ultra-long haul flight a completely open and shut case? What metrics to evaluate are being used here?

The point about price-conscious customers willing to connect - aka, people are willing to sacrifice comfort/endure some irritation for price. Perhaps in the 20th century the thinking was that market is small: but clearly that market is now the dominant force in the industry.

Why can Ryanair and Easyjet make profit margins in the 10's and even 20's percent, consistently, on these price conscious passengers (even after sales and leaseback shenanigans are taken into account)? Clearly the only answer is cost base - which means that you can make good profits on cheap customers, if you have the cost base to match. Europe to Asia for the ME3 is not real, uneconomical, long haul flying, it's 2x6 hour flights, with aircraft (for EK at least) operating at peak fuel efficiency.

Is it not plausible that profits from these efficient spokes pay for the perhaps marginal losses on profitable spokes? EK hasn't discovered an amazing new business model - they have taken existing ones and applied a much more rigorous cost structure to it, and realise that one-stop connections are not arduous for people any more. Not as many people will pay premiums for non-stops anymore, some discomfort is acceptable, especially as the non-stop hard product is increasingly poor.

The point about BELF of 59.9% - yes, in 2014, it would be laughable to think that anyone could achieve that. But at the time that EK was achieving that, in 2003-2004, boom years for the global economy, where fuel was about 0.7 USD per US gallon, other airlines with pax load factors in the 70s, overall load factors in the 60's were still achieving margins of 5%, which means their breakeven - on a higher cost base, was around the very low 60's. Here's BA with 63-65%. Cut your employee costs by 20-30% (about the UK tax rate) - which totalled 2.1 billion GBP, so cut them by 400-600 million GBP, and you have just achieved EKs margin of 10% for the year. http://media.corporate-ir.net/media_..._2003-2004.pdf, with a corresponding drop in BELF to the high 50's.

So really, the continued pointing out of 59.9% BELF is not that unbelievable. It is fully explainable without the need to resort to subsidies and allegations of fraud. If other profitable airlines at the time had EKs employee cost base, it would not be outside the realms of imagination to show them at mid 50's BELF around 2003-2004.

I don't know anything about airline finance but I can certainly see by just looking at a globe how a place like Dubai would make a perfect transit point for flights originating on the East Coast of the United States or Europe than are going to destinations in Asia, India or the African continent. Seems like some smart people in the Gulf (and their European CEOs) could see this too.

There may not be many people needing to go from Houston to Dubai every day, but I'm sure there are many who need to go to India, Asia, the Middle East, and Africa. Gather them all up and offer them a premium plane and inflight experience at a competitive price and watch them beat a path to your airplane door. In my mind, many of the legacy national carriers are toast and I just have to look at my own changed flying habits to see why.

Being based in Thailand, even to get back to the USA, I'll take Emirates over an Asian or US carrier, even though in time it's about 1/3 longer. With the break in Dubai, coupled with the comfort of EK's premium class products, and competitive (usually cheaper) fares it's a no brainer for me. For some upcoming trips to Europe I'm planning (also from Thailand) again EK's has it all over the Asian or European carriers in terms of price, product quality, and flight schedules. Unless one is traveling for business and pressed for time, I can't see a reason for flying direct.

Nope, many legacy carriers are toast...and are already feeling the heat down their necks. I wouldn't be surprised in a few years to see Singapore in real trouble (they already are to some extent) and Thai of course is already a hopeless political and economic basket-case. Cathy may do well with their China/Hong-Kong milk-runs to California, New York, and London/Europe but for many others...rivers of red-ink will flow.

The main leg up these ME carriers had was access to cheap (free?) state capital to get both the airlines and the airports up and running.

What, after collectively losing 20 or 30 billion dollars over the past over the past decade (and billions more before) and with most of them having been through the ringer of bankruptcy (often multiple times for the same airline) and shedding mountains debt, employees, pension, health, and other costs I should hope they would be able to make a little money now. This still doesn't make airlines as a general class much of a recommended investment. Warren himself has said that he would never invest in an airline and he know a bit about what makes an astute investment (he went big into trains this past decade...not airlines).

I guess the main question I have is have you ever flown EK...if so, you might understand why so many choose to fly with them. And what is it you don't get about DXB being a great transit point for much of the world...even from the USA! I mean, anyone nitwit looking at a globe or Google Earth would see that. I think you need to get out of your typical American bubble...it's a big wide world out there...and one of the best days of my life is when I no longer had to fly American carriers.

Don't really have to fire them, it's a societal expectation in Asia (and worldwide actually, except in those "advanced" societies of North America and Europe) that once a woman marries, and especially after they have had children, that she will stop work to raise them. Both these events usually occur by 30 at the latest. If a few of them have been left on the shelf and are still working at thirty, then you can go ahead and fire them :p

His ilk don't understand this...don't forget, 75 percent of Americans don't have passports and consider Hawaii a foreign country. Sorta like my Stateside friends who think my home in Thailand is in Taiwan; and send me worrying emails every time a killer hurricane passes through there.

I'm greatly looking forward to hanging out with the op when he visits Shanghai later this year. I have no intentions of drilling him on the instant case; we shall simply drink beer!

There's an old legal adage: "If the facts are on your side...argue the facts; if the law is on your side...argue the law; if you have neither...bang on the table!"

I submit the op has done nothing but bang on the keyboard. :D

THIS!! a stupid fella who follow me on twitter tagged me in a retweet from US3's whiny Fair and Open Skies "ME3 get $42 billion worth of subsidies" I fired back that US3 get alot of direct/indirect subsidies.. He said as long money stay in country... I knew that it's not gonna worth my time to argue with people who drink kool-aid and stomp around "USA USA USA is best at everything" mentality :rolleyes:

Six months later, the OP still hasn't answered this. Makes one wonder...

Your credentials are, how should I put it, so "impressive" and "excellent" that you can't even be bothered with backing up your claims with any facts. A genius in your own mind, no doubt.
I'm sure your knowledge was relevant during the propeller age.
When everything else fails, repeat the same cherrypicked data until someone hopefully thinks it's relevant. Got it. Keep banging the table. What else do you have?

It really BAFFLES me that this is a legit thread. 100 pages....lmao

Thanks for the summary. EK seems to be defying every known economic/business model, to say the least.

"Credentials" are generally out of bounds on FT because we like to preserve an element of privacy. If the OP told us that he graduated at the top of his class at Harvard, and rocked the house during his two year stint at GS, we might be somewhat impressed. But, we don't demand such. Rather, simply give us facts that we can verify on our own.

The ME3 irritate a lot of people so there's plenty of things to discuss.

Personally this thread has convinced me that Emirates is a legit commercial operation. I still can't say I'm convinced when it comes to the other two but they have many of the same advantages so why not?

The argument that just because it isn't done by the US3 it can't be done is extremely weak and smacks of provincialism. There's a whole world outside the US but sometimes that seem difficult to grasp.

especially since if these fares really are 'subsidised', it would be logical to fly them to take advantage of said subsidy.