View Poll Results: Is Emirates A Financial Scam?
Yes
27
15.52%
No
106
60.92%
Dont care
35
20.11%
Undecided
6
3.45%
Voters: 174. You may not vote on this poll
Is Emirates a financial scam?
May 21, 2015, 7:47 am
#2161
Join Date: Oct 2010
Posts: 2,095
Seems to be no mention here that the Dutch are not preventing the ME3 from getting any additional landing rights at AMS.
http://www.arabianbusiness.com/dutch...l#.VV3an9I5KcM
http://www.arabianbusiness.com/dutch...l#.VV3an9I5KcM
May 21, 2015, 7:49 am
#2162
FlyerTalk Evangelist
Original Poster
Join Date: Mar 2000
Posts: 17,427
As pointed out before, India is a difficult market, huge restrictions, mostly low yield traffic, so many other posters fall for just another trap.
The 15 hour A380 is not profitable per se with loads in the 80's (well, still better than 59.9%
) in case 90% of the people onboard purchased a Y ticket at $1000RT.
You have to have a healthy mix in order to fly long-haul and quite often the hub itself has to sustain some O&D traffic, a huge problem for the very small market of DXB with its limited number of residents.
Even markets like DUS (Catchment 150 of close to 20 million people) is not really able to sustain long-haul service aside from the usual suspects and, again, most of the suspects do not really result in healthy margins for the operators.
The 15 hour A380 is not profitable per se with loads in the 80's (well, still better than 59.9%
) in case 90% of the people onboard purchased a Y ticket at $1000RT.You have to have a healthy mix in order to fly long-haul and quite often the hub itself has to sustain some O&D traffic, a huge problem for the very small market of DXB with its limited number of residents.
Even markets like DUS (Catchment 150 of close to 20 million people) is not really able to sustain long-haul service aside from the usual suspects and, again, most of the suspects do not really result in healthy margins for the operators.
In short, you're describing a market that no aviation professional would ever believe could be financially viable. I challenge anyone to find me ANY independent aviation expert who would say this would work. And, yet, the ME3 can't wait to add even more of this service. It's a fairytale beyond anyone's imagination that demand real explanation and not fan mail.
May 21, 2015, 7:50 am
#2163
Suspended
Join Date: Aug 2008
Programs: Everything is refundable
Posts: 3,727
Um, the US national team is second only to Germany in the most recent Women's rankings, and one of the favorites to win the World Cup in Canada next month. Or does women playing soccer not count? Drew 1-1 with Germany in the Men's World Cup last summer. Made the second round (from the "group of death"!), which was better than some European stalwarts like England, Spain and Portugal, so again your soccer analogy don't quite work for your case. All it shows is that you have certain pre-conceived notions (like Americans don't know soccer/ Emirates doesn't make money from ops) and you will go to lengths to defend your set ideas and biases.
And indeed, the summer dates in Qatar would have been madness. Good thing better sense has prevailed. But that has nothing to do with the topic of this thread.
And indeed, the summer dates in Qatar would have been madness. Good thing better sense has prevailed. But that has nothing to do with the topic of this thread.
There is no doubt that soccer in the US is not what it used to be and it is as obvious to me that the losses from ops at EK are not as high as they used to be.
If you take a look at the financial situation of EK, you see key parameters like debt starting to increase massively shortly after the turn of the century...
May 21, 2015, 7:54 am
#2164
Suspended
Join Date: Aug 2008
Programs: Everything is refundable
Posts: 3,727
The apologists could not find an intern from the Weather Channel, so do not expect them to come up with an expert working for a consultancy or even University researching related content.
May 21, 2015, 8:00 am
#2165
FlyerTalk Evangelist
Join Date: Mar 2008
Location: Netherlands
Programs: KL Platinum; A3 Gold
Posts: 28,754
May 21, 2015, 8:24 am
#2166
Join Date: Nov 2013
Posts: 5,454
This has nothing to do with EK, except to illustrate that EK gets an extra 1-2% of margin vis-a-vis EU carriers on Europe-Asia flights which can go towards reducing fares and still being able to offer sustainable service. Unless there is a truly reaching argument where Russia is now subsidising the ME3 indirectly by imposing punitive costs on EU carriers...but I think that would be filed with the "patently ridiculous" posts in this thread
---
So, the 2.3bn. From the White Paper:
At least $2.3 billion in subsidies from subsidized airport infrastructure since 2004
Airlines do not have to pay or should be expected to pay for the costs of airports - as I mentioned before, take Orlando, which is issuing debt and taking federal and state grants as well as increasing usage fees to pay for its airport expansion. Does that make Southwest and Delta scams or receiving illegal subsidies because they use the airport? How about JFK, paid for the Port Authority of NY and NJ: the aviation division only makes of a profit of 300M USD yet they have capex alone in 2014 of over 700M.
Airlines and Airports are not the same thing and it's unreasonable to expect airlines to pay for the costs and expansion of the host airports they use in every case. If the airport is run as a private, for-profit concern, then that's up to the airport's owners to find a return. If there is a public imperative to have an airport to support economic development, then it's simply government expenditure.
So, the whole 2.3bn USD about cheap airport fees - completely irrelevant. Even if it was relevant, 2.3bn USD is only 230mn a year - more than enough to be paid for out of stated operational profits, which still makes EK profitably sustainable, if not really profitable.
The next thing in the US3 paper is:
Subsidies from non-arm’s length transacting with related parties
For example, as noted in Section II above, virtually every supplier of goods, services and capital that Emirates needs is a related party (most of which do not publish financial statements). Emirates purchased over $2 billion in goods and services from such parties in fiscal year 2013-2014 (over 10 percent of its total reported operating costs), and approximately $11 billion over the past ten years
For example, as discussed in Section III below, Emirates’ financial statements report that the airline purchased over $2 billion in goods and services from related parties in FY 2013-14, as it has in previous years. However, the financials do not disclose what types of goods and services Emirates purchased, or from whom, and they do not state that Emirates transacts with its related parties on terms equivalent to those that prevail in arm's length transactions.
EK had total revenue of 88,581M AED of which 86,728M AED was from external customers. They use the 86,728M AED figure as the basis for top-line revenue. This is proper.
In 2014/15, sales to related parties were 821M AED (a drop in the revenue bucket), and 9,599M AED for purchases of goods and services. Now, consider operating costs 82,926M AED in the period.
Firstly: how does 9,599M out of 82,926M (11.57% of costs) equate to "virtually every supplier of goods, services and capital that Emirates needs is a related party". That is disingenuous at the very least.
The US3 white paper likes to single out dnata, ENOC, and leasing its Freighters from DAE.
dnata - given dnata's revenue in 2014/15 from UAE airport handling was 2.5bn AED and catering was 2bn AED and it states it makes a profit (of 8%, more than EK!), how exactly does dnata have the capacity to absorb losses from EK, given EKs stated handling costs of 5bn AED and catering costs of 3.8bn. dnata doesn't exist only to serve EK, it operates at international airports (like LHR, ZRH) and caters for other airlines etc.
What would be the point to shift losses between these two entities? EK of course gets a discount at DXB for being the major operator - but what qualifies as an acceptable discount and what is a "subsidy" especially as dnata is apparently profitable? It would be one thing if dnata is loss making and still giving EK massive discounts, but given shifting losses from EK would make EK look profitable and dnata loss-making, is the point here that dnata, with profits of only a 900M AED, 245M USD yearly, is actually ridiculously profitable in reality (more profitable than its actual revenue perhaps, if its absorbing billions), but those fat profits are all transferred to prop up EK? To quote your penchant for cold, hard reality - the reality is that dnata doesn't have the capacity to do it, or to do it for decades.
---
Next, ENOC: since Dubai doesn't have any oil, it has to buy crude on markets and refine it - and the refinery at Jebel Ali can't even support the daily use that EK would require as well as the rest of the Emirate (as calculated in previous posts). It can only do 120k bbl daily. 1 barrel can get you about 4 US gals of Jet-A, so that's enough to fill...5.5 A380s a day. Even if ENOC was giving its entire output to EK for free, EK would still need to access commercial providers, as they do.
Or is the allegation now that ENOC buys the fuel from commercial providers and then sells it at a loss to EK?
Let's run with this idea for themoment and be generous and say that half the fuel cost comes from ENOC (with the other half down at outstations at commercial rates). That's 14.3bn AED or 3.89bn USD of fuel. Given Dubai's debt levels and government deficits recently (and its 900m USD projected surplus this year), how does the Dubai government continually fund this?
More likely that EK actually buys the fuel at commercial rates from BP and Chevron and Shell (as those three companies state) and leaves ENOC to get on with the business of supplying mandated cheap fuel for locals to drive around with.
---
Next, Dubai Aerospace. Seeing as their fleet consists of 777 and A330s, I don't think there's really much scope here to play with lease payments, considering the amount of A380s leased on commercial terms with international capital providers. The book value of the assets on DAE's books is only 3.6bn USD, hardly enough to fund the whole of EKs fleet or any significant part of it. What about all the ATR-72s, A320s and 737s on the books too?
Unless the allegation is now that Dubai funds DAE with lots and lots of money in order to buy planes to lease to EK for close to free. In which case we are once again back to the question of - how does Dubai raise the actual cash to buy tens of billions of aircraft for EK? The reality is they haven't got the cash to do this which is why they have to tap international capital markets in the first place!
---
The rest of the US3 allegations against EK are quite tenuous, such as EK and taxation (clearly tax is low as a matter of policy for everyone in Dubai), and its status as a GRE (post Dubai World, GRE status counts for nothing). You can boil down the whole thing to: "we don't know EKs confidential data, so it must be a fraud". I don't think that is a very strong argument.
---
I regret I have no musical number to add to the post to sum it up, although perhaps another poster can help me?
Last edited by eternaltransit; May 21, 2015 at 8:32 am
May 21, 2015, 8:27 am
#2167
Suspended
Join Date: Aug 2008
Programs: Everything is refundable
Posts: 3,727
May 21, 2015, 8:30 am
#2168
Join Date: Nov 2013
Posts: 5,454
Pre-conceived notions are a fundamental requirement for such a thread to last over 2000 posts. I have to earn my monthly salary from the owners of FT somehow...
There is no doubt that soccer in the US is not what it used to be and it is as obvious to me that the losses from ops at EK are not as high as they used to be.
If you take a look at the financial situation of EK, you see key parameters like debt starting to increase massively shortly after the turn of the century...
There is no doubt that soccer in the US is not what it used to be and it is as obvious to me that the losses from ops at EK are not as high as they used to be.
If you take a look at the financial situation of EK, you see key parameters like debt starting to increase massively shortly after the turn of the century...
How does one become a network carrier without accumulated earnings or a rich owner bankrolling you? Clearly you lease a lot of planes and take on debt - and of course the net present value of the liabilities of 12 years or 25 year leases are going to look massive, but in reality the only metric that counts is serviceability.
Otherwise why is there not panic about public debt levels
May 21, 2015, 8:47 am
#2170
Join Date: Jun 2012
Posts: 13
Peer-reviewed article prior to the Global Financial Crisis:
Originally Posted by Vespermann et al., 2008
Aerospace companies from the Gulf region vary from established actors in a variety of fields: Main differences comprise lower operational costs as well as general travel characteristics (e.g. number of destination served, travel time, service level) (O’Connell, 2006). Additionally, long-haul hub carriers from the Gulf countries differ from most of the legacy carriers concerning the way the hub-and-spoke model is operated (Flanagan, 2006)1. In the latter case, the airline’s network consolidates short-haul operations into long-haul traffic. Carriers from the Gulf region by contrast almost solely have long-haul traffic flows. Emirates Airlines, for example, is characterized by the complete absence of domestic flights within its country of origin. Thus, in order to feed their hubs with a growing number of passengers, Middle Eastern carriers are relying on expanding their global networks. As a result, the Middle Eastern carriers focus on the three major long distance routes: traffic between Europe and Asia, traffic between North America and Asia and between North America and Europe. Looking at these markets in more detail reveals that on some of these markets Middle Eastern carriers are less competitive than on others. On the Europe to Asia market, Middle Eastern carriers are particularly competitive on routes to the southern parts of Asia, whereas for the northern parts incumbent players are well-positioned concerning both variety of destinations and travelling time (see Fig. 5). Looking at the North America to Asia market, airlines from the Gulf region are favourably situated for traffic bound to South Asia (e.g. to India) but unfavourably for traffic bound to Oceania or East Asia. Redirecting passenger flows from Europe to North America via Middle Eastern hubs is disadvantage concerning the overall travelling time. Therefore, to further expand their network structure to directly connect these regions carriers from the Middle East have to increasingly look for 5th and 7th freedom rights
Peer-reviewed article after to the Global Financial Crisis:
Originally Posted by de Wit, 2014
In international markets it is not unusual for companies to complain about unfair competition. Non-Western competitors are often accused of having an unfair advantage due to, for example, laxer environmental regulations and labour standards, state aid, and tax concessions. It is claimed this enables them to acquire an unreasonably large share of the international market. Such asymmetries prompt competitors from high-cost countries to call for corrective measures designed to create the so-called “level playing field”.
[...]
If a company from one country enjoys a comparative advantage over a competitor from another country, an unlevel playing field can be said to exist. The inevitability of this is evident from the exogenous nature of the relative differences in the availability of resources between the two countries. The playing field may be unlevel, but that does not mean that it is “tilted”. According to Ricardian theory, under conditions of unrestricted trade, the differences in resource endowments between two countries will lead them to specialise in those products that each of them can produce more cheaply. They will then both be better off in welfare terms than if they had imposed mercantilist import restrictions to protect their domestic manufacturers. Modern evolutionary economics expands the neoclassical concept of resources by introducing innovation into the equation. ‘The essential difference is that in the evolutionary perspective, innovations enable a country to make better use of the existing resource base and thereby strengthen its competitive position’ (De Man, 1996).
[...]
Comparative advantages also include the location of the hub within the continental market.[...] The location of a hub in relation to important intercontinental passenger flows can also be considered an exogenous comparative advantage. In this respect, a hub location within Europe inevitably implies a hub-and-spoke network in which long-haul intercontinental flights and short/medium-haul continental flights feed each other through a hinterland hub. A hub location in Singapore, and more recently in Dubai, however, leads to a hub-and-spoke system with mainly long-haul flights to and from an hourglass hub. The falling costs per seat-kilometre as aircraft size increases and the falling operational costs per kilometre as stage length increases (Doganis, 2002) can lead to significant cost differences just because of the difference between these two types of hub and spoke networks. For this reason the average distance flown per passenger, as a proxy for the type of network, has an explanatory value for the cost per available seat-kilometre (CASK) of an airline. In the case of a long-haul hourglass hub, both the distance advantage and the technological economies of scale of the aircraft act to depress the unit costs.
[...]
Generally speaking, Emirates' CASK is not exceptional from the point of view of the type of network and the utilisation of technological economies of scale embedded in its wide-body only fleet, in conformity with the extended concept of comparative advantages (De Man, op. cit.)
[...]
United Arab Emirates as a whole is oil-rich. However Dubai, unlike Abu Dhabi, has limited resources. If anyhow lower fuel prices can be attributed to the proximity to oil production and refining facilities resulting in reduced supply chain costs (O'Connell, 2011), this is a clear example of a traditional comparative advantage.
[...]
The second item concerns Emirates' cost advantage resulting from the low airport charges at its home base Dubai. Based on a non-replicable analysis of the airport charges at 96 of the 100 largest airports in the world, Oxford Economics (2011) states that airport charges at Dubai in 2010 were more or less in the middle of the range, if government taxes are disregarded.
[...]
The third item concerns the accusation of capacity dumping by Emirates and other Gulf carriers, which seems to have been prompted by their extraordinary fleet expansion. The Emirates' order for 90 A380s is more or less symbolic for this development (Schulte-Strathaus, 2011). This has been followed more recently by an additional order of 50 A380s and 150 B777X (Reuters, 2013). It is however unclear what the meaning is of the two orders in terms of net fleet expansion because substantial numbers of older aircraft in the Emirates fleet will also be phased out in the next years (RBS, 2011). This does not alter the question of whether a fleet based on aircraft orders of inter alia 140 A380 can count on sufficient demand from the market without the danger of capacity dumping. Although the development of the Emirates network has so far been concentrated on Western Europe and South Asia, over the next few years additional aircraft in the fleet will be increasingly used in the intra-regional markets between North Asia and Africa, South Asia and North America, North-Asia and Middle East and Eastern Europe and Middle East (Vespermann et al., 2008 and O'Connell, 2011). Taking the regional differences in future global market growth into consideration, RBS (2011) concluded that, with its growing A380 fleet, Emirates would not extend but only maintain its market share in most regional markets. Its market share will only rise considerably in the four markets named above. Therefore, Emirates' growth plans do not appear excessive for the time being and will not poach significant market share from European, Asian and US network carriers in existing markets, while remaining consistent with the Airbus and Boeing forecasts for regional growth. Rather than capacity dumping, therefore, it is more a case of imposing a cap on the European carriers' ability to leverage the potential growth in the Indian market (RBS, 2011).
Another item in the discussion about an unlevel playing field is the alleged state aid in the financing of Emirates' fleet expansion. Reference is often made to the deep pockets of Emirates' owners in connection with its rapid fleet expansion. Even IATA does so in its Vision 2050 (IATA, 2011, p. 15). No evidence has however, been found that Emirates is funding its fleet expansion in another way than on a fully commercial basis. For the period 2000–2010 Emirates' annual operational profits have enabled the airline to invest in its fleet expansion (58%) and to finance debt (11%) and investors (13%). For financing purposes a total of US$26 billion has been raised from the financial markets in the period of 15 years to 2012. A substantial portion of this total financing need (43%) concerned operating leases. This is reflected in Table 2 by the high share of aircraft leasing costs and the low share of maintenance costs. Other funding options that have been used are investments from commercial banks (19%), Ex-Im bank (12%), bonds (9%) and the European Credit Agency (13%).6 Additionally, 4% has been obtained from Islamic funding and tax-based cross-border leveraged leases. The expansion of the fleet will cause the airline's annual borrowing requirement to rise rapidly to an annual average of $5.34 billion to finance 119 aircraft deliveries in the period from 2013 to 2017 (Yousef and Potter, 2013). In raising the funds needed Emirates emphasises that the Government of Dubai has never acted as a guarantor to reduce its financial risks. All in all, evidence is missing for the accusation that either direct or indirect state aid was involved in Emirates' fleet expansion.
[...]
The preceding analysis clearly shows that the playing field between the European and Gulf carriers, especially Emirates, is unlevel. This is not a unique situation in international civil aviation because comparative advantages between states negotiating traffic rights are unavoidable, simply for geographical reasons. In the case of Dubai, the favourable location of its hub has allowed Emirates to develop a long-haul hourglass hub, which presents a much greater competitive threat7 to the European carriers than the same business model earlier developed by Singapore Airlines. Comparative advantages are the main factor for the explanation of this unlevel playing field and this throws a different light on the Commission's view that there is no reason to assume that European airlines are not able to operate viable hubs.
[...]
If a company from one country enjoys a comparative advantage over a competitor from another country, an unlevel playing field can be said to exist. The inevitability of this is evident from the exogenous nature of the relative differences in the availability of resources between the two countries. The playing field may be unlevel, but that does not mean that it is “tilted”. According to Ricardian theory, under conditions of unrestricted trade, the differences in resource endowments between two countries will lead them to specialise in those products that each of them can produce more cheaply. They will then both be better off in welfare terms than if they had imposed mercantilist import restrictions to protect their domestic manufacturers. Modern evolutionary economics expands the neoclassical concept of resources by introducing innovation into the equation. ‘The essential difference is that in the evolutionary perspective, innovations enable a country to make better use of the existing resource base and thereby strengthen its competitive position’ (De Man, 1996).
[...]
Comparative advantages also include the location of the hub within the continental market.[...] The location of a hub in relation to important intercontinental passenger flows can also be considered an exogenous comparative advantage. In this respect, a hub location within Europe inevitably implies a hub-and-spoke network in which long-haul intercontinental flights and short/medium-haul continental flights feed each other through a hinterland hub. A hub location in Singapore, and more recently in Dubai, however, leads to a hub-and-spoke system with mainly long-haul flights to and from an hourglass hub. The falling costs per seat-kilometre as aircraft size increases and the falling operational costs per kilometre as stage length increases (Doganis, 2002) can lead to significant cost differences just because of the difference between these two types of hub and spoke networks. For this reason the average distance flown per passenger, as a proxy for the type of network, has an explanatory value for the cost per available seat-kilometre (CASK) of an airline. In the case of a long-haul hourglass hub, both the distance advantage and the technological economies of scale of the aircraft act to depress the unit costs.
[...]
Generally speaking, Emirates' CASK is not exceptional from the point of view of the type of network and the utilisation of technological economies of scale embedded in its wide-body only fleet, in conformity with the extended concept of comparative advantages (De Man, op. cit.)
[...]
United Arab Emirates as a whole is oil-rich. However Dubai, unlike Abu Dhabi, has limited resources. If anyhow lower fuel prices can be attributed to the proximity to oil production and refining facilities resulting in reduced supply chain costs (O'Connell, 2011), this is a clear example of a traditional comparative advantage.
[...]
The second item concerns Emirates' cost advantage resulting from the low airport charges at its home base Dubai. Based on a non-replicable analysis of the airport charges at 96 of the 100 largest airports in the world, Oxford Economics (2011) states that airport charges at Dubai in 2010 were more or less in the middle of the range, if government taxes are disregarded.
[...]
The third item concerns the accusation of capacity dumping by Emirates and other Gulf carriers, which seems to have been prompted by their extraordinary fleet expansion. The Emirates' order for 90 A380s is more or less symbolic for this development (Schulte-Strathaus, 2011). This has been followed more recently by an additional order of 50 A380s and 150 B777X (Reuters, 2013). It is however unclear what the meaning is of the two orders in terms of net fleet expansion because substantial numbers of older aircraft in the Emirates fleet will also be phased out in the next years (RBS, 2011). This does not alter the question of whether a fleet based on aircraft orders of inter alia 140 A380 can count on sufficient demand from the market without the danger of capacity dumping. Although the development of the Emirates network has so far been concentrated on Western Europe and South Asia, over the next few years additional aircraft in the fleet will be increasingly used in the intra-regional markets between North Asia and Africa, South Asia and North America, North-Asia and Middle East and Eastern Europe and Middle East (Vespermann et al., 2008 and O'Connell, 2011). Taking the regional differences in future global market growth into consideration, RBS (2011) concluded that, with its growing A380 fleet, Emirates would not extend but only maintain its market share in most regional markets. Its market share will only rise considerably in the four markets named above. Therefore, Emirates' growth plans do not appear excessive for the time being and will not poach significant market share from European, Asian and US network carriers in existing markets, while remaining consistent with the Airbus and Boeing forecasts for regional growth. Rather than capacity dumping, therefore, it is more a case of imposing a cap on the European carriers' ability to leverage the potential growth in the Indian market (RBS, 2011).
Another item in the discussion about an unlevel playing field is the alleged state aid in the financing of Emirates' fleet expansion. Reference is often made to the deep pockets of Emirates' owners in connection with its rapid fleet expansion. Even IATA does so in its Vision 2050 (IATA, 2011, p. 15). No evidence has however, been found that Emirates is funding its fleet expansion in another way than on a fully commercial basis. For the period 2000–2010 Emirates' annual operational profits have enabled the airline to invest in its fleet expansion (58%) and to finance debt (11%) and investors (13%). For financing purposes a total of US$26 billion has been raised from the financial markets in the period of 15 years to 2012. A substantial portion of this total financing need (43%) concerned operating leases. This is reflected in Table 2 by the high share of aircraft leasing costs and the low share of maintenance costs. Other funding options that have been used are investments from commercial banks (19%), Ex-Im bank (12%), bonds (9%) and the European Credit Agency (13%).6 Additionally, 4% has been obtained from Islamic funding and tax-based cross-border leveraged leases. The expansion of the fleet will cause the airline's annual borrowing requirement to rise rapidly to an annual average of $5.34 billion to finance 119 aircraft deliveries in the period from 2013 to 2017 (Yousef and Potter, 2013). In raising the funds needed Emirates emphasises that the Government of Dubai has never acted as a guarantor to reduce its financial risks. All in all, evidence is missing for the accusation that either direct or indirect state aid was involved in Emirates' fleet expansion.
[...]
The preceding analysis clearly shows that the playing field between the European and Gulf carriers, especially Emirates, is unlevel. This is not a unique situation in international civil aviation because comparative advantages between states negotiating traffic rights are unavoidable, simply for geographical reasons. In the case of Dubai, the favourable location of its hub has allowed Emirates to develop a long-haul hourglass hub, which presents a much greater competitive threat7 to the European carriers than the same business model earlier developed by Singapore Airlines. Comparative advantages are the main factor for the explanation of this unlevel playing field and this throws a different light on the Commission's view that there is no reason to assume that European airlines are not able to operate viable hubs.
Jan Vespermann, Andreas Wald, Ronald Gleich, "Aviation growth in the Middle East – impacts on incumbent players and potential strategic reactions", Journal of Transport Geography, Volume 16, Issue 6, November 2008, Pages 388-394, ISSN 0966-6923, http://dx.doi.org/10.1016/j.jtrangeo.2008.04.009.
(http://www.sciencedirect.com/science...66692308000331)
Jaap G. de Wit, Unlevel playing field? Ah yes, you mean protectionism, Journal of Air Transport Management, Volume 41, October 2014, Pages 22-29, ISSN 0969-6997, http://dx.doi.org/10.1016/j.jairtraman.2013.11.012.
(http://www.sciencedirect.com/science...69699713001427)
May 21, 2015, 8:58 am
#2171
Suspended
Join Date: Jul 2001
Location: Watchlisted by the prejudiced, en route to purgatory
Programs: Just Say No to Fleecing and Blacklisting
Posts: 102,095
Sorry, but at this point I am fully convinced that most of your contributions are so biased due to your pretty obvious hate of the US3 and EU3 that it is not worthwhile commenting on them any longer.
It is actually sad, because I really think you can bring someting to the table...
And, yes, all airlines are working the Governments and pockets of the tax payer, why should the ME3 be any different?
Oh, yes, because Clark said so.
It is actually sad, because I really think you can bring someting to the table...
And, yes, all airlines are working the Governments and pockets of the tax payer, why should the ME3 be any different?
Oh, yes, because Clark said so.
... and I have no love for EK either; but I do appreciate the additional competition from EK and the service that facilitates my travels, saving me time and sometimes even money, relative to what I get from the US and EU leviathans.
Last edited by GUWonder; May 21, 2015 at 9:06 am
May 21, 2015, 8:59 am
#2172
FlyerTalk Evangelist
Join Date: Mar 2008
Location: Netherlands
Programs: KL Platinum; A3 Gold
Posts: 28,754
I presume the ASA between the Netherlands and the UAE requires both governments to approve such increments, anyway.
The Financiële Dagblad reports that, in response to Secretary for Transport Wilma Mansveld's written statement that requests for additional services will be refused until such time as the new EU-UAE Air Services Agreement, which is currently being negotiated and which apparently will contain clauses specifically dealing with [state] subsidies is signed, Eric Pels, an aviation economist at the Vrije Universiteit, says that "my opinion is that this will deliver nothing. If Etihad can't expand at Amsterdam, they will just expand somewhere else" (He suggests Frankfurt, which indicates he may not be aware that each of the ME3 are currently at the upper limit of the services allowed under the Germany-UAE ASA). He also warns of the risk of retaliatory measures from the UAE - such as refusing AFKL requests for additional service (however, I can't see AFKL wanting further service to the UAE!).
The Financiële Dagblad reports that, in response to Secretary for Transport Wilma Mansveld's written statement that requests for additional services will be refused until such time as the new EU-UAE Air Services Agreement, which is currently being negotiated and which apparently will contain clauses specifically dealing with [state] subsidies is signed, Eric Pels, an aviation economist at the Vrije Universiteit, says that "my opinion is that this will deliver nothing. If Etihad can't expand at Amsterdam, they will just expand somewhere else" (He suggests Frankfurt, which indicates he may not be aware that each of the ME3 are currently at the upper limit of the services allowed under the Germany-UAE ASA). He also warns of the risk of retaliatory measures from the UAE - such as refusing AFKL requests for additional service (however, I can't see AFKL wanting further service to the UAE!).
May 21, 2015, 9:15 am
#2173
Suspended
Join Date: Jul 2001
Location: Watchlisted by the prejudiced, en route to purgatory
Programs: Just Say No to Fleecing and Blacklisting
Posts: 102,095
Pre-conceived notions are a fundamental requirement for such a thread to last over 2000 posts. I have to earn my monthly salary from the owners of FT somehow...
There is no doubt that soccer in the US is not what it used to be and it is as obvious to me that the losses from ops at EK are not as high as they used to be.
If you take a look at the financial situation of EK, you see key parameters like debt starting to increase massively shortly after the turn of the century...
There is no doubt that soccer in the US is not what it used to be and it is as obvious to me that the losses from ops at EK are not as high as they used to be.
If you take a look at the financial situation of EK, you see key parameters like debt starting to increase massively shortly after the turn of the century...
Debt levels can rise massively but that is not the end of the world. What matters is what happens to the ability to affordably service debt levels. As long as EK isn't squatting on consumers' money, isn't failing to provide contracted services, and is paying its suppliers and debtors, who cares if EK is a "financial scam" like Lufthansa or United.
May 21, 2015, 11:04 am
#2174
Join Date: Apr 2015
Posts: 10
As has been pointed out before, IAG, the world's sixth biggest airline group, believes it can.
May 21, 2015, 11:18 am
#2175
Join Date: May 2004
Programs: BA blue, LH Senator, KQ (FB) gold
Posts: 8,215
Well, the purpose of this thread was to discuss the very bizarre expansion of the ME3 into the USA. We've now gone from 1 flight to 25 in less than 10 years and, as the data shows (see Friday's Fair Skies report), the ME3 attract very, very little connecting traffic on those routes other than to the Indian subcontinent (btw, the data also shows almost no growth in O/D demand for travel from the USA to Dubai/Qatar during that period).
In short, you're describing a market that no aviation professional would ever believe could be financially viable. I challenge anyone to find me ANY independent aviation expert who would say this would work. And, yet, the ME3 can't wait to add even more of this service. It's a fairytale beyond anyone's imagination that demand real explanation and not fan mail.
In short, you're describing a market that no aviation professional would ever believe could be financially viable. I challenge anyone to find me ANY independent aviation expert who would say this would work. And, yet, the ME3 can't wait to add even more of this service. It's a fairytale beyond anyone's imagination that demand real explanation and not fan mail.
I think it perfectly reasonable that a company like EK would recognize this growing market and try to capture it. It has absolutely nothing to do with backpackers, it has to do with commerce. That said, EK's approach to capturing this market is an expensive one and one which I would presume is initially loss-making. Heck, we only have to look at every internet-based company in the world to know that businesses lose money at start-up. Some succeed based on their initial model. Others adjust and succeed. Many fail. None of them are scams. Personally, I think that the sustainability of the volume and distribution of flights is in unlikely and that EK will retrench as it becomes obvious which flights are growing in yield and which ones are not. Is this the best way to operate a start-up or an expansion? Perhaps not. However, it is not prima facie evidence of a scam. It is only evidence of a risky strategy.