Given the profitability of ground stuff and lower costs of many things to Gulf Airlines, I think from an operational point of view, they are profitable. I think the US3 are just upset that Emirates' FOCUS isn't on profitability.

For example, consider an oversimplified world where people will fly only if airlines invest at least $10 per passenger into product and if prices are at or below $60. So, the US3 charge $60 and spend $10 and spend the remaining $50 paying bonuses. Then the ME3 come along and spend $45 and charge $50. They most certainly are profitable, however, the US3 are going to take a hit in profitability because now a better product is being offered for a lower price. You don't need a government subsidy to not focus on profit as long as you cover operating costs.

As pointed out before, routes to Africa or routes in Y do not really create anything worth mentioning, Cargo is a factor when speed comes into play, slow cargo is about as profitable as 99% of the seats in Y.

Again, we are not talking about a narrowbody flying 500 mile routes at $6-8k per flying hour, we are talking about massive aircraft worth billions that have to create a certain return somehow on an airline still mainly known for flying backpackers and migration workers around the world or back to India. Most other routes include unfavourable conditions due to the location of Dubai and the desire or need to fly nonstop, although stopping in between like in Hamburg on the way to New York did not really generate load factors higher than the 30's either.

The numbers 30 to 40 seem to be rather important for this thread, anyway you look at it, $30-40 billion in subsidies or loads of 30-40%, it does not look too good.

And this is exactly the main point the US3 are mentioning, too many routes operated at massive losses, even worse, even without any specific knowledge of the industry, it is pretty obvious that most of the routes are operated at a loss, especially via Doha and Abu Dhabi. ;)

What are your sources for?

1) routes to Africa in Y do not create anything worth mentioning
2) 30-40% load factors
3) $30-40 billion in subsidies

(I've been waiting for the "report" provide clarity on point 3, but if the evidence was especially compelling, I think it would have been leaked by now.)

I feel like you have a distorted view of the world - or, more likely, a Europe-centric view. Europe is less than 25% of Emirates' revenue (as they claim in their report).

Diaspora travel is characterized by inelastic demand. Yields won't be as affected by higher availability (due to large aircraft) as they would in a short-haul/domestic market.


Edit: The HAM-JFK route was an aberration. Emirates often cuts routes with poor loads, so I'm not surprised if the numbers were indeed low.

Edit 2: I have no idea (and have no vested interest in) whether or not EK is actually profitable. I just wanted to point out the the market conditions faced by EK are very different from the market conditions faced by a typical EU or US carrier. And as a result, some of the underlying assumptions don't actually hold.

May I recommend reading all of my posts in this discussion.

Contrary to many posters, I actually work in the industry, so I deal with routes, demand, loads, subsidies on a daily basis.

You can imagine that a lot of former colleagues followed the money and went to the Gulf, many returned with some good staff to tell.

A good friend used to be responsible for handling EK at German airports, so I did not only have the costs, I also had the loads, fare classes sold and with access to a CRS even more information to make a decent calculation. ;)

BTW, as pointed out before, a good chunk of the data is actually available online and for free. You can actually buy fare class data from the CRS providers, it might come handy when an airport wants to lure an airline into operating a route. ;)

Quite frankly, I do not care whether we are talking about 30 or 40 billion in subsidies, I do not care how much money Qatar loses on routes to Philly or BKK using the whale, I just know not to recommend the business model to any other airline, because it is not sustainable financially without a lot of additional factors, factors which would be ruled illegal in the US or the EU, at least in most cases.

Why is this relevant? Easy answer, a long time ago, around the time EK started to grow, other airlines wanted to know about the business model, whether it is a fairy tale from a region well known for beautiful fairy tales or whether it might make sense to take a closer look in order to copy some practices, the answer (as you can imagine) was pretty obvious...

Again, flying Widebodies is something for Pros only and we do not have too many routes on this planet which support the big jets, not really surprising if you take a closer look at the financials of the industry since deregulation. :D

You have to differentiate two things here. Routes from Europe to the US and Asia have proven to be money-makers. Perfect stage length, nicely connected, works quite well, almost perfect stage lengths, 7-10 hours, around 4000-5000 miles, one relief pilot etc.

From the moment you extend the trip, the economics are starting to look different, so flying from the Gulf to Australia or the US is a completely different ball game.

There is no doubt that you earn a lot of revenues, but there are many many question marks whether you can earn a profit on routes from the US or Australia to DXB.

Hence, I pointed out the importance of Europe-Asia routes for EK. Europe might only be responsible for x% of revenues, but we are talking about routes that work on other airlines and not about fantasy routes that are technically feasible, not so much financially.

And Cargo is a moot point when the bird is close to its MTOW due to all the fuel... :(

So once again we have, in effect the ME3 airlines that are just losing money, but reporting a profit. This I can fully understand for Qatar and Abu Dhabi, both of whom have resources that can cover losses it has with their respective airlines, but it doesn't make sense to me that Dubai would consciously lose money in all of their operations in regard to the airline industry.

First the airline is masking its losses. Then the airport is not charging the airline the fees it is supposed to and is also losing money, and lastly the catering fees as well is done at below market costs for EK so they are also on the losing end. So in effect a country that cannot afford to lose a lot of money is just dripping it away because they want to appear to be profitable? Do I have that right?

Or are we to assume that the whole operation that all three of the ME3 are able to run is so unique (location, taxes, aviation friendly government, labour laws) that anywhere else in the world it will fail but in these 2 countries it can succeed? Regarding the profits of the US3 at the moment, surely their margins are inflated because of their bankruptcy laws and the ability to write down tax against their billions of dollars of losses in the preceding years? It is easy to show a healthy margin if you aren't paying tax...something the ME3 knows...

Is there any alternative?

No super malls, no skyscrapers = no tourists

No rock bottom fares, no state of the art aircraft, no world leading inflight service = no passengers

We all know that Dubai was not able to pay for the Burj, the Metro and the aviation structure at the same time some years ago...

We also know that the US and Canada plus Australia (with SQ demanding to fly OZ-US nonstop) had issues with subsidies and state-owned airlines, so again what is the alternative?

As pointed out in this thread some weeks ago, EK asked a major consulting firm to compile a list of subsidies the major EU airlines received over the last twenty years.

This does not justify subsidies for them in the first place, but at least it helps to explain that every airline received lots of money from the taxpayer in their history, so Emirates, Etihad or Qatar are no exception.

The only difference, the amounts the Gulf airlines received over a very short period of time are second to none. We all know how broke AF used to be (not today;)), more so in the early 1990's and that 3 billion Francs represented an amazing amount of money 25 years ago, but what are 3 billion Francs against $ 30 or 40 billion these days... :D

Ah, okay so now we have Dubai hunting for tourist money but losing it when the tourist travel there. Where do they make their money then? If the tourist pays the hotel, is all the hotels owned by the Sheik? Maybe it is the 10% tax when booking a hotel room? Or the 10-20 AED tax per night?

Then again, one of the other criticisms from airlines about Dubai is the fact that they do not have enough O&D traffic to justify the amount of flights to a country. So is EK chasing tourist money or transfers? And why are they chasing transfers if they only lose money and want the tourist money only?

I think you will find that of the $39B total that is thrown about by the US airlines the majority goes against EY and QR (because they are trying to establish themselves in a competitive environment). We have to wait and see what the actual amount is against EK and if it actually does amount to a subsidy or if it is just a benefit.

Classic business case, examples include MUC and DTM (huge deficits running the airport or certain parts of it easily offset by the additional income from all the people using the airports) For a more detailed explanation, please see my earlier posts from some weeks ago.

Creating artificial traffic is never a good idea, you have to have some natural traffic to support your operation. It certainly always depends on the yield of local passengers, but without any significant local feed the business case is already very close to the bucket per se.

Dubai DutyFree is a pretty good copy of Schiphol See Buy Fly.

And copying KLM and Schiphol is always a good idea, hence it is not surprising that EK copied pretty much everything that worked quite well at KLM & Schiphol. ^

How is Asia-Africa any different in cost terms, then?

http://www.flyertalk.com/story/ex-ma...-10-years.html

Ex-Manager Sentenced for Role in Defrauding Delta of Millions Over 10+ Years.

Just read this article while logging into FT. It looks like Delta should be more concerned about whats happening in they're own company first.

Is Emirates a financial scam?
 

So called experts and others can continue to rant and puff about EK not being profitable but the fact is, service far better than tired US airlines and planes always seem pretty full. Keeping it simple. Also as pointed out Dubai cannot afford to subsidise nor would it want to. I look forward to this dodgy dossier complied by the US airlines but I am pretty sure it will not prove anything about EK not being profitable.

Aside from insane costs of doing business in Africa, Dubai is a perfect hub for connecting certain parts of Asia and Africa, unfortunately not too many lucrative city pairs come to mind quickly. Nigeria-Europe and Nigeria to the US are proven markets with very high yields, but again going via DXB from Nigeria to Europe does not necessarily attract the high yielders. ;)

Planes are always pretty full these days, even the very selective airlines known to charge insane amounts for last second tickets achieve loads above 80% and quite frankly your eye cannot differentiate between a PLF of 80 or 85% on a Widebody. It is not about loads, it is about yields. Getting people onboard is rather easy, just sell BKK for €400 ex Europe.

Making money with those passengers is the issue at hand. € 300 net divided by 12000-13000 miles...such yields even make O'Leary cry. :(

You will not get a dodgy report, do you really think the US3 are making such a fuss without hiring the usual suspects to compile the report?

Really? :rolleyes:

The US3 are fat, offer terrible service from outdated airports using even more outdated ATC infrastructure, but the US is Lobbying Central after all. ;)