jamjaruk

*popcorn*

edy4eva

Thanks! I wasn't disagreeing with your analysis either which I found interesting, simply presenting a different perspective.

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).

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.

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.

edy4eva

This isn't about mocking your analysis. It's about proving that your claims lack the evidence and the specificity necessary to distinguish them from fallacious claims.

There's no clear evidence that proves EK receiving subsidies large enough to warrant deploying A380s to the US. The only form of subsidy they get is waiver/discounts on airport charges at home, and for few new routes that are temporary anyway. EK manage their yields and LF quite well all the time and substitute aircraft on under performing routes and even cancel routes. If your claim had any essence we would have seen EK sending A380s to all US routes without any consideration to capacity. Which is not the case as discussed earlier. This is at the lower level of your claim.

At the upper level, assuming you're spot on with the subsidies to cover the losses and funny business. One cannot but ask why? and who benefits out of sending A380s to the US at a loss -coming out of the gov pockets I might add?

So if at both extremes your claims are invalid, and because they lack the evidence therefore it is safe to assume your claims are fallacious.

BTW EK is owned by the Emirates Group, which in turn is owned by Investment Corporation of Dubai which in turn is owned by the government of Dubai. And while it's managed by royals, the wealth created belongs to the citizens of the Emirate.

Forrest Bump

I concur with this.
I've been on flights where upon arriving by bus at the terminal not more than 5 passengers entered the left door.

TRAVELSIG

As am I.

CaptainEKAirbus

So thus, you're assuming that EK's financials are falsified? You do realize these financials are audited by PWC in the UK.

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.

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'?

Ahmed777

I see you enjoy watching their heads explode too.

jamjaruk

I enjoyed it, popcorn was great too

ukdoctor

eshaq786

That just made my day. Lol.

iahphx

Whatever those subsidies may be, I think any rational observer would say that the Chinese airlines are way more cautious in their int'l route development than the Middle Eastern airlines. And the trade/ethnic travel demand for US/China travel is a magnitude several times greater than US/Middle East travel.

TRAVELSIG

You are not the first person to raise this question and particularly underperforming continental European carriers like to repeat it- the Economist took a crack at this more than 4 years ago when DXB was really expanding and this is probably as good as a place to start as any (free for anyone to read):

http://www.economist.com/node/16271573

moondog

Any rational observer would recognize that Chinese airlines are trying their best to stay afloat with the cards they've been dealt:

-in the case of CA/CZ/MU (and subsidiaries), they fly where they are told by their largest shareholder (this is neither cautious nor reckless; it's simply their mandate)
-deal with the fact that PEK/CAN/SHA are not well suited for connections in which other options exist (e.g. okay for HIJ-KUL, not okay for TYO-JNB)
-due to the fact that slots are maxed out, USA style hub banks of flights are simply not possible apart from one-off cases (e.g. JFK-PEK-SIN)
-in the case of point-to-point flying, the HNA Group is arguably the most risk averse in the entire world (e.g. buy a handful of hotels in City X, launch flights to City X, and fill them with junkets)


The situation in the UAE is fundamentally different:

-no need to accommodate a low margin domestic market
-within nonstop geographical reach of 80% of the world's population
-luxury of being able to use hub airports to connect many dots, precisely because they aren't over burdened with O/D demand

The business case for EK seems sound to me in theory, but since I don't have any skin in the game, I'm not overly concerned about their profitability in the event that it isn't. If they want to send 380s to IAH at a loss, passengers benefit, and the airlines that my (US) taxes have repeatedly bailed out get to enjoy some time in the hot seat.

RTW1

I know how to play the guitar and fly a lot, so I'm even better qualified than you to run an airline..... Maybe if you spend less time posting on the internet you also could have been running a profitable airline yourself. Or maybe not.....

Anyone who has spent an few hours reading how the ME airlines operate can easily see what makes the big difference, a substantially lower cost base than all those EU and even US airlines. And most of those A380's (and 777's) are leased on fairly favorable terms making the operations costs of having a modern fleet very good as well. Combined with low personnel costs and hubs that are fairly cheap to operate out of and that are not burdened with a lot of regulations (e.g. allowing night flights) and almost anybody can see that they have a lot of things going for them compared to most other airlines.

And not every route has to be profitable from the start, opening new routes is also about having a strategy that can take a few years to realize. Also plenty of opportunity to substitute A380 and B777 when the seat or cargo demand warrants it.

For no company a claim can be made that the financials are 100% sound, history has proven that it's still fairly easy to manipulate those. But look at it from another perspective, that's largely irrelevant here since they are state/government investment fund owned... the only reason I could see for manipulating the figures is influencing the debate about subsidizing airlines. And really that happens everywhere in lots of different ways. The business case here is also a bit more extensive than with most other airlines, it's not only having a profitable airlines but also maximizing on other governmental investments as the airport and hotels/shopping. Something that also applies to some other regions but not as straight forward as the case is here.

The big question is what are the leasing companies going to do with all those A380's that will become available in the coming years, after their lease has expired.... But that's not much of a problem for EK themselves.