Let's talk about EK not the ME3, as they have been around longer and are perhaps the least questionable of the ME3, and indeed are the subject of this thread. Could it conceivable that EK's ULH operations to the US, and perhaps some of the poorer performing parts of it's European network, are actually subsidised by the more profitable parts of the company? There are chunks of the network, that would seem to tolerate reasonably high fares alongside reputable competitors such as BA, QF, SQ, LH etc. Also there are parts of their network (China/NE Asia-Africa) that where they have minimal competition and do seem to extract a premium for this.

But US carriers don't operate in a completely free market. How much of their BILLIONS comes from (somewhat protected) domestic operations? It does seem that whilst UA derives half of its revenue from international ops, the other 2 seem to more heavily dependent on domestic revenue streams. So comparing apples with oranges.

In addition, two more points. Firstly, other airlines, including QF & SQ have incorporated more than just 3 or 4 A380's into their fleets and seem to be making profits out of them (although some would admit not as successfully as they hoped), so it would seem it is profitable to operate them. Secondly, US geography doesn't necessarily suit the EK business model, certainly you wouldn't fly Asia-Europe or China-Africa via ATL, and DXB is to India/ME what ATL is to North America,with a larger number of short flights intra-region to connect a more limited number of long haul flights.

I don't particularly care whether EK is or isn't subsidised, and don't care with US starts imposing restrictions on the ME3's flights to the US. I also think it is more than likely that some of the US routes at the current point in time are loss making, and thus are subsidised somehow. There however seems to be a very biased, narrowly focussed view in the arguments against EK which seems to only consider them in relation to the US perspective and US airlines, without even an acknowledgement that the ULH flights to the US make up only a modest amount of EK's overall capacity and that there are airlines outside US, such as SQ &CX, that are successful using a business model that EK seem to have copied.

In other words, any American consumer who wants to fly somewhere the ME3 fly would get hurt. Honestly, I really don't care very much if the ME3 _are_ being subsidized - if the gov't of Dubai wants to, in effect, write checks to Americans, that's fine with me.

Just as a heads-up, repeatedly saying something does not actually count as proving it. You've said over and over that their business plans are impossible without subsidies. You've never given any actual evidence that's the case. SHOW us WHY it's impossible to make money flying A380s from XXX-DXB-US with 85% loads.

Appeal to authority isn't a valid way to make an argument. Appeal to authority you refuse to even name or cite is an exceptionally weak version of an invalid strategy.

IAG pulls BA, Iberia from AEA in protest at protectionist agenda
 

International Consolidated Airlines Group has pulled its subsidiaries out of the Association of European Airlines (AEA) in protest at that association's protectionist viewpoint Regarding the ME3.

And there are many other short-sighted people who agree with you about this. IMHO, it's horrible public policy, but you have the right to your opinion.

As far as data goes, I don't have access to specific numbers, although I'm sure the DOT will get the data and go through it in great detail (and then release their findings). I am 100% certain they will conclude that the math "doesn't work." That opinion is based on decades of experience (including investing millions of dollars of my own money) in the industry. But you don't need to be an airline expert to understand this. If you're not skeptical of why nobody else is copying this supposedly innovative and fantastic business model -- indeed, they run from it like the plague -- well, I don't know what to tell you. If this model worked, believe me, those A380s would be flying off the shelves. Unless you believe that only the Sheiks understand the airline industry.

Meanwhile, I heard that Emirates is now going to go 2x daily to BOS. I'm pretty sure that's more seats than exist between BOS and DUB -- a route that is about 10x more logical. Is somebody going to now tell me their are more Arabs (or Indians) in BOS than Irish? Puh-leez.

That's racist. You blindly assume that passengers of a certain flag carrier need to be of a certain nationality. :td:

The problem is how many industries get some sort of subsidies by a variety of countries. It isn't done because of great financial reasons today, but for the long term (in theory).

I'm an engineer in the broadcast industry where we make equipment, China (as in the state), will guarantee loans and provide huge subsidies to not just product but engineer products in that country. Now I work for an American company in Canada but over time lots of our products are being produced in China with subsidized Chinease dollars than sold to us back here in North America at much lower costs than we can produce for.

The same thing happened with Solar panels, they wanted to build up there solar industry, market was subsidized panel costs dropped dramatically, and prices went down. Now it's obviously not an even comparison because one is a produced product one in a service, but we accept subsidized products pretty much daily. My fear with the US 3/ Air Canada, the big 3 in Euro with there joint ventures will just create a oligopoly with little competition and we as consumer we will suffer in the long run. So let the state of China subside there airline industry, let the Gulf do the same just to keep our airlines in check for international service.

The one country I am surprise that isn't more involved is India. I'm curious what there stance is, Air India can't go into bankruptcy protection like the American carriers did a while back to clear and restructure debt. They have the me3 right there, than the Euros get fed from North American Airlines to make India profitable. Wonder if they will limit me3 growth in India, or limit the amount of code sharing/ joint ventures they will allow the euro 3 with North America carriers to have into India.

The point about subsidies and one's economic ideology notwithstanding, consumer choice and consumer benefits are not a critical part of regulatory thinking these days - whilst there may be some merit in the idea that in the long-run state intervention in economies might end up harming consumers, we still have the status quo where airline operators all around the world are the beneficiaries of state protection: the TATL protected Joint Ventures which artificially increase fares because of the idea that without these inflated fares the airlines would find it too hard to compete and therefore there would be no TATL service. YMMV as to how convincing you find that argument.

Unless the argument is that US/EU state involvement is fine, but Middle East government involvement is not fine - then picking and choosing what type of state support is okay and is not is not really a discussion about operational profits of EK but a discussion of public policy.

Moving on - the DoT already has part of the data they need to make analyses: seats and passenger data. In fact they already publish it here:
http://www.dot.gov/policy/aviation-p...ort#TheReports
Here is 2014 YTD pax data: http://www.dot.gov/office-policy/avi...ndar-year-2014
And here is 2014 YTD seat data: http://www.dot.gov/office-policy/avi...ndar-year-2014

All the DoT need to do to make a judgement on daily revenue is request revenue data - or project from fare data available at the time, which they may be able to do on a confidential basis.

As answered in the previous few pages - other operators can't copy the multiple A380 superhub approach because they don't have the geography to leverage: the billions of people within 6 hours and the confluence of new economic flows (China-Africa/EU-SE Asia). You can't copy a business model exactly that's rooted in geography and demography - but it's similar to the model of other places where airline capacity seems to be higher than local O&D market demand - like Singapore, Hong Kong, Amsterdam. The reason you don't see it in the American domestic market is because of the capacity discipline approach the US3 take and the consequential high margins they can get out of it - the A380 works well if you are happy with 4-5% net margin like EK, but not so much if you need 10+% if you want to avoid Wall Street wrecking your share price. TATL - the A380 certainly works: just ask BA.

Back to the data points you mentioned about BOS - luckily I said before that the DoT does publish data, so we don't need to rely on being "pretty sure" - we can be 100% sure.

So, BOS-DUB for the first half of 2014. There is only one carrier, EI:
Jan - 15443/20631: 74.8%
Feb - 10944/16622: 65.8%
Mar - 17569/24449: 71.8%
Apr - 23983/32944: 72.8%
May - 29250/35260: 82.9%
Jun - 33481/35420: 94.5%

In the real world, of course I know that not everyone going to DUB from BOS is going to take the direct flight, so looking at load factors as a whole from all the gateways that fly to DUB: (ATL, EWR, IAD, JFK, MCO, ORD, PHL and SFO), we're looking at a range of load factors:

Jan - 69-93%
Feb - 58-87%
Mar - 72-92%
Apr - 73-92%
May - 79-86%
Jun - 91-95%

So, DUB is a pretty popular destination it seems, from the United States - but some carriers have more difficulty than others filling their seats around off-peak times. Why do they still carry on at sub-80% load factors though? Because their yields are good enough to compensate. But why are they good enough? TATL JV immunity I think, plays a part. If Norwegian or Ryanair or another LCC finally gets approval to commence major TATL operations, I think the lobbying effort to stop them will start to get even more dirty - not that the Norwegian approval process seems to be in good faith, but that's a story for another thread. http://aviationweek.com/commercial-a...c-debate-heats

Let's compare this with BOS-DXB. First let us not forget this was a brand new route that started in March 2014. Now, as you know from the aviation industry, it is standard practice to allow a new route to get established first, before you start evaluate it to see if you want to keep it. New routes generally don't perform well and take time to ramp up. What happened with BOS though?

Mar - 10093/11172: 90.3%
Apr - 14199/15960: 89.0%
Jun - 12388/16492: 93.3%
Jul - 13838/15960: 86.7%

By all measures for a new route - opened with a 777-200LR, that is really excellent performance. There is clearly a lot of demand, comparable in fact to ex-USA demand to DUB in terms of demand/capacity matching which means there is going to be a good variety of price points represented. In other words, it's not going to be completely filled with low yield pax: there are enough rich people paying to fly F and J to cover operating costs above fuel costs/subsidise the loss-making promotional fares that establish a base.

We shall see when H2 2014 data is published as to whether this continues, but if you were a route planner at EK, knowing as you have seen the historical growth of the US market (10% year-on-year passenger numbers), that this would be a very good bet to double capacity.

Your thesis that BOS-DXB makes no sense (or 10x less sense than BOS-DUB) is simply not borne out by the numbers provided by the DoT - independent, verifiable data. It is arguably a more logical route than BOS-DUB simply because the load factor spread is narrow (and so close to launch date!).

I don't think I need to comment in detail about the idea that only Arabs or Indians fly EK as that is clearly such an absurd notion - one only has to look in the Trip Reports forum on this flight - that it doesn't bear any mention apart from it highlighting the prism which you view this whole debate and analysis (along with all the assumptions and prejudices therein) which I think is blinding you to the new economic and demographic global reality.

As cestmoi123 has said - where is the data refuting that idea you can make money on flights to the US with 85%+ loads on a 777-200LR/300ER or A380 that isn't based on "no one has done it before" or "it's simply absurd"?

There are already strict controls not just on service to certain cities in India by EK (and other ME3) carriers, but down to the specific number of daily seats to each airport in India from each specific emirates in the UAE. EK lobbies hard to additional rights, but EY with the Jet JV (itself the result of serious lobbying efforts - and I believe the parlous financial state of the Indian aviation industry) may find themselves at an advantage in funnelling traffic to AUH over DXB.

http://centreforaviation.com/analysi...-6-year-156514

As stated in one of the CAPA reports - the irony is rather delicious when you think about it: US3 and JV partners complaining about EK siphoning "their" traffic" - which is essentially Indian subcontinent-US via TATL JV, but in the end, India is just sitting there watching all these foreign airlines siphoning all of "their" passengers and not being able to do anything about it!

I think it's about time now, in 2015, where the notion of each airline/region "owning" all the passengers that originate there and everyone then taking non-stops (which the global alliance system did well to establish as the one and only paradigm for many years), and to hell with the price - I think that notion needs to die a quick death in the name of consumer choice and benefit. Alas, like a wounded and dying animal, it lashes out at the unwary :D

A digression on LCC TATL service which would really shake things up: (Ryanair boss wants to charge 100 EUR for TATL)

http://centreforaviation.com/analysi...0-fares-219313

Conclusion though, the AEA (which IAG just pulled out of, likely under pressure from its 9.9% owner QR) need not fear as right now, EUR 100 fares + ancillary revenues seem at first glance to be too low to be sustainable.

But it does illustrate the fact that with lower cost bases and different ideas, you can feasibly create a new service that doesn't rely on the paradigms of old. And if anyone can do it, Michael O'Leary can do it.

Would you mind clarifying what exactly your interests are? With millions of dollars of your money at stake, you are not a disinterested party. We already have some clues as to where your interests lie. Can you tell us how, or in which companies, you have invested?

You keep banging on about "why nobody else is copying this supposedly innovatice and fantastic business model" while your fellow communicant, FD1971, keeps banging on about how EK (and others) copied their business model from KLM and others.

You really seem to have a bee in your bonnet about the A380. As if this single aircraft type is inherently unprofitable and unworkable.

But the fact is that the Emirates business model is pretty similar to that of most other airlines in existence today - fly planes as full as possible and at as high a price as possible and transfer lots of passengers over its hub. This business model is copied ALL OVER THE GLOBE. When you add in the less common aspects - such as placing a greater degree of emphasis on the in-flight service, comfort, entertainment, lounges, etc; and maximising their global spread to dramatically increase the number of city-pairs that can be connected via a single transit; and 24-hour hub operations; then yes, the only airlines copying the Emirates model are: Turkish Airlines; Qatar Airways; and Etihad.

Why doesn't a US carrier seem to have global ambitions of the sort that perhaps Pan Am, and TWA had? A very good question. Most seem too content making good money in the closed domestic market. If you have ever flown transatlantic with a US carrier - at least not on the flagship routes - then you will see that they don't even care, or try.

Even for those routes where it would seemingly make sense for US airlines to compete, they apparently don't care or want to. I've been to Australia 11 times in the past 10 years. Never have I seen a decent or competitive offer from Europe to Australia on a US carrier. Even for flights to South America - perhaps the only place other than North America itself a US carrier would provide a logical connection for a European passenger - the US offerings are not competitive.

That's geography for you. In aviation terms, the Gulf is at the crossroads of the world. The US is peripheral and not a natural transit point for the same amount of passengers.

That's why no US airline ever did, or ever could, become a super-connector of the likes of Emirates or Turkish.

Meaning that only Irish people in Boston would want to fly to/through Dublin and/or fly on Aer Lingus? Or that only Arabians and Indians would want to fly to/through Dubai and/or on Emirates?

Can I ask you: do you have a passport? Have you travelled much, internationally? Have you ever flown on a non-US Airline? Have you ever flown on Emirates?

Given the overall terrible profitability history of this industry, being a long-term airline investor isn't something I'd brag about. Unless you invested in Southwest (also a business model that "couldn't possibly work" when it was introduced), you'll have been putting your money into a series of companies that cratered. After all, as Buffett once said (may be apocryphal), "airlines are where equity capital goes to die."

First off, you may be shocked to hear this, but white people travel to countries with brown people in them. Lots of them. For work, and for leisure. 800k+ Americans visit India alone every year, just for tourism. That doesn't include business travel.

Secondly, are you seriously comparing trips to DXB, a massive feeder hub to a huge section of the world's population, with trips to DUB, which is overwhelmingly O&D traffic to a country with under 5 million people? Wow. That's not apples to oranges, it's apples to bulldozers.

Sorry, demographics aren't racist. Who do you think is flying Emirates from BOS. Boston tourists to Dubai? All 2 of them?

If you say, so, sir.

I'm not going to tell you my ROI, but I will say that I was an investor in Doug Parker's then-airline in the months after 9/11. And I still own those shares.

If you know what you're doing, there are opportunities in every industry. The herd is often wrong.

Such pressure would not have been necessary. IAG's Willie Walsh has long been an admirer of the Gulf Airlines, and of course BA sponsored Qatar's entry into oneworld 2 years ago. IAG's stance towards the Gulf airlines pre-dates any such tie-ups with QR - that happened only last January - and one would say that it is indicative of IAG's forward-looking, business-like approach.

IAG was pretty much disengaged from the AEA long before this.

Do you really not understand that it's not about Dubai O&D traffic? Do you think that AA runs 15 daily flights AUS-DFW because that many people in Austin want to visit Dallas?