Now, think how many more people fly between DFW and AUS but who did not start their journey in DFW.

Now, apply the same principle to DXB-BOS.


DTW is a hub, but the city it was attached to is almost entirely gone!

A "hub" doesn't really need a large city nearby. A hub, by definition, as you have said "collects people". Many of those people will arrive by aeroplane - it is, afterall, an airport! - so it is not totally dependent on the nearby city and the buses, cars, trains, taxis etc bringing people to the hub. (It's the outstations, at the end of each spoke, where the nearby city and its buses, trains, cars and taxis become very, very important).

Hubs don't require strong O/D traffic to work. Just look at FRA.

But anyway, the UAE's hubs are in the UAE's largest cities - just like the US!

(Don't tell me that the lack of a domestic market is what is throwing you. Look at AMS, SIN, HKG - all massive global hubs, with exactly zero domestic flights (within their own country/Special Administrative Region)

We've been telling you for the last several months.

The fall in the oil price helps all airlines - it brings their costs down.

Dubai has no oil. Your continued assumption that EK is subsidized by the government, who in turn gets their money from oil, IS WRONG!!!

Honestly - it's not.

You still inhabit your US-centric bubble.

Think about it: how could an airline whose passenger numbers double roughly every 5 years, and has been growing steadily for 30 years, NOT be making some profit? How could an airline which is not based in the "slower growing" or "mature" and challenged economies of the West, but which operates globally and is therefore more active in the faster-growing economies around the world - and which links more cities/countries via a single stop in Dubai than any other airline/airport; - NOT benefit from increasing demand?

With some of the (lack of) arguments being presented, and refusal to engage in any line of argument other than "it doesn't make sense here" therefore " it won't work anywhere", I am begining to wonder if the OP is actually a lobbyist for EK.

Also find it amusing that the discussion is no longer about EK, but always brought back to the ME3, which include the more questionable QR and EY. Whilst we're at it let's throw TK into the mix.

Also find it amusing that the world is entirely defined by DL, UA and AA. Discussions about carriers like CX and SQ, and even the defiant BA, are completely and absolutely ignored.

To be fair, lots of companies are willing to incur losses for the sake of growth. (That's almost the rule in the tech sector here in China... grow fast or die.)

http://www.thestreet.com/story/13114...ranscript.html

Comments from Delta CEO Anderson about potential changes to open-skies agreements.

Actually further than just the anecdotes you have quoted from FT posts, proving that people actually travel to DXB, there are actually one or two airlines that fly to DXB from their hubs, where clearly DXB is end of the line as they don't offer transfer services there . One wonders what sort of subsidies these airlines have to offer a service to some backwater in the middle of the desert like DXB,:D

From wikipedia the main carriers (East/SE Asian, N American, European) that have flights to DXB as end of line destination include: Aeroflot (Moscow), Air China (PEK), Air France (CDG), Austrian (VIE), BA (LHR), Cathay Pacific (HKG), China Eastern (PVG, KMG), China Southern (URC, CAN), Delta (ATL)*, KLM (AMS), Korean (ICN), Lufthansa (FRA, MUC), Malaysia Airlines (KUL), Philippine Airlines (MNL), Norwegian (Oslo, CPH), Singapore Airline (SIN), Swiss (ZRH), Thai (BKK), Transaero (Moscow), Turkish (IST), United (IAD), and Virgin Atlantic (LHR). With Air Canada starting up services from YYZ later this year.

* One wonders how DL can support this route. Surely there isn't that much O/D traffic is not that different comparing DXB/BOS to DXB/ATL.

Arf!

Off the EK topic but still relevant.

Etihad CEO warns EU “growing resistance” will have consequences.

Etihad Airways President and Chief Executive, James Hogan, has met with the European Commission Transport Commissioner.

http://gulfnews.com/business/aviatio...nces-1.1492696

Indeed.

But Emirates has been growing for 30 years.

That's not "grow fast or die". And that's a long, long time to sustain losses.

Or perhaps the OP thinks that it is only since EK began expanding in the USA that losses began to mount?

Hubs collect people with O/D demand you say, but that is 20th century thinking - "Superhubs", of the likes that TK and EK have built in IST and DXB and EY and QR are catching up to complete (QR has of course the new airport at DOH and AUH is nearly there) are called superhubs because their catchment area is no longer defined just to be the city they are located in, but extend out, across international boundaries to cover all the major population centers where there is long haul demand to somewhere on the other side of their hub.

The idea that airports are restricted to their local area and that airlines should be restricted to "rightful" passenger flows should have died in the 60's and 70's - what we mean by aviation liberalisation and globalisation is to reflect the new reality that new business models are possible, if you remove the quite frankly nationalist-protectionist idea that carriers and airports own passengers within their "sphere of influence". In geo-politics, one could argue that is positively Cold War thinking.

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In post 1333: the OP states: "The ME3 are already having an impact on the US3 (look at who's exiting the India market this month after decades)"

Yes, so what if a US3 carrier is leaving India - it makes economic sense, because of the margins on domestic routes and TATL are on the order of 10%+ judging by their results, why would you gamble on a ULH route unless you could be sure of massive returns? Whilst the US3 are making money, investors will be unhappy with profligate uses of capital.

Yes, EK do it cheaper - for all the reasons in this thread absent subsidies (EY and QR of course and their cash injections notwithstanding) but that doesn't mean money can't be made. After all, AC is starting YYZ-DEL service http://www.thestar.com/business/2014...new_delhi.html and YYZ-DXB service, hoping that pax going to YYZ want a direct non-stop.

The problem for US airlines is that there are very few markets they can enter which offer comparable net margins as they do on their protected routes: leaving them in a bit of a quandary - investors will punish them if their net margin drops from their excellent current performance, but also if they don't find new growth markets, in case the protected markets suffer macro-economic factors, or if they suddenly become unprotected. The other non-protected markets (TPAC-Asia/South America/Indian Subcontinent) are all filled with carriers which have tolerances for lower margins (2-4%) so to compete with that you have to offer quite a product premium to demand the fares required to sustain network margin. One can argue about whether the US3 offer a product that would be worth the premiums required to operate that route in line with margins on other parts of the network.

As to the sentence: "Instead of trash talking, perhaps it would be worth explaining how the ME3 can "make money" with a strategy that doesn't work anywhere else in the world -- and yet they're all expanding wildly at the same time despite obviously tough economic times in their home towns. See, for example:"

Let us ignore EY and QR for now - let's talk about the established player which has pioneered this superhub trend: and why can't anyone copy them. Well, apart from TK which is copying them out of Turkey, but they are in Star and don't have such a powerful marketing campaign behind them...or more prejudiced reasons but let's not go there quite yet...

The strategy cannot work to such an extent anywhere else in the world because nowhere else in the world sits between the number of new passenger flows at convenient aircraft stage lengths (6hr flights, around 5000km - optimum fuel burn efficiency for a 777 and A380 - and the oft quoted statistic about the number of potential pax and city pairs not just within but at around 6 hours of DXB - https://www.gov.uk/government/upload...efficiency.pdf), and the current economic growth potential of all these source markets: China, Africa, India, SE Asia: all playing economic catch up to mature markets and so have stellar growth rates compared to the 1-3% of mature economies. Not to mention the absolute number of potential pax.

Now as to why no one wants to take a risk in innovating new business models in the aviation industry? Well Tony Fernandes and Michael O'Leary did the impossible and came up with what were seen to be revolutionary new ideas - except they weren't new at all: what happened was the economic and demographic conditions to make those models a success were present. One can say the same thing about Tim Clark. EK wouldn't have worked 40-50 years ago: it likely wouldn't have worked 20-30 years ago. But now? It works - because you can compare load factors and fares with projected costs. I've done the numbers for you, but you said there were many things wrong with it, months ago. I am still waiting to be corrected with hard evidence.

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To 1340, lokijuh:"* One wonders how DL can support this route. Surely there isn't that much O/D traffic is not that different comparing DXB/BOS to DXB/ATL."

There is also the IAD-DXB route from UA...one wonders whether these routes would survive without the Fly America Act...

Plus, how else are people going to use the US3 airlines as much as possible to get to places like BAH/DOH/MCT :D

iahphx: While I can sense that you're a nice person, I simply don't believe that you are either a financial analyst (at a firm that anyone would take seriously) or a personal investor who has regularly plopped "millions of dollars" into airline stocks for "decades". Your post history simply doesn't support such (I do not hold this against you in the slightest, by the way).

This is just false information. The USA (very reluctantly) gave AWA a loan after 9/11 after the financial markets were closed to them. The federal gov't demanded a large chunk of the airline's equity in return. A few years later, the gov't sold those shares for hundreds of millions of dollars -- perhaps the best USA gov't investment since they bought Alaska.

No subsidy was involved.

I can assure you that the UAE will never be able to get the billions they've invested in Emirates back in a stock sale to independent investors.

The CX route is certainly interesting -- and risky. It might make sense given the "short cut to Asia" that polar flying represents. Only time will tell. Dubai is obviously not a short cut to anywhere from BOS. Indeed, it's very hard to imagine how you could make money on such a route unless you were able to operate with much lower costs. Otherwise, basic logic would suggest that it would be a stone cold loser to overfly Europe to just about any destination Emirates could serve from BOS.

I do believe Emirates could significantly undercut the European airlines on CASM. I am also certain that they would operate at an enormous revenue disadvantage as well. Just a handful of extra biz class passengers would make the difference, and those business class passengers are far more likely to be headed to Europe (which is, of course, the reason why low cost European airlines have been generally unsuccessful since the time of Freddie Laker). Without any evidence whatsoever -- except the word of Tim Clark and some questionable accounting -- Emirates supports believe that their airline has overcome these immutable facts. Until Emirates releases financial information like a public company does, I think any thinking person would be extremely skeptical that they've "reinvented the wheel." The far more logical conclusion is that there's billions of dollars being pumped into the company, which is exactly what the comprehensive USA investigation has found.

Detroit "the city" is a failure. Detroit the metropolitan region is not. Don't confuse the two. Per capita, Detroit is the 17th richest city in America, and that understates the average citizen's buying power because real estate is so much cheaper than it is on the coasts.

http://en.wikipedia.org/wiki/Highest..._United_States

Lower fuel costs will certainly help Emirates because they do so much ultra long haul flying -- the least profitable flying in the world. That said, economic growth is far more important for an airline than fuel costs. In 2009, airline fuel bills plummeted by more than half. Yet, many airlines faced bankruptcy. Why? Because business travel collapsed. I've already provided links showing that Middle East economies are suffering now. It would be a complete shock if they weren't, given the complete collapse in oil revenue. Is there anyone on this board who's going to tell me that Dubai has not been impacted by these woes? Even Ms. Rosie Scenario (the Emirates' newspaper) admits there are problems:

http://www.thenational.ae/business/e...he-right-track

Nobody running a Middle East airline FOR PROFIT would be doing a gangbusters expansion right now. Did you see Richard Anderson's statements from Delta yesterday? He's CUTTING int'l capacity next year due to softness in the world economy. That's what profitable airlines do. That's how they stay profitable. Like with all other aspects of their business, Emirates operates with "immunity" to financial realities that everyone else in the industry deals with.

Even the 17th-richest city in America is no match for the "region" surrounding the Gulf. Let me quote eternaltransit here to show you that your idea of a "hub" needing a large, and local, O&D population is no longer valid:

May I remind you - or, perhaps, inform you in case you don't already know - that Turkey has already started building a new, third airport in Istanbul which will handle 150 million passengers per year when built, making it the largest airport in the world.

(Atatürk Airport's passenger figures almost quadrupled in the 10 years between 2004 and last year, to 57 million. Sabiha Gökçen Airport openend only a little over 10 years ago; it has posted double (or even treble) digit percentage growth each year, and last year handled 27 million passengers. Are you aware of Turkish Airline's growth? It has been growing at roughly the same rate as Emirates in the past decade).

Istanbul has gone from handling about 12.5 million passengers in 2003 to almost 84 million in total last year.

What are your opinions on Turkish Airlines? Can they be profitable without the benefit of oil/gas (a resource also lacking in Dubai)? Does their successful adaptation of the superconnector business model sway you in any way?


Indeed, economic downturns are bad for the airlines (the US and European ones) who derive most of their profits from the US/Europe/Transatlantic.

But an "economic downturn" that might curb US employers from sending their staff overseas, or prevent bankers from commuting across the Atlantic every week, has much more impact on airlines that cater to these markets, and less so for airlines that are not reliant on these markets (do you think the booming Chinese airlines were affected by the "economic downturn", for instance?)

The US airlines' networks are complementary to those of the Gulf 3; "business travellers" that use the US3 are unlikely to find their way onto the Gulf 3 because, as you well know, the Gufl 3 cannot carry passengers around North America, nor can they (with the exception of MXP-JFK) carry pax between North America and Europe.

So, the type of "economic downturn" that spells disaster for the US and EU airlines is not of the same consequence to the Gulf 3.

You only have to look at their figures - passengers increased throughout, services kept being added, profits kept being generated.

But they're not doing a "gangbusters expansion" (whatever that means) now. It's not as if any of the 3 airlines are adding frequencies or destinations at an unprecedented pace.

You seem to forget as well that, particularly for Emirates, the more destinations they have, the greater the attraction that airline is. The number of passengers who suddenly live in the catchment area of an Emirates airport is growing all the time. And the number of destinations that these passengers can travel to, one-stop, is growing all the time. And not only the well-worn and highly travelled routes are feasible - London to Sydney; New York to Mumbai; Tokyo to Sao Paolo; but all other kinds of weird and wonderful city-pairs become possible that individually may not attract large traffic flows, but across such a vast network, add up to significant numbers travelling the Emirates network.

May I remind you, once again, of that old article from 3/4 years ago that I posted months back, focusing on a random flight from Glasgow to Dubai, and for which passengers were transferring onwards to an additional 39 other Emirates destinations beyond Dubai. There is only one of the US3 with a year-round presence at Glasgow - United, to EWR - I wonder how many destinations a typical GLA-EWR service handles? Can you get to see the world from Glasgow with United? No - just parts of the Americas. But for everywhere else, with the exception of Europe, you're going to start looking East.

ok, this one is easy.
DL and UA can support this route because of:
a) FlyAmerica Act - when most of your traffic is forced to fly your national colours - and there are two options - you can almost call it a route subsidy :p
b) UA/DL's traffic rarely terminates in DXB. They do in fact transit there, mostly to FlyDubai, but some to other airlines - to go to work to places where US Govt and private corporations have lots of contractors out and about - Iraq/Afghanistan/etc, etc...



By his own accounts, the OP is a millionaire and has invested millions in the airline industry, and apparently has made even more millions ROI, so only question left to ask, is, why hasnt the OP started his own airline??

Having the government sell you something (capital, in this case), on terms far below what the private market is willing to offer, is pretty much the definition of a subsidy. If jet fuel went back to $3/gallon, but the UAE decided to buy it on the open market, and then resell it to EK at $1.70/gal, that would be a subsidy, just as the AWA bailout was.

Oh great! A poll :)

Let me guess....

Yes = 2
No = 287