You've still to quote your sources. So I can only assume that the "few dozen experts" you mention are those that not only have an axe to grind, but are wielding those axes via the "Fair Skies" initiatve, their reasons for doing so baffling at least one group of independent aviation analysists.

If someone like Willie Walsh was sure that business models used by Emirates and Qatar Airways were so unsound, why has he long been an admirer? Why did he court Emirates for oneworld, and eventually end up sponsoring Qatar into the alliance?

And you needn't tell me that Qatar now owns 10% of IAG - yes, I know. But IAG's admiration for Qatar long precedes that transaction, and precedes QR's entry into the alliance.

Why would IAG so publicly support an airline which can't make money?

Again, you confuse two things.

The business model of flying people from A to B incl. a stopover in the middle of nowhere to benefit from their spending locally is completely different from making money flying people around the world.

There is absolutely no doubt that EK is on steriods, received huge Government subsidies and lost substantial amounts of money operating aircraft.

There is also no doubt that Dubai faced a cash shortage and had to be saved by a rich neighbor some years ago.

However, it is too early to tell whether the whole Dubai Inc. business model will work out.

After we consider all things, there has to be an economic surplus for Dubai Inc. , in other words, all the losses combined from running an airline, an airport, ATC etc. should be lower than the total economic benefit resulting from all those activities.

If this is the case, I applaud the people in charge for coming up with a construct that is comparable to the 'Dutch Aviation Complex' or airports in Dortmund or Munich, which are cross-subsidized due to the application of the same basic principles.

Discussing the motivation and underlying reasons to comment on other airlines, alliance partners etc. would derail this thread completely and with all due respect, the Magic 44 have their hands full finding anyone supporting the clean sheet of the ME3.

Speaking of WW, I am more than happy to read his comments about EK being clean, that they never received any subsidies and make money from flying aircraft. ;)

And I would actually pay a lot of money to listen to WW explaining how a low cost airline can make money with loads in the low 60's in the 21st century.

Irishguy, do you have any idea?

NO YOU DIDN'T..... You keep saying this, but you haven't quoted anybody (other than yourself and your "aviation degree").

According to the linked reports...

1993 - 66.9%
1994 - 69.9%
1995 - 68.1%
1996 - 70.2%
1997 - 71.1%

Not once do I see a LF in the 50s or in the low 60s. I'd hardly call yourself an expert if you're basing assumptions off of incorrect data, that you could have easily sourced from the public domain.

The basis of what I've got from the above is that according to yourself, an 'expert', it's simply impossible that an airline is capable of flying a fleet of A380s on ultra long-haul flights, without any form of government subsidy, and that for this reason, others haven't adopted it.

So, on this basis, I have to wonder why we aren't bringing airlines like CX and SQ into this discussion forum. Both airlines employ the exact same business model that EK does. Both of these airlines are profitable, making multi-million dollar profits, much like EK.

It's been argued time and time again by yourself, and the other 'expert', that the yields simply don't exist, because of the low yielding traffic that Emirates flies. Both CX and SQ operate in an environment where the only domestic feed for traffic is from their homeport, and thus heavily rely on the 6th and 7th freedom traffic like Emirates does. Is the argument against this, that the O&D flows from SIN and HKG are stronger than DXB? Then how come there's only ~88 airlines operating into HKG, ~71 into SIN versus, ~109 airlines operating at DXB? Surely, there must be enough of a demand from DXB to stimulate yields that attracts foreign airlines into DXB. Just look at AC; during the landing-rights dispute several years ago, they claimed there wasn't the O&D demand to justify flights to Canada on their own metal. Now look, they're starting DXB this year!

On the topic of connecting traffic, just look at the countries that surround HKG and SIN. CX and SQ are capturing a significant portion of traffic from countries like the Philippines, Thailand, Malaysia, Indonesia, Vietnam... These countries don't exactly have GDPs of Western countries quite yet. So, why would we assume that these countries are producing high-yielding customers? Most probably, CX and SQ are catching similar 'low-yielding' traffic like EK does from it's major catchment areas. As aforementioned, both of these airlines have profitable operations, and link North America to their respective hubs using the exact same business model that EK uses, connecting low-yielding traffic via their hub, and taking advantage of their lower operational costs to do so.

I have a rule-of-thumb that has served me well in life.

Anybody who refers to themselves as an expert, generally isn't :)

The crux of the arguments against EK being able to run profitably is that no EU or US airline can do it. But they do not have the same advantages that both EK and EY and QR enjoy. I do wonder what the airline would have looked like if you had a US3 mentality to running the airline in Dubai. No chauffeur service, small lounges, small aircraft flying multiple frequencies between cities (20 flights to LHR on B757 or A321)? But the profits would have been staggering though...

Not once did I talk about the 1990's, but mentioned a time frame from 2005-2010. ;)

So you might come across a BELF of 59.9% eventually.... @:-)@:-)@:-)

The airline business is very simple:

RASM>CASM

As long as you stick to the laws, nobody really cares whether you make profits on CASM of 4 cents or 10 cents.

Based on all kinds of data, people are aware of the potential of routes, hence many many route pairs are disregarded per se. Others are tested, others are operated despite heavy losses (i.e. in Europe, Brussels is difficult for many airlines)

Hence, it is not surprising that we see many competitors on proven routes...and it is also not surprising that we do not see too many competitors trying to copy the ME3 business model. ;)

In reply to 1414:
I don't think Worldcom's fraud was much to do with covering operating losses - it was done to prop up the stock price as the CEO's stock holding was collateral for private business interests. Comparisons with Enron and Parmalat I think would be more accurate with regards to loss concealment.

The thing is though, those three frauds caused major damage to owners - shareholders were left holding losses. In the case of EK, if the accusation is of sustained fraud for over 10-20 years for EK, once again - what would be the point, if the (historical) accounts were only there for the owner? Is the accusation that management is trying to defraud the owners? It seems like a lot of effort to engage in a massive conspiracy to defraud them...who exactly, were EK trying to lie to then? Regulators in the EU may be an answer for the last 5 years or so in order to preserve market access, but 20 years ago? Is the accusation that management and Sheikh Ahmed were trying to siphon money out of the government for their own personal gain using losses at EK? But then EK should have been publishing losses that the owner could then fund (and they could siphon). There are no other shareholders here to pick up the pieces when the whole sham collapses.

And the other question, 1426 - how does EK find the money to finance this scheme of loss concealment: it has international creditors who must be paid constantly. The government certainly doesn't seem to have the money to do so consistently. Unless the allegation is that the entire Emirate of Dubai has been engaging in false accounting for years and years? But then again...what's the point? The truth seems much cheaper to report on than constructing an elaborate charade with questionable benefits.

—

In reply to 1418 and 1420:
I think it is helpful to extract the information referred to. From EKs published reports (profit/revenue, margin, pax load factor, cargo): http://www.theemiratesgroup.com/engl...al-report.aspx
1993: 11M AED/1827AED, 0.60%, 66.9%, 64M kg
1994: 90M/2204M, 4.08%, 69.9% 87M kg
1995: 95M/2507M, 3.79%, 681.%, 108M kg
1996: 81M/2805M, 2.89%, 70.2%, 130M kg
1997: 112M/3292M, 3.40%, 71.1%, 160M kg

Now, from the 2001-2 annual report, EK published breakeven load factors as well for the 5 years prior, as well as pax and overall load factor:

1998: 262M/4089M, 6.41%, 70.0%, 200M kg, overall load: 69.3%, breakeven LF: 63.9%
1999: 312M/4443M, 7.02%, 74.5%, 212M kg, 69.4%, BELF: 64.7%
2000: 300M/5113M, 5.87%, 71.9%, 269M kg, 68.3%, BELF: 64.5%
2001: 421M/6417M, 6.60%, 75.1%, 335M kg, 69.5%, BELF: 65.5%
2002: 468M/7274M, 6.43%, 74.3%, 400M kg, 68.3%, BELF: 65.1%
2003: 906M/9607M, 9.43%, 76.6%, 525M kg, 70.0%, BELF: 64.5%

Now as the Emirates aircraft acquisition programme carries on, we can see the effects on revenue and costs: margins are sustained, but on top of a bigger revenue stream.

2004: 1576M/13286M, 11.86%, 73.4%, 660M kg, 64.9%, BELF: 59.0%
2005: 2340M/18113M, 12.92%, 74.6%, 838M kg, 65.1%, BELF: 58.2%
2006: 2475M/23066M, 10.73%, 75.9%, 1019M kg, 65.8%, BELF: 60.3%
2007: 3096M/29840M, 10.37%, 76.2%, 1156M kg, 65.1%, BELF: 59.9%
2008: 5020M/39467M, 12.72%, 79.8%, 1282M kg, 66.8%, BELF: 62.7%
2009: 981M/44189M, 2.22%, 75.8%, 1408M kg, 65.1%, BELF: 63.9%

Let’s pause a minute here to note a few things. There was a massive hit to profits here: one can say that is down to the fuel hedge losses. However, you can see that if they retained profits for the years before on the balance sheet, there would be enough to cover a 2-3 billion USD cash hit, or at least be able to find financing to fund an immediate cash call, given their historical financial performance.

Underlying performance indicators of yield and unit cost are still relatively healthy: 63.9% BELF. Unit costs in fils per ATKM rose from 2006: 129 to 2009: 164 - so underlying unit costs (re: fuel) are clearly factored in. Let’s also note that 2008 is the year that EK first started to receive A380s. Thus we should expect in the next few years, for unit cost to go up and breakeven load factor correspondingly. Let us see what happens:

2010: 3538M/43455M, 8.33%, 78.1%, 1580M kg, 66.8%, BELF: 64.4%
2011: 5373M/53098M, 10.12%, 80.0%, 1767M kg, 68.9%, BELF: 65.0%
2012: 1502M/61508M, 2.44%, 80.0%, 1796M kg, 66.7%, BELF: 65.9%
2013: 2283M/71159M, 3.20% 79.7%, 2086M kg, 67.5%, BELF: 66.9%
2014: 3300M/80717M, 4.09%, 79.4%, 2250M kg, 66.5%, BELF: 64.9%

As we can see, far be it from these A380s contributing to stunning profitability, they are expensive, pushing up the costs and breakevens - but EK’s efforts on marketing and sales are pushing up yields by just enough to eke out 2.44% in 2012. I am inclined to agree with a previous poster (FLLDL on page 20 in post 291) who said that the years of easy growth are over: now it is going to be hard to sustain the margins if they have an unforeseen setback, either macroeconomic or political. We can see this reflected in the low margins in recent years compared to back when they started. One can possibly attribute this to the A380 and the capacity wars in the Middle East. Far be it from any “apologists” in this thread saying there’s an infinite pool of pax and everyone is making lots of money: the statistics show that there clearly isn’t much money to be made and the capacity increases with EY and QR and TK coming online, along with A380s everywhere, are really causing margin issues for EK. But they can still just about hold their heads above water. And that makes them not require cash injections to stay afloat.

Now, I dug up some airline reports from similar periods to see whether the insinuation that 60% breakeven load factor is anomalous and indicative of fraud/unbelievable operational performance, or par for the course for other airlines at the time. Breakeven load factor is determined by unit cost and yield. We know that unit costs are EK are generally low for both of these factors. The difficulty that some people have is in thinking that EK can actually achieve acceptable yields. Break-even load factor isn’t a magical number you can point to and say: look, it’s clearly unobtainable. There are plausible scenarios where low unit costs and acceptable yields are possible.

I found this though, trawling through a few historical reports, just to compare other network carriers for additional hard data (I won’t do every carrier for every year, just enough to give some sort of a snapshot - the data is of course publicly available if anyone wishes: just google!). I’ll look at late 90’s, early 2000s (2004 or so) and then post financial crisis: 2009 and 2013/14. UA actually releases Q1 2015/FY 2014 tomorrow.

CO (during the Gordon Bethune heyday - cited by the OP as someone who knows what he’s doing): from 1995-1997, in a similar format above:
http://www.airtimes.com/cgat/usa/con.../ar/co1997.pdf
http://ir.unitedcontinentalholdings....-reportsannual
1995: 215M USD/5825M USD, 3.69% net margin, Pax LF: 65.6%, BELF: 60.8%
1997: 383M/7213M, 5.31%, pax LF: 70.9%, BELF: 60.0%
2004: -363M/9744M, -3.73%, pax LF: 77.6%, unit cost per ASM: 9.65c including special items,, 9.49c excluding, revenue per ASM was 11.28c. The loss came from various technical adjustments, labelled “other”
2009 (after merging with UA) -146M/12586M, -1.16, pax LF: 81.4%
2013: 571M/38279M, 1.49%, pax LF: 83.6%, BELF - but note this includes special costs, such as integration costs around 90%. Clearly they have also been carrying cargo etc. around.

LH:
http://investor-relations.lufthansag...port/2014.html
1997: 924M DM/14983DM, 6.2% net margin, pax LF: 72.2%, Unit costs not disclosed for each operating segment, but we can safely say that it would be in the 60s, considering net margins and profitable cargo operations.
2004: Passenger operations: 265M EUR/11207M revenue, 2.36% margin, pax LF: 74%; Cargo operations: 34M/2469M, 1.37%, LF: 67%. We can again assume that BELF would be in the 60s again considering LH’s aviation businesses made profits
2009: -112M/22283M EUR, -0.50% margin. Signficant “other operating expenses” but the problem was a drop in top line revenue. pax LF was 77.9% and cargo at 60.3% with yields down as well. Still good profits in Technik and Swiss managed to help make it not a total disaster.
2014: 55M/30011M, 0.18% margin. I’ll be nice and include non traffic revenue too. Pax LF was 80.1% and cargo load was 69.9%, but the breakevens are up in the 80’s? Why? Costs.

SQ - now I like SQ’s reports as they are very transparent with breakevens down to the individual segments. It’s almost as if as the results start to get worse, companies stop highlighting things :D https://www.singaporeair.com/jsp/cms...nualreport.jsp
1997: 1035M SGD/7724M revenue, 13.4% net margin, pax LF: 70.5%, cargo load 68.9% BELF: 65.2%
2004: 849M/9762M, 8.7%, pax LF: 73.3%, pax BELF: 72.8%, cargo LF: 66.5%, cargo BELF: 62.7%, overall LF: 69.1%, overall BELF: 66.8%
2009: 1062M/15996M, 6.64%, pax LF: 76.5%, pax BELF: 73.6%, cargo LF: 59.4%, cargo BELF: 65.2%, overall LF: 66.3%,, BELF: 65.1%
2014: 360M/15244M, 2.36%, pax LF: 78.9%, pax BELF: 82.0%, SilkAir: LF 69.6%, BELF: 71.5%, cargo LF: 62.5%, cargo BELF: 67.0%, overall LF: 68.9%, overall BELF: 71.6%. Thank god for profits in engineering and aircraft sales!

So - back to where we were before the data mining. We are trying to debunk the insinuation that breakeven load factors for EK are either artificially low, or no other airline can work to the same performance metrics as EK and therefore EK must be therefore lying in their accounts.

I don’t really think the data backs up that conclusion. EK was slow to ramp up in the early 90s with margins in the 3-5%. They managed to hold onto their cost base and increase margins with the additions of new aircraft, then in the boom years of 2003-2008, they managed to grow when other carriers had problems - but not anomalously so, because SQ, a carrier with a similar business model serving regions of the world with better economic growth than the US and EU, also had fat margins between 1997 and 2004. After the financial criss, everyone in the industry is having problem, with margins shrinking to the 2-3% you see today. Let us not forget that the A380 only entered into service in 2008 for EK, and that is when we correspondingly see increases in breakeven load factor, mirrored by other airlines.

To reply to the point in 1437 - the hub cost should not be borne by airlines, they are borne by local developers or governments. To indict EK for being in a jurisdiction where the government wants to promote aviation is unfair. I illustrate again an example such as BA whose 4.5 billion GBP terminal should be on IAG books, if that logic is to be followed. The discussion about the report by the US3 has occurred on this thread as well - once again in 1437 there is an inaccurate and possibly deliberate conflation of EK with the ME3 - as we all know they are different entities. This was picked up in the reports by the US3, who have lots of compelling evidence about EY and QR, but none about EK which doesn’t have other plausible explanations. In 1438, a point is made about sources. If they are publicly available via Google, then there should be no problem sourcing it with a link.

In 1439 - the insinuation is that armchair amateurs in this thread have no access to real information - that is not the issue here. We are using publicly viewable information to construct possible scenarios where profitability could occur. What is this hard data, such as historical performance data: does it itemise the revenue and individual fares for each flight by every carrier, or is it projections? Some methodology would go well into satisfying curious readers.

In 1440: EK’s utilisation is high compared to many carriers: one of the world’s highest. Links can be provided to this analysis, or a quick google will suffice, as you advised in 1438. Here is one, but I appreciate you may find it amateur. It does though, have thorough methodology behind it. http://www.airliners.net/aviation-fo...d.main/4939112

In 1442: you state that a poster is confused. I think there are also some confusions in your post. For instance:
Clearly there is some doubt, hence this thread and other analyses. Where is the evidence - disbelief because operators you admire cannot do it is not evidence.

As I replied in page 84, post 1256 http://www.flyertalk.com/forum/emirates-skywards/1627541-emirates-financial-scam-84.html, Dubai itself didn’t run out of money, Nakheel, a real estate developer did. The choice was to bail it out or face sovereign downgrades as money was lent to it on quasi-sovereign terms. It has nothing to do with EK - or are you saying that Dubai spent 59 billion USD on Emirates (where did it get that?!) so when it came down to it, the government didn’t have enough cash to satisfy creditors?

Also in 1442 you state:
Here are the comments in question: http://www.arabianbusiness.com/no-evidence-gulf-carriers-get-artificial-support-says-willie-walsh-564516.html#.VTjVh86r-Vg

As to how a low cost airline can make money with loads in the low 60’s in the 21st century: I agree, you can’t do it at loads in the low 60’s. It’s a good thing that EK has loads in the 79-81% range, and keeps a lid on its unit costs, aka staff costs and operates a very fuel efficient fleet. Although SQ is quite close to the 60’s LF range and they just about survive. Must be something about those low costs and connectivity.
—

So - to recap
- Insinuations that EK having breakeven load factors in the 60’s historically doesn’t mean we can conclude that that is way outside the norm: as other profitable and public enterprises have done the same thing.
- EKs strategy and A380 deliveries have impacted breakeven load factor in the way they that is expected: it goes up.
- They have made enough money in previous years to either have cash on hand to satisfy fuel hedges, or to be credit-worthy enough to obtain financing for that
- Other airlines have followed the same profit margin trajectories as EK - low, then high, then after the financial crisis, low again. Some markets have bigger problems than others.
- No new wheel re-invention, just the margin for error in getting the strategy, yield or loads wrong is going to tip EK into losses.

We are still waiting for these hordes of insider “experts” to be named or their methodology shown with verifiable information. If they are so confident in their conclusions, why not share to put all of the amateurs out of their misery? It would also be useful to know their cultural and business background, because I suspect if they are all going to come from the same places and countries and companies, they might suffer from a bit of an echo chamber or groupthink effect leading to a sort of narrow-mindedness that doesn’t allow them to accept that there may be other ways of doing business in the world now and that the old models are dead. The margins in 2014 certainly support that thesis: 2-5% is the norm, 10%, from the likes of US markets or TATL JV anti-trust immune participants, are the result of distortions, not the other way around.

What low-cost airline are you talking about there? And what relevance does this have to the topic?

In 2010/11 the average load factor was 80%

In the last half-year results, released last November, the load factor was 81.5%.

So, rather than talk about these spurious load factors, why not provide sources for your outlandish claims?

It might also help your standing if you engaged with the mounting questions that are being asked of you in an intellectual way.

To be scrupulously fair to FD1971, he was referring to break-even load factor, rather than passenger or cargo load factors individually. Of course, it is still possible for a company to be profitable even though pax load factors are lower than the synthetic break-even number, or to lose money even though pax loads are higher (although the latter is harder, of course!). For instance, for some of the LH and SQ results above, for some years, passenger and logistics performance was loss-making, and they were only saved by delayed depreciation and amortisation and other equity investments (e.g. LH) or in the case of SQ, technical operations.

Some of the reports, e.g. for CO, didn't report a specific breakeven load factor for passenger or cargo operations specifically, or even for total operations - and indeed, had 4 separate CASM calculations - including or excluding various "special provisions" or "third-party related costs". I find that to be even more obfuscatory than allegations that EK are not entirely transparent...

And they exceeded the break-even factor by a clear 20%, based on his uncited figures.

If these figures are false, what does it matter? The actual load factors are considerably higher...

Indeed - if one simply believes that everything EK says is a lie, then what is the point of even trying to continue discussion, unless you take a sort of perverse pleasure in questions being asked about your position and then not engaging with them...in order to somehow reinforce your position.

And even if historically, there are no corroborating statistics from national agencies, aircraft manufacturers and fuel market participants, there are now statistics and data available, which support the figures being published by EK. Or is the insinuation that national statistics agencies, oil majors and manufacturers are also in on the alleged conspiracy in inflating passenger numbers and underreporting costs?!

Far be it from the OP's position that FD1971's argument is much more plausible (in post 1419), the number of people involved in a conspiracy of this size, from auditors to banks, to national statistics agencies, all with the sole purpose of inflating passenger numbers and revenue in the Emirates Group, and to transfer costs off-balance sheet - the simpler explanation is that they are literally doing what they are saying, as unbelievable to some as that sounds. The mass conspiracy angle is just not as plausible as the lean, miniscule profit operation angle.

Seems like no one on team "scam", is giving an answer to my questions:

1. Where is the money coming from?

2. What's in it for Dubai gov?