View Poll Results: Is Emirates A Financial Scam?
Yes
27
15.52%
No
106
60.92%
Dont care
35
20.11%
Undecided
6
3.45%
Voters: 174. You may not vote on this poll
Is Emirates a financial scam?
Dec 2, 2014, 7:43 am
#271
Join Date: Nov 2013
Posts: 5,454
That's a lot of calculations eternaltransit, but you forget the single most important part: Most people (at least here on FT) would not use EK miles to buy flights, but rather to upgrade existing bookings, as you get "more bang for the bucks (or better said miles)" that way..
Some programs are better for direct bookings (like M&M and imho most US based programs), some others (like EK) are better for upgrades imho.
Some programs are better for direct bookings (like M&M and imho most US based programs), some others (like EK) are better for upgrades imho.
But yes, I think you'd be mad to do a straight redemption on a long haul route with EK. I can just about justify it on say, BKK-HKG, but I'd have to really think about it if I had to pay 1500USD in charges, considering the actual fare!
Dec 2, 2014, 7:53 am
#272
Join Date: Nov 2013
Posts: 5,454
@eternaltransit good points raised there. Must not forget that EK sell award inventory to their partners, invoicing them at a rate that we don't know, but it's safe to assume their bases are covered.
EK also treat their markets differently. AU/NZ have different earn/burn levels (I believe Dave Noble ran some numbers a long while ago, and shown that the earn/burn rates are roughly the same) and redemptions ex-US attract steep carrier-imposed fees.
The point I'm trying to make here is that their FF strategy is segmented per regional market which further suggests a well thought out scheme -though not without its loopholes
that seeks to maximise revenue at every opportunity. So to the outsider award availability might look as being too generous, but in reality it's not.
EK also treat their markets differently. AU/NZ have different earn/burn levels (I believe Dave Noble ran some numbers a long while ago, and shown that the earn/burn rates are roughly the same) and redemptions ex-US attract steep carrier-imposed fees.
The point I'm trying to make here is that their FF strategy is segmented per regional market which further suggests a well thought out scheme -though not without its loopholes
that seeks to maximise revenue at every opportunity. So to the outsider award availability might look as being too generous, but in reality it's not.This then feeds into the idea that EK doesn't want or need to compete on the strength of the loyalty programme (as opposed to many carriers around the world, but especially legacy US carriers), but instead competes on things like price, schedule, connectivity and product - both hard/soft and airframe type! Therefore the point in post 12 about alliances driving travel habits, combined with load factor data, either leads one to conclude that the pax travelling on EK originating in the US don't care that much about loyalty programmes (I know, anathema to flyertalkers!) and prefer the combination of hard and soft product or onward connectivity, or that the traffic doesn't originate mainly in the US. I tend to think it is a combination of both.
Dec 2, 2014, 8:23 am
#273
Join Date: Nov 2007
Location: KYE
Posts: 4,156
To further wash down that argument about the abundance of award seats, here's my take. The dollar revenue from FF seats that are considered by some as 'free seats... an indicator that they must NOT be selling enough paid fares' is guaranteed and here's how:
<Basic assumptions: EK rely on scarce revenue from the US market to fund their suspicious long and thin route-operations, this is the upper limit as per the OP's views. EK sell heavily discounted Y and F fares because no one wants to go to DXB, so the values shown here are at the lower end of yields. Clients travel to DEL, like once a month. Clients redeem their miles solely in the same cabin they flew in to accumulate them because of the controversial pay gap in the US -no upgrades. Clients only book saver Y/F fares and are lucky, since these are empty planes, to score the lowest same fare each and every time. There's abundance of saver redemption seats since these planes are flying empty. They also like to fly to DEL the long way via DXB because they're very price sensitive -even in F. Since they fly this frequently they quickly reach the balance required for an award - so no questions like 'Got 16k expiring from a trip taken 2 years ago, gone to waste?' because everyone shuttles between LAX and DEL like they do between SFO-LAX>
1- EK sell Skywards miles at 4cpm. This is among the highest in the industry. And unlike the US programs, they run no promotions/bonus buy offers. (how many here bought/transferred EK miles at a steep rate to get an award/upgrade? My gut feeling tells me those who didn't are very few)
2- EK award miles at a measly rate. LAX-DEL return in Y only gets 8k-16k miles for a 20k mile trip, or about 0.4-0.8 Skywards mile per actual mile flown. In F that's 32k-40k, or 1.6-2 mile per flown mile. In terms of dollars per miles earnt, assume saver fares at for Y/F 800/8000USD -> 0.1cpm/0.25cpm.
3- EK buy back miles at a ridiculous rate by imposing steep fees on redemptions: A Y saver return for LAX-DEL costs 85k plus about 700 dollars in fees. A F saver costs 255k plus 1.5kUSD in fees.
4- Ratios: It takes ~9 return trips in Y to get enough mileage for a redemption (tier bonus included) or a spending of 7.2kUSD. For F, it takes ~6 return trips or a spending of 48kUSD.
5- Net effect: Exchanging 85k miles that cost 7.2kUSD to accumulate (and forgoing additional 8k earn potential) to save 100 dollars off a paid fare, that's 0.1cpm! In F, it's 255k that cost 48kUSD to save 6.5kUSD off a paid fare, that's 2.2cpm. A client can buy up to 25k miles at the prohibitive rate of 4cpm as per pt.1 to redeem on an award that gives a 2.2cpm in the best case scenario, hardly a bargain.
So in effect EK STILL generate enough revenue from FF to under these highly skewed assumptions that envelope both extremes. Given that if any of the assumptions are relaxed, the net effect works to the benefit of EK revenue, it is therefore safe to assume that in the real world EK will generate enough revenue from FF to make the observation about FF seat abundance an expected phenomenon rather than an exception.
I know my argument is over the place, it's past 2AM here and have had too many coffees yesterday. Others feel free to correct my limited but very specific scenario.
<Basic assumptions: EK rely on scarce revenue from the US market to fund their suspicious long and thin route-operations, this is the upper limit as per the OP's views. EK sell heavily discounted Y and F fares because no one wants to go to DXB, so the values shown here are at the lower end of yields. Clients travel to DEL, like once a month. Clients redeem their miles solely in the same cabin they flew in to accumulate them because of the controversial pay gap in the US -no upgrades. Clients only book saver Y/F fares and are lucky, since these are empty planes, to score the lowest same fare each and every time. There's abundance of saver redemption seats since these planes are flying empty. They also like to fly to DEL the long way via DXB because they're very price sensitive -even in F. Since they fly this frequently they quickly reach the balance required for an award - so no questions like 'Got 16k expiring from a trip taken 2 years ago, gone to waste?' because everyone shuttles between LAX and DEL like they do between SFO-LAX>
1- EK sell Skywards miles at 4cpm. This is among the highest in the industry. And unlike the US programs, they run no promotions/bonus buy offers. (how many here bought/transferred EK miles at a steep rate to get an award/upgrade? My gut feeling tells me those who didn't are very few)
2- EK award miles at a measly rate. LAX-DEL return in Y only gets 8k-16k miles for a 20k mile trip, or about 0.4-0.8 Skywards mile per actual mile flown. In F that's 32k-40k, or 1.6-2 mile per flown mile. In terms of dollars per miles earnt, assume saver fares at for Y/F 800/8000USD -> 0.1cpm/0.25cpm.
3- EK buy back miles at a ridiculous rate by imposing steep fees on redemptions: A Y saver return for LAX-DEL costs 85k plus about 700 dollars in fees. A F saver costs 255k plus 1.5kUSD in fees.
4- Ratios: It takes ~9 return trips in Y to get enough mileage for a redemption (tier bonus included) or a spending of 7.2kUSD. For F, it takes ~6 return trips or a spending of 48kUSD.
5- Net effect: Exchanging 85k miles that cost 7.2kUSD to accumulate (and forgoing additional 8k earn potential) to save 100 dollars off a paid fare, that's 0.1cpm! In F, it's 255k that cost 48kUSD to save 6.5kUSD off a paid fare, that's 2.2cpm. A client can buy up to 25k miles at the prohibitive rate of 4cpm as per pt.1 to redeem on an award that gives a 2.2cpm in the best case scenario, hardly a bargain.
So in effect EK STILL generate enough revenue from FF to under these highly skewed assumptions that envelope both extremes. Given that if any of the assumptions are relaxed, the net effect works to the benefit of EK revenue, it is therefore safe to assume that in the real world EK will generate enough revenue from FF to make the observation about FF seat abundance an expected phenomenon rather than an exception.
I know my argument is over the place, it's past 2AM here and have had too many coffees yesterday. Others feel free to correct my limited but very specific scenario.
Last edited by edy4eva; Dec 2, 2014 at 8:37 am
Dec 2, 2014, 8:55 am
#274
Join Date: Nov 2013
Posts: 5,454
To further wash down that argument about the abundance of award seats, here's my take. The dollar revenue from FF seats that are considered by some as 'free seats... an indicator that they must NOT be selling enough paid fares' is guaranteed and here's how:
<Basic assumptions: EK rely on scarce revenue from the US market to fund their suspicious long and thin route-operations, this is the upper limit as per the OP's views. EK sell heavily discounted Y and F fares because no one wants to go to DXB, so the values shown here are at the lower end of yields. Clients travel to DEL, like once a month. Clients redeem their miles solely in the same cabin they flew in to accumulate them because of the controversial pay gap in the US -no upgrades. Clients only book saver Y/F fares and are lucky, since these are empty planes, to score the lowest same fare each and every time. There's abundance of saver redemption seats since these planes are flying empty. They also like to fly to DEL the long way via DXB because they're very price sensitive -even in F. Since they fly this frequently they quickly reach the balance required for an award - so no questions like 'Got 16k expiring from a trip taken 2 years ago, gone to waste?' because everyone shuttles between LAX and DEL like they do between SFO-LAX>
1- EK sell Skywards miles at 4cpm. This is among the highest in the industry. And unlike the US programs, they run no promotions/bonus buy offers. (how many here bought/transferred EK miles at a steep rate to get an award/upgrade? My gut feeling tells me those who didn't are very few)
2- EK award miles at a measly rate. LAX-DEL return in Y only gets 8k-16k miles for a 20k mile trip, or about 0.4-0.8 Skywards mile per actual mile flown. In F that's 32k-40k, or 1.6-2 mile per flown mile. In terms of dollars per miles earnt, assume saver fares at for Y/F 800/8000USD -> 0.1cpm/0.25cpm.
3- EK buy back miles at a ridiculous rate by imposing steep fees on redemptions: A Y saver return for LAX-DEL costs 85k plus about 700 dollars in fees. A F saver costs 255k plus 1.5kUSD in fees.
4- Ratios: It takes ~9 return trips in Y to get enough mileage for a redemption (tier bonus included) or a spending of 7.2kUSD. For F, it takes ~6 return trips or a spending of 48kUSD.
5- Net effect: Exchanging 85k miles that cost 7.2kUSD to accumulate (and forgoing additional 8k earn potential) to save 100 dollars off a paid fare, that's 0.1cpm! In F, it's 255k that cost 48kUSD to save 6.5kUSD off a paid fare, that's 2.2cpm. A client can buy up to 25k miles at the prohibitive rate of 4cpm as per pt.1 to redeem on an award that gives a 2.2cpm in the best case scenario, hardly a bargain.
So in effect EK STILL generate enough revenue from FF to under these highly skewed assumptions that envelope both extremes. Given that if any of the assumptions are relaxed, the net effect works to the benefit of EK revenue, it is therefore safe to assume that in the real world EK will generate enough revenue from FF to make the observation about FF seat abundance an expected phenomenon rather than an exception.
I know my argument is over the place, it's past 2AM here and have had too many coffees yesterday. Others feel free to correct my limited but very specific scenario.
<Basic assumptions: EK rely on scarce revenue from the US market to fund their suspicious long and thin route-operations, this is the upper limit as per the OP's views. EK sell heavily discounted Y and F fares because no one wants to go to DXB, so the values shown here are at the lower end of yields. Clients travel to DEL, like once a month. Clients redeem their miles solely in the same cabin they flew in to accumulate them because of the controversial pay gap in the US -no upgrades. Clients only book saver Y/F fares and are lucky, since these are empty planes, to score the lowest same fare each and every time. There's abundance of saver redemption seats since these planes are flying empty. They also like to fly to DEL the long way via DXB because they're very price sensitive -even in F. Since they fly this frequently they quickly reach the balance required for an award - so no questions like 'Got 16k expiring from a trip taken 2 years ago, gone to waste?' because everyone shuttles between LAX and DEL like they do between SFO-LAX>
1- EK sell Skywards miles at 4cpm. This is among the highest in the industry. And unlike the US programs, they run no promotions/bonus buy offers. (how many here bought/transferred EK miles at a steep rate to get an award/upgrade? My gut feeling tells me those who didn't are very few)
2- EK award miles at a measly rate. LAX-DEL return in Y only gets 8k-16k miles for a 20k mile trip, or about 0.4-0.8 Skywards mile per actual mile flown. In F that's 32k-40k, or 1.6-2 mile per flown mile. In terms of dollars per miles earnt, assume saver fares at for Y/F 800/8000USD -> 0.1cpm/0.25cpm.
3- EK buy back miles at a ridiculous rate by imposing steep fees on redemptions: A Y saver return for LAX-DEL costs 85k plus about 700 dollars in fees. A F saver costs 255k plus 1.5kUSD in fees.
4- Ratios: It takes ~9 return trips in Y to get enough mileage for a redemption (tier bonus included) or a spending of 7.2kUSD. For F, it takes ~6 return trips or a spending of 48kUSD.
5- Net effect: Exchanging 85k miles that cost 7.2kUSD to accumulate (and forgoing additional 8k earn potential) to save 100 dollars off a paid fare, that's 0.1cpm! In F, it's 255k that cost 48kUSD to save 6.5kUSD off a paid fare, that's 2.2cpm. A client can buy up to 25k miles at the prohibitive rate of 4cpm as per pt.1 to redeem on an award that gives a 2.2cpm in the best case scenario, hardly a bargain.
So in effect EK STILL generate enough revenue from FF to under these highly skewed assumptions that envelope both extremes. Given that if any of the assumptions are relaxed, the net effect works to the benefit of EK revenue, it is therefore safe to assume that in the real world EK will generate enough revenue from FF to make the observation about FF seat abundance an expected phenomenon rather than an exception.
I know my argument is over the place, it's past 2AM here and have had too many coffees yesterday. Others feel free to correct my limited but very specific scenario.
Point 2 I think makes more sense in the context of your post if you say that EK are selling you miles at 4.57cpm for Y savers and at 20.8cpm for F savers - if you are Platinum. (17.5k rt saver in Y, 38.5k rt saver F, platinum).
To distill your point into a sentence: EK sell you miles at an expensive price - (at least 4cpm) and the maximum value you can get from them is only 2.2cpm. Hence, profits.
With regards to the business model around redemption - it is both profitable on a skywards programme basis (aka the profitability of sales and buybacks of miles) and on a per-sector operational cost model (aka redemptions cover the actual cash operating costs of the seat mileage in question).
Dec 2, 2014, 4:58 pm
#275
Join Date: Oct 2009
Posts: 281
Wow iahphx really does have his head in the clouds and not in the flying sense. As demonstrated before Ek can make money based on cargo and Y pax alone or heck probably even just Y pax. Therefore your so called evidence goes out the window. Not really evidence to begin with.
Dec 2, 2014, 8:38 pm
#276
Suspended
Join Date: Aug 2012
Location: New York
Programs: EK Plat, UA GS, Hyatt Diamond, SPG Platinum, Marriott Platinum, Amex Centurion
Posts: 514
So EK isn't making money?
http://www.businesstraveller.com/new...n-on-wine-prog
Sure, an airline that isn't making money will spend $500 million on a their new wine program.
( I know, he's probably going to say something about how this proves nothing )
http://www.businesstraveller.com/new...n-on-wine-prog
Sure, an airline that isn't making money will spend $500 million on a their new wine program.
( I know, he's probably going to say something about how this proves nothing )
Dec 3, 2014, 3:55 am
#277
Join Date: Nov 2013
Posts: 5,454
So EK isn't making money?
http://www.businesstraveller.com/new...n-on-wine-prog
Sure, an airline that isn't making money will spend $500 million on a their new wine program.
( I know, he's probably going to say something about how this proves nothing )
http://www.businesstraveller.com/new...n-on-wine-prog
Sure, an airline that isn't making money will spend $500 million on a their new wine program.
( I know, he's probably going to say something about how this proves nothing )
Dec 3, 2014, 5:32 am
#278
Join Date: Nov 2007
Location: KYE
Posts: 4,156
If anything, it just adds to the mountains of evidence saying it *is* a scam - what profitable airline in the world would waste money on something as useless as a wine investment program! Only an airline that didn't care about profits and was getting funded by its owners with no regard to losses would spend that kind of cash on a worthless vanity project!
By contrast AA in the 80s found out by cutting down on the olives, that it would save them tens of thousands of dollars a year. Fast forward 20 years and AA files for bankruptcy. If AA and their ingenuous austerity measures led them to this outcome within 2 decades, then EK must be insane to spend two 77W worth on rotten grape juice. EK will definitely belly up in 2 years before that wine even begins to mature.
<OP hat off>
Dec 4, 2014, 6:44 pm
#279
Join Date: Mar 2011
Posts: 723
With EK's order book of 85 A380s and 51 B777-300ERs, and 150 777-8/9xs, they have incredible fleet flexibility to adapt to changing market conditions. If EK wants to expand, current orders will expand the fleet, and older aircraft will be kept around. If EK doesn't want to expand, then current orders will be used to replace older aircraft. EK originally intended for all the 343s and 345s to be out of the fleet by 2014; evidently that has not occurred, they've realized that there's a surplus of demand in the market, and they've kept the aircraft around in order to expand to meet demand.
Dec 4, 2014, 9:41 pm
#280
Join Date: Jun 2012
Location: 30,000ft
Programs: EK, BA, EY, SQ, IHG, HH, SPG
Posts: 670
Is Emirates a financial scam?
Not to mention the fact that EK has been profitable virtually since it's inception. I don't think any financial scam had managed more than a few years before being discovered. Certainly not 25+ years! I love the OP's love letters to American carriers who go bust all the time and have very poor customer service. Really feels like a parallel universe he is describing!
Dec 4, 2014, 10:45 pm
#281
Join Date: Sep 2013
Programs: BAEC Gold, EK Skywards (enhanced Blue !), Oman Air Sindbad Gold
Posts: 6,399
Havoc10G - Hmm ..... I'm not sure I can agree.
I firmly believe that in recent decades US carriers have proven themselves to be respected models of profitability, innovation and quality in customer service ; in stark contrast to more newly-developed carriers - notably Emirates - in the Gulf & Asian region - which have clearly struggled to achieve any sort of foothold, reputation or indeed financial viability across global markets.
And I also believe the earth is flat.
(Which it is. Isn't it ....?? )
I firmly believe that in recent decades US carriers have proven themselves to be respected models of profitability, innovation and quality in customer service ; in stark contrast to more newly-developed carriers - notably Emirates - in the Gulf & Asian region - which have clearly struggled to achieve any sort of foothold, reputation or indeed financial viability across global markets.
And I also believe the earth is flat.
(Which it is. Isn't it ....?? )
Dec 5, 2014, 2:53 pm
#283
Join Date: Nov 2013
Posts: 5,454
Agreed - a drop in load factors to 60% would easily tip EK into the red: especially as they need cash flow to service aircraft finance debts. That's not inconceivable given the reactions to public health crises and possible economic problems in their major markets (not the US).
Dec 5, 2014, 6:40 pm
#284
Join Date: Mar 2011
Posts: 723
When the OP mentioned that EK would 'likely over-expand and run out of money', I was implying that EK's managerial staff would prevent any over expansion from occurring in the foreseeable future (and likely long-run); one example of preventing over expansion is the fleet flexibility EK has.
For the foreseeable future, there will be an increase in demand for air travel, and EK will match supply (in the form of capacity) to demand, to prevent any instances of over expansion and running out of money as put forth by the OP.
EK has a business model that has been successful at being resilient to factors that have decreased demand for air travel. Look at the Gulf War, Asian Economic Crisis, 9/11, ... EK has remained profitable throughout all these events. What I should have said was that given EK's ability to adapt to challenges, it's likely that EK will not 'over-expand' and 'run out of money' with the current (economic and industry) trends, however it is still possible should there be a very large negative event that provokes the airline/industry. Perhaps a very large-scale war, would be one way.
Dec 6, 2014, 7:20 am
#285
Ambassador: Emirates Airlines
Join Date: Sep 2004
Location: Manchester, UK
Posts: 18,618
Agreed - a drop in load factors to 60% would easily tip EK into the red: especially as they need cash flow to service aircraft finance debts. That's not inconceivable given the reactions to public health crises and possible economic problems in their major markets (not the US).