A Run for the Money

Emirates has been successful in Asia-Pacific markets, particularly where the home carrier is weak, and it has also benefited from the European Commission’s move to ban some Asian carriers due to safety concerns.

Travelers in countries subject to an EC ban often have no choice but to fly a foreign carrier to Europe .

The commission banned all Indonesian carriers in June 2007, although it did partially lifted that last year by allowing in Garuda Indonesia and a handful of other Indonesian carriers. Garuda responded in June this year by resuming services on the Jakarta-Amsterdam route, but it has a tough time competing against Emirates.

Garuda cannot provide nonstop services to Europe, as it is waiting to receive Boeing 777s; it operates Airbus A330s to Amsterdam with a stopover in Dubai .

Biman Bangladesh Airlines is another carrier that faces difficulty competing against Emirates. Its Dhaka- New York service has been suspended since 2007 because the FAA barred it from using McDonnell Douglas DC-10s.

The European Commission also banned Pakistan International Airlines (PIA) in 2007 from operating its Airbus A310s and Boeing 747s to Europe , only allowing its relatively new 777s.

The EC restrictions against PIA have since been lifted, but PIA has been unable to boost European services because its poor financial situation has hampered efforts to expand the fleet.

Shahid Abbasi, PIA chairman in 1997-99 and now CEO of Pakistan’s Airblue, says PIA’s capacity is 30% lower than it was in 2000.

Emirates has four daily services to Karachi , Pakistan , some using 777-300ERs, says Abbasi. The Middle East carrier has also been trying to get approval to operate Airbus A380s to Karachi , although the Pakistan civil aviation authority has blocked it, following pressure from PIA, he says. “Emirates had agreed to put in a new bay for handling the aircraft and to expand the taxiways,” he adds.

Emirates wants to increase services to Islamabad , Lahore and Peshawar , as well, says Abbasi, adding that these services are currently less than daily. “I think we should allow the sixth-freedom guys to operate freely. Neither we nor PIA has capacity to cater to the premium market, which clearly these guys do,” he says.

Pakastani carrier Airblue and PIA are more focused on point-to-point traffic and catering to price-conscious consumers, he says.

One fear within PIA and among other carriers, Abbasi says, is that Emirates will capture the Muslim traffic heading to Saudi Arabia . Emirates has a Dubai-Jeddah flight every 3-4 hr. and some operated with the A380, says Abbasi.

When he was chairman of PIA in the late 1990s, Abbasi says he met with Emirates President Tim Clark, who told him Emirates’ ambition was to have an hourly service to Jeddah, the Saudi Arabian gateway to Mecca .

If Emirates achieves that goal, it will have a huge impact on airlines throughout the world that rely on revenues from the Saudi market, says Abbasi.

Meanwhile, Emirates’ presence in the Australia - New Zealand market is drawing the ire of Air New Zealand (ANZ). The Middle East carrier operates widebodies between the two countries, using fifth-freedom rights granted under the New Zealand/United Arab Emirates air services agreement.

While ANZ has repeatedly asserted that this distorts the market, it is part of the New Zealand and Australian governments’ liberal open-skies policy, which has increased competition by foreign airlines.

ANZ says it is generally supportive of aviation liberalization, but it believes Emirates is abusing its rights by essentially dumping capacity on routes across the Tasman Sea . An oversupply of seats makes it difficult to operate profitably in this market, says ANZ.

The complaint gained new traction this year when Emirates began flying A380s on the Auckland-Sydney route, pumping more seats into the sector. The aircraft would be sitting idle otherwise, so Emirates has little to lose by making the relatively short trip to Auckland during its layover.

Regarding long-haul flights, ANZ argues that the intent of open-skies agreements is to increase passenger traffic between two countries. But in Emirates’ case, most passengers are not traveling to or from Dubai , but connecting to Europe and elsewhere. Both Qantas and ANZ also say that government ownership gives Emirates an unfair advantage.

North of Australia, Emirates also poses a challenge to Singapore Airlines.

“I know they really give Singapore Airlines a run for their money in Singapore ,” says Peter Hill, CEO of Oman Air and former CEO of Sri Lankan Airlines. “The advantage they have is the location of their hub, Dubai . They’ve made Dubai a superb transiting point, like Singapore Airlines did with Singapore Changi in the 1970s and ’80s,” he says.

Emirates is successful in Asia because it is “good at keeping prices competitive” and offers a quality product, says Hill. “Asian travelers like to see forward-thinking airlines, and Emirates sums up the modern thinking in airlines.”