Transport Airlines

Emirates’ Expansion Slowed by Foreign Airlines Lobbying Their Governments

May 10, 2014 4:00 pm

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These defensive moves by older carriers will work in short term, but will do little in the medium to long term, as these giant airline have big enough budgets to start going direct to consumers to make their case.

— Dennis Schaal

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Emirates

Competition is getting more intense from Emirates, which notes that foreign carriers are lobbying their governments to blunt Emirates' gains. Pictured, a woman enjoys Emirates business class service. Emirates


Emirates, the No. 1 airline by international traffic, said its drive to add new routes using the world’s biggest fleet of wide-body jets is being frustrated as foreign carriers lobby governments to limit market access.

The Dubai-based carrier, which today reported its 26th straight annual profit, is also seeing average fares come under pressure as rivals seek to counter its expansion, Chairman Sheikh Ahmed Bin Saeed Al Maktoum said at a press conference.

“Our industry has always been competitive and that competition is getting more intense,” Sheikh Ahmed said today. “Our yields are under pressure, our competitors challenge us every day and lobby their government to restrict us.”

State-owned Emirates has remained outside the world’s three global airline alliances as it focuses on building Dubai into an intercontinental super-hub. The strategy, made possible by the Gulf’s location at a natural crossroads between Europe and the Americas and Asia-Pacific, Middle East and Africa, is quickly winning traffic from established hubs and airlines.

An Emirates route from Milan to New York’s John F. Kennedy airport introduced in October using so-called fifth freedom rights faces a challenge in the Italian courts, while the Gulf carrier’s access to Germany under a bilateral accord signed by the United Arab Emirates government has also been limited.

Suspended

Emirates will stick with the Milan-New York route as it seeks to overturn a decision that would halt an operation that’s already profitable, the chairman said.

The suit was filed by Rome-based Assaereo, which represents Italian carriers including Alitalia SpA, with the ruling in April by the Lazio Regional Administrative Court later suspended by the Council of State pending consideration by higher courts.

“We’ll continue service,” the chairman said at the Dubai earnings briefing. “There is a ruling for us yesterday to continue until the big hearing in six months.”

The Boeing Co. 777-300ER service leaves Dubai at 9:05 a.m. local time, touching down in Italy at 1:50 p.m. and departing at 4 p.m. to arrive in the U.S. at 7 p.m. the same day. The return trip operates overnight.

Emirates boosted net income across the group 32 percent to 4.1 billion dirhams in the 12 months ended March 31 as it boosted passenger numbers 13 percent to 44.5 million.

Earnings at the main airline arm, which offered nine new destinations including Boston and Taipei, rose 43 percent “despite a tough market,” Sheikh Ahmed said.

The group invested a record 22 billion dirhams during the year, largely on aircraft, he said. Some 24 new planes arrived, including 16 Airbus Group NV A380 superjumbos and eight 777s, taking the total to 217, while orders were placed for 50 A380s and 150 upgraded 777s at the Dubai Air Show.

“We just have to stay ahead of the competition,” the chairman said. “ That’s why we’re investing so much of our profits back into the business.”

To contact the reporter on this story: Deena Kamel Yousef in Dubai at dhussein1@bloomberg.net To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Christopher Jasper

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