Is the Emirates flight from Milan (MXP) to JFK (soon to be upgraded to an A380) illegal? According to US carriers, it might just be.
Have you read through the 55 page white paper that Delta, American, and United have put together in order to make their case against the Middle East carriers? I’m still going through the entire document but here’s one interesting tidbit – the US carriers are claiming that the Emirates is not exercising fifth freedom rights on the route above, but instead seventh freedom rights. Seventh freedom rights given an airline the ability to carry passengers between foreign countries without stopping in the carrier’s home country. The report claims that Emirates has only “an incidental connection to the UAE ” and that the real purpose of the flight is to use their growing fleet to carry traffic between Italy and the US. That arrangement would violate the Open Skies agreement. What do you think after reading the below?
And They (ME Carriers) Are Beginning to Target Trans-Atlantic Routes Between the United States and Europe: Moreover, while the Gulf carriers have primarily focused on direct flights between the United States and their respective hubs, in October 2013, Emirates launched a “fifth freedom” route between Milan and New York, and the airline is considering similar routes between the United States and other cities in Europe and Asia.
These types of services are particularly harmful to U.S. carriers. Although they do little to further the Gulf governments’ economic development strategies – that is, flowing traffic over their hubs – they provide a means for the Gulf carriers to opportunistically plunder trans-Atlantic and trans-Pacific routes that are vital drivers for U.S. carriers’ profitability. And because many of these routes are mature, growing very slowly, and already served by multiple U.S. and foreign carriers, the introduction of the new capacity will necessarily displace incumbent operators.
Emirates’ Route Between New York and Milan Underscores the Threat that the Gulf Carriers Pose on Trans-Atlantic and Trans-Pacific Routes: Emirates’ service between New York and Milan is a case in point. On October 1, 2013, Emirates launched a daily non-stop service from New York’s JFK airport to Milan. Prior to this entry, American, Delta, United (from Newark), and Alitalia offered daily non-stop service for this route. While total average daily bookings for the route increased after Emirates’ entry as U.S. carriers attempted to defend their share, U.S. carriers have lost 13 points of market share directly to Emirates. Emirates Entry Will Likely Force One or More U.S. Carriers to Exit the Route: In addition, the excess capacity on the route has driven U.S. carriers’ margins to a level that is well below the industry cost of capital. The inability of U.S. carriers to cover their cost of capital on the route is unsustainable in the long run and will eventually force one or more U.S. carriers to exit the route. And as the Gulf carriers introduce similar services on other Trans-Atlantic and Trans-Pacific routes, the problem will continue to recur.
Emirates’ service between New York and Milan, for example, is purely opportunistic, since the carrier was already offering two daily non-stop services between Dubai and New York City before it launched the Milan-New York City service. The route does nothing to further the government of Dubai’s strategy of flowing traffic through Dubai; it is purely about finding opportunistic uses for an ever-expanding fleet. And if those uses undermine the profitability of U.S. and EU carriers in their home markets, so much the better. These services, which have only an incidental connection to the UAE and Qatar, are targeted at capturing seventh freedom traffic. Seventh freedom passenger services are not provided for under the U.S.-UAE and U.S.-Qatar Open Skies agreements.