Growth at Emirates Airline Shows Need for US Airways/AA Merger
Want proof? Consider Emirates' Airline's recent announcements that it will begin Milan-New York service in October and Dubai-Boston service in March, two more indications of Emirates' breathtaking growth.
The two new flights underscore flaws in U.S. aviation policy, or lack of it, and in particular flaws in the Justice Department's effort to halt the planned merger, which would create a third U.S. carrier able to compete not only with Delta (DAL - Get Report) and United (UAL - Get Report), but also with expanding international carriers.
The Dubai-based carrier will provide passengers at Boston Logan International Airport with another option to reach dozens of international destinations, a benefit for them. Its Milan-New York service will add a fifth option on a route that appears to have ample service. That may be good for somebody, but it is unclear who."Emirates is getting bigger and bigger," said Merrill Lynch analyst Mike Linenberg in an interview. "I look at the growth in China and I see the growth of Middle Eastern carriers, and then I see that the U.S. government has come and said to American 'You guys cannot get any bigger.'" (BA) 777s, with more than 175 of them. It is the largest Airbus A380 operator, with 37 planes. It currently serves 134 destinations including seven in the U.S: Dallas, Houston, Los Angeles, New York, San Francisco, Seattle, and Washington. On the Milan-New York flight, Emirates will compete with three airlines: Alitalia, American and Delta, in addition to United, which flies Milan-Newark. The Dubai-Milan-New York route is made possible by a bilateral treaty between the United Arab Emirates and Italy, and by Italian regulators' agreement to grant Emirates "an extra-bilateral right," to fly the Milan-New York segment, despite objections by Alitalia. Emirates has various advantages in competing with U.S. carriers. For one, it is backed not only by the Dubai government, its wealthy owner, but also by the U.S. government, which helps Emirates buy Boeing aircraft with below-market interest rates provided by the Ex-Im Bank. Emirates pays less for Boeing airplanes than U.S. airlines pay, then competes with U.S. airlines for passengers, according to a suit filed by Delta, Hawaiian and the Air Line Pilots Association. Additionally, the U.S. government has been prone to sign aviation treaties benefiting airlines in other countries more than they benefit U.S. airlines. Aviation consultant Robert Mann said: "For years, we've had an open skies policy that trades away access to the U.S. market for what amounts to nothing, in most cases, because we sign treaties with anyone who gives us open skies, even places with no internal traffic. Now, a couple of fast-growing carriers are maximizing their take, due to open skies." The combination of open skies treaties, Ex-Im financing, high airline taxation and the approval of three mergers followed by rejection of a fourth shows that "we lack a coordinated air transportation policy," Mann said. "In some cases there is no evidence of any policy, and in other areas there is evidence of a lack of a coordinated policy." Follow @tedreednc -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here: Ted Reed
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