Airline Weekly - October 3, 2011

Cover Story

Dubai’s Eyes on America’s Skies: Emirates expands in America, but why Dallas and Seattle? And which airlines should worry?

If there were any doubts about its ambitions in America, this should put them to rest. Last week, Emirates announced not one but two new U.S. routes, both of them surprising. In February, it will begin flying to Dallas-Fort Worth. And one month later, it will begin flying to Seattle.

Not that Emirates is showing interest in the U.S. market for the first time. It already flies to the country’s two largest cities—New York and Los Angeles—as well as Houston, a big energy market, and San Francisco, a big information technology and tourism market. It does not, however, fly to Washington, the country’s capital, or Chicago, its third largest city. Nor does it fly to Atlanta, its busiest airport, Detroit, its auto manufacturing hub, or Boston, a big finance center.

So why Dallas-Fort Worth and Seattle, two cities that have attracted considerably less attention from other longhaul international airlines? In fact, only five airlines will offer longhaul service from Dallas DFW this winter, compared to eight from Texas rival Houston (despite less overall service there), 13 from Boston and 21 from Chicago. Seattle has 10 longhaul carriers, but most of them serve the U.S. west coast-to-East Asia market, one in which Emirates isn’t positioned to compete.

But the less intense competition from European airlines in particular is one of the attractions for Emirates. At DFW, KLM is exiting the market this winter, and Air France hasn’t served it in years. Korean Air and newcomer Qantas won’t compete for the same traffic as Emirates (they’re going westbound, Emirates is going east), leaving just Lufthansa and British Airways as the only European rivals for longhaul traffic to the Middle East, the Indian subcontinent, parts of East Africa and southeast Asia. Financially troubled American, meanwhile— which dominates the Dallas DFW domestic market—operates transatlantic flights to just a handful of European cities, including London, where it cooperates closely with British Airways.

To be sure, Dallas is a big market. It’s now the fourth largest metropolitan area... (355 of 1,422 words)

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Not even the empires of Alexander, Genghis Khan or Napoleon stretched this far. Emirates is now penetrating deep into U.S. territory, further broadening its impressive solar system of destinations orbiting its powerful hub in Dubai.

But other airlines are building global empires too, some with the help of alliances. Lufthansa, for example, bought more planes for organic expansion last week (including A380s), complementing its push to broaden the Star Alliance.

It was the SkyTeam alliance, however, that added a new member last week: Taiwan’s China Airlines. And not to be left out of the coalition building, Emirates formed a partnership with WestJet. So, for that matter, did Aerolineas Argentinas and Gol.

For oneworld member Kingfisher in India, the financial vital signs aren’t good. So to stem losses, it’s abandoning the low-fare, low-frills end of the market, focusing up-market instead. But that won’t be easy for an airline that operates mostly shorthaul flights in competition with fast-expanding LCCs. Besides, yield premiums are difficult to obtain in a market oversupplied with seats because of India’s insistence on keeping the zombie Air India alive.

Philippine Airlines hopes to stay alive after facing crippling strikes. Though not in danger of disappearing anytime soon, its ability to compete against East Asia’s fast-growing LCCs is questionable.

For Air France, competing with LCCs means imitating their operating model at new bases, the first of which launched in Marseilles last week.

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