Issue 27 September 2017 The Government Affairs Journal of Emirates

Transcription

1 Issue 27 September 2017 The Government Affairs Journal of Emirates India to become #3 Sir Tim Clark s Op-Ed Emirates US economic impact 30 years in Germany ACI Europe on connectivity Enemies of facts and competition Beijing and Shanghai A380 services Air Canada s 6th freedoms

2 India to become the third largest aviation market India has emerged as one of the world s fastest growing aviation markets, with passenger numbers growing at around 20% each year - far exceeding the global average of 7.3%. These impressive growth rates demonstrate the tremendous potential that exists in India s aviation market. India is currently the third largest aviation market in the world, in terms of domestic passenger traffic, and the fourth largest aviation market in the world, in terms of all passenger traffic. In 2016, India s domestic passenger traffic stood at 100 million, an increase of 23% from the previous year, and international traffic stood at 59 million, an increase of 10%. It is estimated that nearly 120 million passengers will fly in India in Also, according to the IATAcommissioned Value of Aviation study, India is expected to be a market of 442 million passengers, with the aviation industry supporting 19.1 million jobs and contributing US$172 billion in GDP by Over the past few years, most of this growth has come from Indian carriers. Air India has continued to expand its international operations with new services launched from India to Vienna, San Francisco, London and Madrid in the past year, with plans to launch new routes to Bangkok, Frankfurt, Johannesburg, Stockholm and Washington, D.C. this year. Jet Airways, Indigo and SpiceJet each plan to expand their international operations this year also. It is worth highlighting that much of this international growth from Indian carriers is to the US. Air India has created viable nonstop routes to the US, even with one-stop competition from other carriers, including Emirates. The US3 carriers (Delta, American and United) barely serve the US-India market, claiming that Emirates has driven them out. While they complain, Air India continues to grow and now operates to five US points (New York-Delhi, Chicago-Delhi, Newark-Mumbai, San Francisco-Delhi, Washington, D.C.-Delhi) with announced plans to add two more (Los Angeles and Houston or Dallas). Among the international carriers operating to and from India, Emirates ranks third with an 8.7% market share - behind Jet Airways with 13.7% and Air India with 10.4%. Emirates has progressively grown its India 30% 25% 20% 15% 10% 5% 0% 20% 4% 23% 0% network since 1985 and now operates 172 weekly passenger flights to nine destinations Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kochi, Kolkata, Mumbai and Thiruvananthapuram. Over the past few years, seat capacity between India and Dubai has increased significantly. The majority of this growth has come from Indian carriers, who in 2015 alone, increased capacity between Dubai and India by 27%, compared with 14% growth from Dubai carriers. This growth escalated in 2016, with Indian carriers increasing capacity between Dubai and India by 24%, compared with only 2% increased capacity from Dubai carriers. Indian carriers now have 64% market share (in terms of frequencies) on routes between Dubai and India, with 362 weekly flights compared to the 202 weekly flights operated by Dubai carriers. 11% 0% International market share from India (seat capacity) Others 67.2% Source: CAPA Growth in annual seat capacity between India and Dubai % 14% Jet Airways 13.7% 17% 2% Air India 10.4% Emirates 8.7% Market share of India-Dubai services (frequencies) Source: OAG Analyser Indian Carriers 64% Dubai Carriers 36% Indian carriers Dubai carriers Source: OAG Analyser Because of the increase in flights between India and Dubai, operated capacity is now at 100% of the approximately 65,000 seats per week permitted under the Dubai-India air services arrangements. There is clearly demand for more capacity and Emirates is confident that the airlines operating on these routes will utilise more seat capacity, if agreed, and share in the benefits of that growth. As India s aviation market continues to mature, there is enormous scope to add route options that do not exist today connecting India s tier-two cities with Dubai and beyond. However, a lot will depend on how the Government deals with the challenges that lie ahead. For example, current restrictions on bilateral traffic rights; constrained airport capacity; and high taxes and charges, could all act as major stumbling blocks and prevent India s aviation market from reaching its full potential as a key driver for India s economy. The Government s National Civil Aviation Policy, which was released in 2016, contains some positive reforms to move India s aviation industry closer to this potential. Policy levers such as the Regional Connectivity Scheme, and strategies to ensure industry-specific skills development, are useful steps in reshaping the industry s domestic operating framework. However, additional measures to solidify India s position as a leader in the global aviation market are also important. An extension of India s bilateral network of cooperation in aviation including an Open Skies policy that strengthens India s relationships with its closest partners would significantly enhance India s aviation growth, both domestically and internationally. In 2015, the National Council of Applied Economic Research (NCAER) undertook a study to quantify the impact of Emirates operations on the Indian economy. The study concluded that Emirates has contributed over US$848 million annually to India s GDP, supporting over 86,000 Indian jobs and generating almost US$1.7 billion in Foreign Exchange Earnings. These results showcase the indirect and direct impact an airline can have on the overall economic and trade activities of the country. As a long-term strategic partner for India, Emirates is committed to future investment and expansion in the market in support of India s 2020 growth targets. We are confident that with increased capacity, Emirates can contribute even more to India s growth in the years to come.. 2

3 Sir Tim Clark: Americans are being fed a distorted view of the Open Skies agreement In response to James Burnley s 22 July Op-Ed It s time to defend US airlines and workers the latest chapter in a longstanding misinformation campaign driven by the Big 3 US carriers, Sir Tim Clark responded with the facts to Fox News on 9 August. article referred to the Big 3 s self-published and inaccurate report on the finances of Emirates and other competitors without mentioning the 210-page report we submitted to the US government, which completely debunks the Big 3 s baseless claims. He also neglected to refer to our more than 20 years of annual reports, which are audited by PwC, and readily available on our website. There is a reason the Big 3 have opted to advance their distorted math via million-dollar lobbying campaigns instead of filing a formal complaint against Emirates with US Department of Transportation the facts don t support their claims. The Big 3 s goal is to preserve their domination of the US longhaul market by pulling out of America s longstanding and mutually beneficial Open Skies trade agreement with the United Arab Emirates, and blocking Emirates and others from serving America. As Mr Burnley noted in his article, Open Skies agreements have provided great benefits to the US airlines, their workers and, most importantly, the American travelling public. That is certainly true in the case of Emirates. Emirates supported more than 104,000 American jobs and contributed $21.3 billion in revenue to the US economy in We brought hundreds of thousands of new travellers to the US and helped increase competitive air transport options for more than one million American and international travellers who flew with us generating $3.2 billion of new trade-based revenue for the US. We are also the world s largest purchaser of US-built Boeing 777 aircraft and a primary reason the US enjoys a $19 billion trade surplus with the UAE. We have been very clear about the fact that Emirates competes on a commercial basis and does not receive subsidies. Mr Burnley s The Big 3 are also happy to take advantage of governmentsponsored benefits when it suits them. Some well-documented examples include their $15 billion bailout, the antitrust immunity enjoyed by the Big 3 s joint-venture partners, pension-relief legislation, the grandfathering of airport slots, fuel-tax breaks and various types of support from individual state governments. Does Mr Burnley who apparently wants a level playing field for global aviation think these are strong examples of free-market capitalism? Another point of misinformation contrary to the Big 3 s apocalyptic rhetoric, their balance sheets are flush. American, Delta and United ranked 1st, 2nd and 4th in terms of airline profitability last year. Behind their talking points, the Big 3 and their apologists are really looking to defend the all-too-recent status quo in which they controlled the US long-haul market at the expense of consumer choice. They hope to go back to a time when they could extract pricing premiums from US consumers, while providing a poor product in return. The Big 3 should use their ample means to compete in the current system, versus selectively supporting free trade when they feel it suits them and protectionism when they feel it does not.. Campbell-Hill quantifies Emirates annual economic impact in the US Emirates commissioned Campbell-Hill Aviation Group, a well-established economic consulting firm to US airlines, airports and the aviation industry, to quantify Emirates annual economic impact in the US. They analysed Emirates passenger and cargo operations to and from the US as well as purchases of US products and services in 2015 to determine the direct, indirect and induced impacts on US employment and revenue, including GDP and labour income. Sir Tim Clark, President Emirates Airline said, Campbell-Hill s data reaffirms the significant stimulative effect of Emirates operations on the US economy. It shows we ve brought hundreds of thousands of travellers to the United States, helped increase competitive air transport options for over a million American and international travellers who flew with us, and contributed to increased demand for US exports in aerospace and many other sectors.. The results of the study are summarised in the infographic. The executive summary and full report can be viewed on Emirates website: 3

4 30 30 years of Emirates in Germany: a game of winners and winners Emirates has recently marked the 30th anniversary of its flights to Germany. Since 1987, over 21 million passengers have flown on Emirates between Dubai and Dusseldorf, Munich, Hamburg and Frankfurt. Emirates continues to provide significant competitive choice for Germans connecting via Dubai to vital destinations not served by German carriers such as Hyderabad, Colombo, Sydney, Kuala Lumpur and Auckland among others. Those are threefold benefits for consumers efficient access to unserved markets, increasing choice and value for money. With this long-standing footprint, Emirates is an instrumental contributor to Germany s aviation landscape. Lufthansa, the largest airline group in Europe which enjoys a dominant competitive position in Germany, still seems to spend an increasing amount of time and resources in Berlin and Brussels to portray Emirates as an unwelcome competitor. In fact, the more German and European customers benefit from the consumer choice Emirates provides, the louder Lufthansa s complaints become. What exactly is Lufthansa s complaint and alleged competitive harm? Lufthansa is going from strength to strength: It has grown overall passenger numbers by 22% since 2010 and has added 7,000 new employees in the last two years. Their recently announced half year financial results were the best in the company s history. Lufthansa is operating an unprecedented number of flights to Asia and has increased the number of seats by 14% in the last decade. All of Lufthansa s commercial success is proving to coexist well with Emirates gradual capacity increases in Germany, on the basis of the strong demand for our flights, product and service. So despite this rather formidable competitive position, and facts that show Lufthansa is thriving, it nonetheless continuously portrays itself as a victim in dire need of a backward looking mercantilist aviation policy to protect it. However, this indignation is selective and hypocritical. For example, is it not peculiar that a foreign competitor such as Emirates - with a 30-year footprint in Germany and an irrefutable track record of financial transparency is the primary target of Lufthansa s complaints? Meanwhile, Lufthansa conveniently turns a blind eye years in Germany toward some significant fellow Star Alliance members and joint venture partners that, when seen through the narrow Lufthansa prism, unquestionably fit its definition of state-owned fair competition violators. The Lufthansa obsession with Emirates undeniably suggests a have your cake and eat it agenda of trying to limit competition and consumer choice. Lufthansa falsely claims it is a zero-sum game of winners and losers Emirates success equates to Lufthansa s loss. However, the reality is Emirates success over the past 30 years has been a win for Germany. A win for the economy - stimulation of commercial activity, growth and new jobs; a win for consumers - more competitive choice, greater connectivity and excellent value. Lufthansa is actually winning too despite the energy and resources spent on portraying itself as a victim.. Emirates looks forward to the next 30 years of delivering value in Germany, side-by-side with Lufthansa. There is plenty of success for both. ACI s report on connectivity in Europe: The impact of Gulf carriers For the first time, ACI Europe s Airport Industry Connectivity Report 2017 looks into the impact of the three major Gulf carriers (and Turkish Airlines) on connectivity from Europe. AIRPORT INDUSTRY CONNECTIVITY REPORT 2017 While they have gained an increased market share of indirect connectivity between European and Asian destinations, the report debunks the claim by Lufthansa and Air France-KLM, in particular that competition has hurt direct connectivity on these routes. Over the past 10 years, the Gulf carriers and Turkish Airlines have increased indirect connectivity between the EU and Asia Pacific by 66%, and have therefore been instrumental in connecting the EU with 4 emerging markets. The penetration of the Asian market has been a particular success story for Gulf carriers by flying to many destinations that are not served by Europe s major legacy airlines Air FranceKLM, Lufthansa Group and IAG (EUB3). Other non-european carriers, mainly Asian carriers, have also reinforced their position and increased indirect connectivity between the EU and Asia Pacific. Crucially, the oft-repeated view in France and Germany that the growth of Gulf carriers has negatively impacted the EUB3 s connectivity with Asia Pacific is not supported by the report s findings. In fact, between 2007 and 2017, the EUB3 increased their indirect connectivity between the EU and Asia Pacific by 20.5%. Air France-KLM witnessed the highest growth at 38%, followed by the Lufthansa Group at 17%. In the report ACI Europe suggests that it is not competition from the Middle East, but rather the individual strategic network development priorities of the EUB3 and the growth of low-cost carriers that has had an impact on the connectivity of their respective hubs in Amsterdam, Paris, Frankfurt, London and Madrid. This is best illustrated when looking at the concerned airports individually. Indeed, since 2007, Amsterdam-Schiphol has made strong connectivity gains delivered by Air France-KLM on routes to Asia Pacific (+14.9%), while the group underperformed and lost ground at Paris Charles de Gaulle (-11.7%). Similarly, Lufthansa Group s direct connectivity to Asia Pacific increased at its Zurich hub (+56%) and Munich hubs (+19%) but decreased at its Frankfurt hub (-15.2%). Overall, none of the EUB3 have experienced a reduction in their direct connectivity to Asia Pacific over the past 10 years, proving that their claims against the Gulf carriers negatively impacting connectivity from Europe to Asia are extremely misleading..

5 Enemies of Facts and Competition Never let the facts spoil a good story... We have previously covered how the Brussels airline association sphere has become a lot more populated and probably more bewildering for policy makers. When the same airlines are members of multiple associations, who speaks for whom, and which of these groups truly advocate for the interests they purport? Adding to the confusion is Europeans for Fair Competition (E4FC), a coalition set up by Air France-KLM (AF-KL) and Lufthansa which in reality champions an agenda for reduced airline competition and less air travel choice in Europe. They claim to speak for concerned Europeans but judging by the self-serving aims it is obvious these two airline groups only have themselves in mind and perhaps those of their US joint venture and alliance partners, with which they control 85% of the trans-atlantic Europe- US market. Does this sound familiar? It should. It mirrors the US advocacy group, Americans for Fair Skies, which claims to champion consumers and concerned Americans but instead pushes the anti-competitive and protectionist agenda of its legacy airline benefactor, Delta Air Lines. According to a recent Politico EU article, there is evidence of involvement by US entities in E4FC - in fact involvement by the same person that set up the Fair Skies front group in the US. For that article, Politico EU also sought to find out more from E4FC who exactly was behind its formation, but any disclosure to that effect was refused. Needless to say, what E4FC lacks on the transparency front, it makes up for with comical tweets and alternative facts. Here are some good examples: Yes, because even European secondary airports can sustain direct, intercontinental flights An oft-repeated alternative fact is the alleged lost Lufthansa Group and AF-KL routes due to competition from Emirates - as spelt out in the Allegations below. However, it is so creative that it raises fundamental questions about the overall credibility of this coalition and what it stands for. If you cannot trust the accuracy of purported hard facts, what can you believe? First they define South East Asia-Pacific as an area which includes cities such as Baku, Azerbaijan, Beirut, Lebanon and Damascus, Syria. Secondly, also included in their lost routes list are numerous African cities such as Marrakesh, Morocco (which lies much further west than Paris) and leisure destinations in Tunisia, such as Djerba and Monastir, all cities NOT served by Emirates. Let s look at Djerba, Tunisia specifically. They say Swiss leisure subsidiary Edelweiss Air - because of Emirates - has stopped operating to Djerba, even though Emirates doesn t fly there. Furthermore, they imply that people fly en masse from Zurich to Dubai (6 hours travel time in the wrong direction) to then transfer to a flight back to Tunis (6.5 hours travel time) to then transfer in Tunis to fly another hour to Djerba, or complete the journey by an 8-hour bus ride and that Edelweiss Air therefore has been forced out of the direct Zurich- Djerba market. Really? We have fact checked some other E4FC claims below. Rather than claiming to speak for concerned Europeans, European consumers should be concerned by the amounts of misinformation that is used on their behalf to deliberately seek limitations to their travel options. When a group claims its raison d être is promoting the interest of European travellers, yet its policy advocacy focuses solely on reducing competitive choice and enriching entrenched legacy carrier members at their expense, Europeans have good cause to be very wary. In turn, policy makers should be under no illusions regarding the negative effects of pushing a competition limiting agenda on the basis of such misinformation. Considering the admirable aims of improving EU air connectivity and expanding travel choices for Europeans set out by the European Commission in its recent Aviation Strategy, debates around competition should at least be fact-based.. AIRLINES THE ALLEGATIONS Surely this is stating the obvious! ROUTES LOST DUE TO GULF CARRIER SUBSIDIZED EXPANSION SOUTH EAST ASIA-PACIFIC: FROM FRANKFURT: CALCUTTA, HYDERABAD, MANILA, KARACHI, LAHORE, SYDNEY, HO CHI MINH CITY, ABU DHABI, SANAA, TASHKENT, KATHMANDU, DENPASAR/BALI, PUSAN, MALE/MALDIVES, MAHE/SYCHELLEN, COLOMBO FROM MUNICH: SINGAPORE, JAKARTA NOT ADDED BECAUSE OF DOMINANCE BY THE GULF CARRIERS AFRICA: ASMARA, NAIROBI, KHARTOUM, HARARE, MAURITIUS, ENTEBBE, LUSAKA SOUTH EAST ASIA-PACIFIC: ABU DHABI, BAHRAIN, DOHA, JEDDAH, KARACHI, CHENNAI, HANOI AND PHNOM-PENH AFRICA: DAR ES SALAAM, KIGALI SOUTH EAST ASIA-PACIFIC: DENPASAR, MELBOURNE, SYDNEY, SHANGHAI, KUALA LUMPUR, SINGAPORE, COLOMBO, KATHMANDU, BOMBAY, RANGOON, PHUKET, JEDDAH, RIYADH, BEIRUT, DAMASCUS, TRIPOLI, BAGHDAD AFRICA: NAIROBI, JOHANNESBURG, HARARE SOUTH EAST ASIA-PACIFIC: HO CHI MINH CITY, JAKARTA, COLOMBO, KARACHI, KUWAIT, ABU DHABI, JEDDAH, RIYADH, TEHRAN, BEIRUT, DAMASCUS, BAKU AFRICA: YAOUNDÉ, LAGOS, ACCRA, MALABO, HARARE, DOUALA, LIBREVILLE, TRIPOLI, BENGHAZI, TUNIS, CASABLANCA, EDELWEISS AIR: KILIMANJARO, MOMBASA, AGADIR, DJERBA, MONASTIR, LUXOR, MARRAKESH, MARSA ALAM, MAURITIUS SOURCE: LUFTHANSA DOCKET SUBMISSION/AFKLM DOCKET SUBMISSION THE FACTS THE FACTS Lufthansa terminated flights to Sydney in Emirates began operations in 2000, Etihad in 2007 and Qatar Airways in Lufthansa terminated flights to Denpasar/Bali in Emirates began operations in 2015 and Qatar Airways in Emirates does not fly to Tashkent, Kathmandu, Busan or Asmara. Air France terminated flights to Phnom Penh in Emirates began operations in 2017 and Qatar Airways in Air France terminated non-stop flights to Hanoi in Emirates began operations in 2016 and Qatar Airways in Emirates does not fly to Kigali. Austrian terminated flights to Yangon (Rangoon) in Emirates began operations in 2016 and Qatar Airways in Austrian (Lauda) terminated flights to Denpasar/Bali in Emirates began operations in 2015 and Qatar Airways in Austrian terminated flights to Phuket in Emirates began operations in 2012, Etihad in 2014 and Qatar Airways in Emirates does not fly to Kathmandu. Emirates also terminated flights to Damascus in 2012 and to Tripoli in 2015 because of the respective situations of instability. Swiss terminated flights to Ho Chi Minh in Emirates began operations in 2012, Etihad in 2013 and Qatar Airways in Emirates does not fly to Baku, Yaoundé, Malabo, Douala, Libreville, Benghazi, Kilimanjaro, Mombasa, Agadir, Djerba, Monastir, Luxor, Marsa Alam and Marrakesh. 5

6 Emirates all-a380 services to Beijing and Shanghai In response to strong consumer demand, Emirates began operating all A380 services to Beijing and Shanghai in July, with the upgauge of its second daily flights. By operating all-a380 services, Emirates increased seat capacity to both Beijing and Shanghai by 18.5%, and now offers passengers even more seamless A380- to-a380 connections between the two Chinese cities and over 30 destinations. Emirates now flies the A380 to 48 cities on six continents, including seven north Asian cities - Beijing, Shanghai, Guangzhou, Hong Kong, Taipei, Seoul and Tokyo Narita. The latest cities to join the A380 network this year are Sao Paulo, Casablanca and Nice. Emirates is the world s largest operator of the A380 aircraft, with currently 97 of these double-decker aircraft in service representing 45% of the global A380 fleet, and with a further 45 on order. The Emirates A380 is a popular choice for travellers, carrying 80 million passengers since On Emirates flights to and from China, passengers in all classes can enjoy local Chinese cuisine and industry-leading service from Chinese-speaking cabin crew. Passengers can also enjoy over 2,500 channels of the latest films and TV shows, including Chinese content, as well as music and games on Emirates award-winning inflight entertainment system ice. Chinese travellers can now book their own flights with Emirates through Alitrip, powered by Alibaba. This online platform provides options for advanced seat selections. In addition to booking flights, customers can also use Alitrip to shop for duty-free products online, book hotel reservations, handle visas, and buy tickets for tourist attractions. Shanghai was Emirates first Chinese destination. As the first airline to establish non-stop connectivity between the Middle East and mainland China, Emirates launched freighter operations to Shanghai in 2002, followed by passenger services to the city in Emirates launched services to Beijing in 2006, and deployed its first A380 service on the route in August Emirates was the first international airline to fly this award-winning aircraft on Chinese scheduled passenger routes. Today, with 38 weekly flights to China, Emirates enables convenient connections to over 150 cities in more than 80 countries, weekly Emirates passenger flights to Shanghai, Beijing, Guangzhou, Yinchuan and Zhengzhou million passengers carried on Emirates flights to/from China thousand tonnes of cargo carried on Emirates flights to/from China including 39 destinations in Europe, 22 destinations in Africa and 14 destinations in the Middle East. In 2016/17, Emirates carried more than 1.4 million passengers and 120,000 tonnes of cargo on its China services. The strength of Emirates China services is highlighted by an average seat factor of 82% over the past five years.. 6

7 They said it best... Open Sky brings you the best quotes from the aviation industry. With these excellent traffic figures in the first half-year of 2017 behind us, July s figures offer a promising start to the second half-year. We re well on the way towards our combined goal of forty million passengers for KLM and Transavia in Pieter Elbers, President & CEO, KLM We have achieved the best first half-year result in our company s history. In addition to strong demand and a robust pricing environment, this is attributable to the fact that we achieved a further structural reduction in costs. Our hard work in cutting our costs is reaping its rewards. But we must continue these endeavors: this is the most important way that our margins can be improved sustainably. Ulrik Svensson, Chief Financial Officer, Deutsche Lufthansa AG It s an absolute joke that there s competition in the airline industry. Rep. Duncan Hunter, R-California Alan Joyce CEO Qantas Even when we start flying direct to London, Dubai will still play a big role. Emirates has 40 destinations in Europe. We re never going to fly direct to places like Venice and Prague. EU airlines are ultimately responsible themselves for their competitiveness and must continue to adapt their products and business models to the prevailing market conditions European Commission Non-liberalised airspaces make it expensive for African airlines, putting some of them out of business. Such trends are worrying and we hope that they will not see the aviation industry end up closing like the shipping industry did largely due to such challenges. Dr. Elijah Chingosho, Secretary General, African Airlines Association I laugh about the US airlines because they never get subsidies but they re happy to... [file for bankruptcy] every time they re in trouble and wipe out all the pensions for their employees and then continue to compete and at the same time try to stop aviation from evolving. Tore Jenssen, CEO, Norwegian Air International Air transport agreements with non-european countries must result in better connectivity. Passengers and business need good direct connections to destinations around the world. Market foreclosure jeopardizes Germany as a long-term location. statement issued by ADV German Airport Association on the occasion of its 70th anniversary According to Airlines for America (A4A), employment in the US airline industry rose to a 16-year high at the end of 2016, while the operating profits of US passenger carriers, including the legacy carriers, have also risen by 313% over the past five years, US Department of Transportation data show. Roger Dow President and CEO US Travel Association The economic benefits of Gulf carrier routes echo far beyond the major gateway cities their planes fly into. We ve got to remember that nearly 30 percent of Gulf carrier passengers transfer to a domestic flight once they ve arrived, spreading their impact into hundreds of destinations across America. Just last year, that was nearly 1.7 million people who might not have flown to the US otherwise, staying at our hotels, eating at our restaurants, supporting our local businesses and enjoying all the country has to offer. 7

8 Air Canada targets sixth freedom traffic and Dubai for growth Air Canada seems to have woken up to the opportunities provided by sixth freedom traffic (i.e. traffic carried from one foreign country to another foreign country via the carrier s home country). After years of criticising Emirates over sixth freedom traffic, it appears Air Canada is increasingly after a bigger piece of the sixth freedom pie themselves. Carrying sixth freedom traffic is something that the majority of the world s large international airlines do. Back in 2010, Transport Canada and Air Canada opposed Emirates request to increase air service entitlements between Canada and the UAE on the grounds that Emirates, utilising sixth freedom rights, would turn Air Canada hubs into stubs. Air Canada has since embarked on an aggressive international expansion plan, aiming to grow revenue from international routes to an estimated 62% in 2018, with sixth freedom traffic as an integral component. Commenting on this strategy in November 2016, Air Canada CEO Calin Rovinescu admitted, We cannot count on filling a Delhi route with only the local Toronto traffic. We have to have a lot of US and other Canadian traffic. Referring to the carrier s recent capacity expansion into India, he added that those (Toronto and Vancouver to Delhi) routes would not be viable without sixth freedom traffic. He also stated that Air Canada had been increasing its sixth Fast Facts * Aircraft in fleet 261 Destinations 157 Revenue (Airline)* Profit (Airline)* Fuel Costs (Airline)* Passengers* Cargo* $23.2 billion $340 million $5.7 billion 56.1 million Passenger Seat Factor* 75.1% 2.6 million tonnes freedom flying significantly and its modest goal was to attract a 1.5% fair share of the US sixth freedom market, which could potentially bring CA$ million and 1.1 million passengers in incremental business. Further attributing sixth freedom traffic to Air Canada s recent years of strong financial performance, Rovinescu touted the unlimited air access to the US on account of the Canada-US Open Skies Agreement, and expressed further prospects for sixth freedom traffic from several other countries. As part of the new strategy, Air Canada aims to turn its three major Canadian hubs into larger transfer points for international travellers crossing the North American continent. For years before Air Canada commenced its Toronto-Dubai non-stop service in 2015, it repeatedly also denied the existence of sufficient market demand and growth to warrant non-stop flights. Rovinescu commented, Simply put, the market between Canada and the UAE has not developed to the point where more capacity is warranted. Period. Full stop. There are already more airline seats being flown between Dubai and Canada than there are people to fill them. That doesn t entirely Employees (Airline)* 64,768 Financial Auditor PwC First flight 25 October 1985 Average daily flights 534 A380 fleet 97 (on order 45) Boeing fleet 164 (on order 167) Average fleet age* New Passenger routes (2017) square with the fact that Emirates Dubai- Toronto seat factors have averaged 90% since Air Canada has since u-turned. We are seeing a good number of people travelling from the UAE since we launched the service in November 2015, an Air Canada representative said in July He also said there has been a 14% growth in traffic between Canada and the UAE in the first five months of this year, when compared to the same period last year, and We expect this trend [growth] to continue in the coming months as more people travel to Canada for studies, immigration, and tourism purposes. As a profitable carrier with a quality product, Air Canada s new strategy to increase its sixth freedom traffic is welcome in a competitive environment. However, it certainly dilutes any argument that the growth of some competitors should be restrained on the basis they carry a degree of sixth freedom traffic.. 63 months Athens-Newark, Zagreb and Phnom Penh Oslo Stockholm St. Petersburg Seattle San Francisco Los Angeles Toronto Boston Chicago Newark New York Columbus Washington, DC Dallas/Fort Worth Houston Orlando Fort Lauderdale Mexico City Aguadilla Quito Glasgow Newcastle Copenhagen Moscow Dublin Manchester Hamburg Birmingham Amsterdam Warsaw London Düsseldorf Brussels Liege Luxembourg Prague Paris Frankfurt Vienna Basel Munich Budapest Geneva Zurich Zagreb Lyon Milan Venice Bologna Nice Zaragoza Rome Istanbul Madrid Barcelona Lisbon Athens Algiers Tunis Malta Larnaca Casablanca Cairo Dakar Ouagadougou Khartoum Djibouti Conakry Lagos Addis Ababa Abidjan Accra Eldoret Entebbe Nairobi Dubai Kabul Multan Karachi Peshawar Islamabad Sialkot Lahore Bengaluru Kochi Thiruvananthapuram Maldives Delhi Ahmedabad Kolkata Mumbai Hyderabad Chennai Colombo Dhaka Yinchuan Kuala Lumpur Zhengzhou Yangon Bangkok Phnom Penh Phuket Guangzhou Hanoi Singapore Clark Beijing Seoul Shanghai Taipei Hong Kong Ho Chi Minh City Manila Cebu Tokyo Osaka Middle East Network Beirut Amman Medina Jeddah Erbil Basra Kuwait Dammam Bahrain Riyadh Tehran Baghdad Mashhad Dubai Muscat Viracopos Rio de Janeiro São Paulo Ciudad del Este Buenos Aires Luanda Cape Town Johannesburg Dar es Salaam Lusaka Harare Lilongwe Durban Seychelles Mauritius Route Map September 2017 Jakarta Perth Bali Adelaide Melbourne Brisbane Sydney Auckland Passenger Routes Freighter Routes Passenger & Freighter Routes Christchurch 8 Please visit our website for more information on Emirates International, Government and Environment Affairs department or write to us igea@emirates.com