x Abu Dhabi, UAEWednesday 17 January 2018

Angry words fly as Emirates eyes Canada

Emirates Airline wants to boost its presence in Canada from the present handful of weekly flights serving one city.

The North American carrier has criticised Gulf airlines for receiving unfair subsidies and being 'instruments of government policy'.
The North American carrier has criticised Gulf airlines for receiving unfair subsidies and being 'instruments of government policy'.
A war of words is going on between Emirates Airline and Air Canada, and the stakes are a lot higher than bragging rights at the next aviation conference. Canada has the world's 10th-largest economy, but Emirates is allowed only three flights to the country per week - something one official at the airline described as the equivalent of running a corner store but being allowed to open only on Mondays, Wednesdays and Saturdays.

Emirates serves only Toronto and uses its Airbus A380 superjumbos to balance the high demand with its limited slots. It would like to fly daily to the city, and to Vancouver and Calgary as well. But despite a two-year campaign by Emirates to win more access, Transport Canada, the government authority, has consistently said no. The transport agency does not seem to be ruling in the interests of ordinary Canadians, who would be able to fly to the Middle East and beyond from more Canadian cities, more often, and with shorter transit times than under their current options.

In whose interest has Transport Canada been ruling? The answer is Air Canada's. The flag carrier draws a lot of water in Canada and has nearly 25,000 employees. And it is ailing, as are many airlines today in the slow global economy. It took a C$1.02 billion (Dh3.68bn) loan package from the government last summer. The airline has hardened its rhetoric against Emirates, criticising a study the Dubai airline released last month.

The study, sponsored by Emirates, found that increasing the carrier's service to Canada, including extending flights to Vancouver and Calgary, would lead to more than 2,800 direct and spin-off jobs in Canada and generate US$480 million (Dh1.76bn) of additional economic activity in the country annually. With the expanded service, an additional 274,927 passengers would be transported to and from Canada annually, according to the research, which was conducted by the transportation consultancy InterVISTAS. Most of the economic benefits would come in the form of tourism, new business activity and taxes, the study said.

Air Canada's response was to call the report "fictional" and to urge the public to see through this "subterfuge". Air Canada has consistently spoken in terms of airlines fighting against each other, with itself as the home team underdog, when the real issue is consumer choice. Dubai recognised decades ago that it sat at the halfway point between the great economic centres in Europe and Asia. It invested in airport infrastructure and in Emirates Airline, buying state-of-the-art aircraft to span continents. Emirates has been steadily changing the way people fly because it offers them shorter flights with more entertainment options and other amenities.

Calin Rovinescu, the chief executive of Air Canada, said this week that Emirates's strategy was "to scoop up travellers going elsewhere in the world and funnel them through Dubai, further strengthening Dubai as a global flow hub". He is exactly right, although what is unfair about this situation is not exactly clear. Bruce Cran, the president of the Consumers' Association of Canada, believes the Emirates-funded study deserves a fair examination.

"Air Canada is certainly saying they are wrong, but what would you expect?" he told the Toronto Star newspaper last week. "If this is a bad deal, and these figures are wrong, it's Transport Canada that should be telling us why they're wrong, or why they're right," he said. "If it is a good deal, let's get along and do it." What Air Canada and its Star Alliance may not want to accept in this case is that for the most part, air travel is a commodity. Customers really care about the ease of travel, and they want more flight options and shorter trips. As the world shrinks through globalisation, the reality is that the airline that happens to be sitting halfway between two points is much more attractive than one at either end.

Another part of the Air Canada rhetoric is that the carrier wants the Canadian government to disburse air rights between the UAE and Canada on the basis of the amount of traffic that starts and ends at either point. As might be expected, it then says Emirates serves no underlying demand for direct services between Canada and the Gulf, and that the current number of slots should be maintained. This is, of course, exactly the opposite of the Emirates model, and for that matter that of Etihad and Qatar Airways, the other Gulf-based long-haul airlines that rely on transfer traffic. A large part of their business, for example, comes from serving Indian expatriates visiting friends and relatives in places such as the US and Canada.

Air Canada has also in the past criticised Gulf airlines as receiving unfair subsidies and being "instruments of government policy". Such claims may subside now that the airline has received a financial lifeline from the Canadian government. Gulf airlines are indeed state-owned, and some have continued to rely on recapitalisations from their state owners as they work towards profitability - although this is not the case with Emirates, which is profitable.

Such support is nothing new. Governments have long thrown their financial support behind their national champions as a way to bring prosperity to all citizens. For his part, Sheikh Ahmed bin Saeed Al Maktoum, the chief executive and chairman of Emirates, is taking a more sanguine approach, at least in public. "I'm sure there will be progress," he said. "Bilaterals sometimes take some time."