x Abu Dhabi, UAEWednesday 26 July 2017

Rapid expansion of Gulf airlines squeeze out European rivals

The Gulf airlines' US offensive comes as European carriers including Air France-KLM and Lufthansa warn that competition on US routes could hit profits this year.

Etihad Airways' flights to the US will rise to 31, equivalent to 8,866 seats by the end of 2014. Jaime Puebla / The National
Etihad Airways' flights to the US will rise to 31, equivalent to 8,866 seats by the end of 2014. Jaime Puebla / The National

FARNBOROUGH, ENGLAND // Europe’s big airlines are being hit hard by the rapid expansion of Arabian Gulf rivals in the US amid a looming transatlantic price war.

Etihad Airways and Emirates Airline will both boost capacity on US routes by more than a quarter this year, adding thousands of new seats every week to routes that include Los Angeles and Boston. Qatar Airways last week added a direct daily service between Doha and Dallas-Fort Worth.

Their US offensive comes as European carriers including Air France-KLM and Lufthansa warn that competition on US routes could hit profits this year.

But while the trend is hurting airline profits it is likely to benefit passengers as fares fall.

“The rapid route expansion of Gulf carriers in the US is starting to have a big impact — especially to the west coast,” said Shane Mallon, the general manager of Capricorn Travel, a London-based travel agency. “They offer good rates on modern fleets, efficient airports and that applies to Asian and Australasian routes as well.

Etihad and Emirates have kept step in their US route expansion.

Etihad offered 21 flights and 7,000 seats per week to the US at the end of last year.

That will rise to 31 flights and 8,866 seats by the end of this year, which equates to a 27 per cent increase in seat capacity.

Emirates expects to boost capacity to the US by 26 per cent in the year to October 2014 after starting flights to Boston in March and with plans to fly to Chicago from next month.

“This is through a combination of larger A380 aircraft being deployed to Los Angeles effective from December 2013 and Dallas from October 2014,” an Emirates spokesman said in a statement.

Dallas-Fort Worth is one of the US airports benefiting from the US route-building among Gulf carriers. It is one of four US airports that now accommodate all three of the big Gulf carriers – the others being Chicago, Washington and JFK.

“To get to the Indian subcontinent you used to go through Europe,” said David Magana, a spokesman for Dallas-Fort Worth airport. “Now you see a lot of shift as people choose Gulf carriers.”

The addition of new routes by Gulf airlines across the Atlantic is creating fresh headwinds for European carriers in an increasingly crowded marketplace.

Air France-KLM issued a profit warning last week, citing overcapacity. That followed a similar warning from Lufthansa, which blamed, among other factors, overcapacity on North Atlantic routes and competition from Gulf carriers.

The German flag carrier has been vocal in its criticism of Gulf carriers benefiting from what it regards as state aid.

The airline also objected to the planned investment by Etihad in Alitalia, the ailing Italian carrier, on the grounds that it would amount to unfair competition.

But last week the Lufthansa chief executive, Carsten Spohr, struck a more conciliatory tone at an investor presentation in London which followed the release of the company’s new strategy aimed at boosting profits.

That flagged up the possibility of Lufthansa developing a long-haul platform with Sun Express, its budget joint venture with Turkish Airlines.

“I am generally open to work with anybody, including in the Gulf, if there is a win-win project. We do work with Emirates in MRO [maintenance, repair and operations], with Etihad in catering, with Qatar in station management and there is close personal relationships. I’m open to any win-win,” Mr Spohr said.

scronin@thenational.ae

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