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Emirates faces turbulence from Truss

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Yada Yada

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theaustralian.news.com.au said:
Emirates faces turbulence from Truss
Steve Creedy, Aviation writer
June 19, 2006

ATTEMPTS by Dubai-based airline Emirates to get more access on key Australian routes this week may face an uphill battle in the face of hardening government support for home-grown carriers.

Transport Minister Warren Truss warned last week that the Government would protect Australian airlines and said free trade in aviation remained "a far-off goal".

Mr Truss told a conference in Canberra that the Government had reached some firm views on the importance of the Australian aviation industry. Describing Australian airlines as some of the most efficient and innovative in the world, Mr Truss said they provided more than 40,000 jobs and were among the biggest trainers and employers of skilled workers.

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Interesting comment from Mr Truss. Pity the government had not "reached some firm views" and felt a little more protective of airline industry jobs back in 2001 when AN was going under. :evil:
 

JohnK

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Yada Yada said:
Interesting comment from Mr Truss. Pity the government had not "reached some firm views" and felt a little more protective of airline industry jobs back in 2001 when AN was going under. :evil:
We would all be better off had the government been a little bit more protective back then and AN was still around today.

I think the stance with Emirates is the correct one. We have nothing to gain by giving them access to more routes out of Australia yet we have a lot to lose by Emirates taking additional passengers to Asia and Europe who could have possibly travelled with local carriers.
 

Kiwi Flyer

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We do gain with EK - in the form of lower prices and competition in the product offering.

EK consistently is much cheaper than the competition, not only on trans-tasman, but also to asia and europe.
 

dajop

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Why is air travel so special relative to just about every other industry? It is a global economy and there are very few other industries in Australia receive the level of protection that QF does. Hey perhaps we should try and experiment - open skies from MEL & maintain current bilaterals from SYD, and see who benefits the most.
 

Yada Yada

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dajop said:
Why is air travel so special relative to just about every other industry? It is a global economy and there are very few other industries in Australia receive the level of protection that QF does. Hey perhaps we should try and experiment - open skies from MEL & maintain current bilaterals from SYD, and see who benefits the most.
That would be fun to watch. I reckon all of us SYD-based people would be flying to everywhere out of MEL if that happened! :eek:
 

jakeseven7

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Most other Australian companies do not have to compete with other companies bankrolled by rich governments and who pay little / no tax.

The government is absolutely justified affording Qantas and Virgin some protection.
 
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NM

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Kiwi Flyer said:
We do gain with EK - in the form of lower prices and competition in the product offering.

EK consistently is much cheaper than the competition, not only on trans-tasman, but also to asia and europe.
Lower prices are good for some people, but if others have to cut service levels to compete with the low labour costs of their off-shore staff, then we can start to lose out big time.

We all like to complain about the JQ model of low cost services, but if we want to have low air fares due to foreign competition, then we only have ourselves to blame for forcing the local full-service operator to reduce whatever costs they can, and if labour costs cannot be reduced then services are the only place left to reduce costs to compete.

I don't buy into the utopia of low fares due to competition. That only works to the point of forcing the operators to be more efficient. Once the low hanging fruit efficiencies have been achieved (and I believe they have with carriers like QF and NZ in our region) the only place left for cost reduction is to cut service levels. Then we all start to complain about these service level cuts. We can't have our cake (low fares) and eat it too (enjoy high standard of service) without sending labour costs off short to markets where they pay peanuts.
 

JohnK

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Kiwi Flyer said:
We do gain with EK - in the form of lower prices and competition in the product offering.
We as flyers might gain lower prices but Australia as a country gains absolutely nothing. No new tourism, no new jobs. Just plain nothing. In fact there may end being job losses if business is taken away from QF by EK.

I still tend to agree with the decision of the government to protect local airlines.
 
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Dave Noble

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JohnK said:
We as flyers might gain lower prices but Australia as a country gains absolutely nothing. No new tourism, no new jobs. Just plain nothing. In fact there may end being job losses if business is taken away from QF by EK.

I still tend to agree with the decision of the government to protect local airlines.
I completely disagree, a free market is a good thing. The prices on the kangaroo routes are low , I posit, because of competition. Qantas is *not* owned by the government , it is a public company that should expect to operate in a competitive market. It is possible , off peak, to get r/t fares from UK-Oz for around GBP550 ( under AUD1400 ) ; I doublt that these would exist without the competition

Dave
 

Yada Yada

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Dave Noble said:
I completely disagree, a free market is a good thing.
I'm from the Keynesian school of economics so I have to disagree with that. There is no such thing as a "free market". They are all tainted by various forces and will not always find an equilibrium that provides a good outcome on both the supply and demand side. So some form of regulation will probably always be necessary.

The airline industry requires massive capital investment so will never support enough companies to ensure consistently low airfares and provide sufficient profits for the operators at the same time. Tight competition will lead to low fares for the short to medium term (generally at the cost of service as NM has mentioned above), but over time operators will withdraw or merge or go bust. After which fares will rise again when one or two operators establish dominance.
 

Kiwi Flyer

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Yada Yada said:
The airline industry requires massive capital investment so will never support enough companies to ensure consistently low airfares and provide sufficient profits for the operators at the same time. Tight competition will lead to low fares for the short to medium term (generally at the cost of service as NM has mentioned above), but over time operators will withdraw or merge or go bust. After which fares will rise again when one or two operators establish dominance.
Over time could be a very long period though. For as long as I have been flying (and most likely well before that too), the kangaroo/kiwi route to europe has been substantially cheaper than transpac to usa. Why? Surely no coincidence that there is plenty of competition between europe and down under, whereas there is little effective competition between usa and down under.
 

Yada Yada

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Kiwi Flyer said:
Over time could be a very long period though. For as long as I have been flying (and most likely well before that too), the kangaroo/kiwi route to europe has been substantially cheaper than transpac to usa. Why? Surely no coincidence that there is plenty of competition between europe and down under, whereas there is little effective competition between usa and down under.
True, but I assume it is because this route has a much larger number of passengers travelling, probably because there are many more countries and possible destinations, and therefore it also has more airlines participating on many of the segments. The pacific route is not like this - it's pretty much just two countries with not much in between. Nonetheless there seems to have been a gradual contraction of the number of airlines operating between Australia and Europe, at least from casual observation.

I am assuming the same applies on the trans-tasman route and is the reason why QF and NZ want to share.
 

rosesplus

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I think a lot of the loyalty that is being shown here to QF is not warranted.
QF is 49.4% owned by overseas interests and is lobbying the Australian Govt to allow this to be increased. QF now sources staff overseas and has announced plans to service aircraft overseas (so much for Australian jobs). QF has been very successful in stepping outside the intent of it's work agreements by starting AO, JQ and has been regularly laying of Australian based staff etc.
If QF is "Australian" it certainly not does act "Australian".
 

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Emirates dogs Flying Kangaroo in battle for skies
Scott Rochfort, Sydney
June 22, 2006

EMIRATES has stepped up its campaign to double flights to Australia, with the message it will be in Australia's national interest and will pose little threat to Qantas' profits.

After holding talks with Transport Minister Warren Truss this week to push for greater access for flights into Australia, Emirates chief executive Tim Clark argued that his carrier had not stolen market share from Qantas but had rather "brought people to Australia who we believe would not have come if our air service was not (here)".

During his visit to Canberra this week, Mr Clark also spent time spruiking Emirates' latest publication, Emirates. A friend of Australia. "We believe that we haven't done damage to anybody," he said. "We do not believe that we have damaged Qantas. "In the time we have operated (into Australia) since 1996, Qantas' profitability has grown and grown and grown."

Mr Clark's comments were made about an hour after Qantas issued a profit downgrade yesterday. He said Emirates' 22 European destinations were stimulating traffic to Australia from areas Qantas did not service.

In an attempt to ease worries over Emirates' share of the aviation market into Australia — which has grown to 6 per cent in the past decade — Mr Clark said he was not asking for an immediate doubling in flights.

Instead, he said it would ask for a phased-in introduction of the additional air rights that would culminate in four daily flights to Sydney, Melbourne, Brisbane and Perth by 2014.

"We believe this is a phased growth which we believe to be non-confrontational," Mr Clark said. He argued that Emirates had only taken the crumbs from the Australia-to-London route dominated by Qantas and British Airways. "We do not believe we pose a threat to either Qantas or British Airways on this arrangement," Mr Clark said. He said Qantas did well out of Emirates. "Believe me, every punter that comes into Australia (on Emirates) does a minimum of two sectors on Qantas," Mr Clark said.
Qantas chief executive Peter Gregg said Emirates had snared market share from other airlines. "We don't believe what Emirates is saying is correct," he said. "We believe there's a lot of substitution going on there."
 

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Emirates in the news

From The Age

Emirates flight bid set for take-off

Katharine Murphy, Canberra
July 4, 2006

TREASURER Peter Costello has endorsed Emirates Airlines' push for extra flights to Australia.Mr Costello said provided Emirates helped Qantas win reciprocal landing rights on its routes, Emirates would get permission for more flights to Australia. "I think, subject to Qantas getting reciprocal landing rights on routes that Emirates controls, Emirates should get landing rights and be able to provide a service to the (Australian) public," Mr Costello said.

"If they give equivalence of treatment to Australian airlines, and that means Qantas, then they can expect opportunities in our market." Qantas has been lobbying heavily in Canberra against an Emirates proposal that would effectively double the carrier's landing rights in Australia to 16 flights a day by 2014.

The chief executive of the United Arab Emirates-based airline, Tim Clark, was in Australia late last month to lobby federal transport officials and push the proposal. Emirates has indicated it wants to expand its business in Australia, but this would put Qantas under significant commercial pressure.

Industry sources believe Transport Minister Warren Truss will protect Qantas from Emirates. Last year, he moved to protect Qantas when there was a proposal before cabinet to give Singapore Airlines access to Qantas' most-profitable route, that between Australia and the United States.
Frustration with a lack of significant competition in Australia's aviation policy has also led Tourism Minister Fran Bailey to write to Mr Truss backing the Emirates push.

Ms Bailey believes more services from Emirates will help expand tourism and give people more travel options. Ms Bailey was also among a group of senior ministers, including Mr Costello and Industry Minister Ian Macfarlane, who backed Singapore Airlines' push to win access to the Pacific route.

Australia's major airports, but most aggressively Melbourne Airport, have intensified pressure on Canberra to do more to build passenger numbers through increased airline competition. A recent decision from Canberra refusing permission for Qatar Airways to fly to Melbourne alarmed Melbourne Airport executives, who want more foreign airlines to have access to Australia.

Qantas has strong political support at the highest levels in Canberra. But the national carrier's decision to substantially cut its Australian workforce after last year's favourable cabinet ruling on the Pacific route has irritated some senior ministers.

Greater access to the Australian market by Emirates would require high-level discussions between governments to reopen the bilateral aviation agreement that sets the number of flights between the two countries.
Qantas argues that it faces a significant disadvantage competing against airlines such as Emirates, which have a different ownership structure, better tax treatment and discounts on key costs such as fuel.
 

Yada Yada

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Re: Emirates in the news

Lindsay Wilson said:
From The Age

Qantas has strong political support at the highest levels in Canberra.
Indeed! This is why SQ, EK and others have little chance of changing current Australian aviation policy.

However if the treasurer is able to get the top job - and he seems to be "stepping out" this week making policy-type announcements on a range of issues - we may see some changes.

If Geoff has not started lobbying Mr Costello, he'd better start soon! :eek:
 
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