Canada and Emirates Airline
Busting myths. A reasonable request
Emirates Airline is seeking to provide daily service from
Dubai to Toronto, a city currently capped at just three flights
a week. Emirates also wants to offer daily service to Calgary
and Vancouver. Additional flights would generate significant
economic benefits for Canada and are endorsed by hundreds
of Canadian stakeholders. Emirates’ proposed flights have been
characterised by Air Canada as ‘capacity dumping’. However
even with the sought increase, Emirates would still be one of
the smallest international operators to Canada behind Lufthansa,
British Airways, Air France and Swiss - and would represent less
than 2% of Canada’s international air services. While Emirates
respects the government’s recent decision to deny additional
flights, we must rebut the myths of Air Canada in its attempt to
deny choice to Canadian consumers and protect itself from fair
and reasonable competition.
Myth: Emirates is subsidised.
Fact: Emirates has been profitable in every year but one since
it began its operations 25 years ago. It is fully audited annually
by PricewaterhouseCoopers, the world’s largest accounting firm,
attesting to its transparency and non-subsidised credentials.
Our accounts and annual reports have also been reviewed
and substantiated by leading analysts from major international
investment banks such as UBS and JPMorgan. By comparison,
many other airlines including Air Canada and others in the Star
Alliance have relied on government subsidies or aeropolitical
protection in recent years.
“Many of my European counterparts will bitch and moan about
the way the Middle East carriers operate; they think that it is
unfair competition. I don’t buy into that... I just got a copy of
[Emirates] its accounts the other day, and they look like a normal
set of accounts to me... and have no doubt that they acted in a
rational, commercial way in every way that I have seen.” - CEO
of British Airways Willie Walsh.
Myth: Emirates is seeking to “dump” capacity in
Canada.
Fact: Emirates is currently limited to operating three flights per
week to Canada. Those flights have been operating at near full
capacity since their launch in October 2007. Emirates’ current
market share as a proportion of all international bookings
to and from Canada is 0.5% - in comparison to Star Alliance’s
market share which is 41%. With a daily A380 service to Toronto,
Emirates market share of international traffic to Canada would
grow slightly to only 1%. It is projected that with a daily service
to Toronto and a daily service to each of Calgary and Vancouver,
Emirates’ market share of international traffic to Canada would
still be less than 2%.
Myth: Emirates will “steal” traffic from Air Canada
and divert it over its mega-hub in Dubai.
Fact: Currently 98% of passengers on Emirates’ Toronto flights
originate or depart from Dubai and other points to which
Air Canada does not fly directly. By securing daily flights to
Toronto, Calgary and Vancouver, Emirates is seeking to fill
significant unmet two-way demand between Canada and Dubai,
the Middle East, Africa and the Asian subcontinent - all regions
for the most part ignored by Air Canada.
This debate also raises questions about who is ultimately being
protected: Air Canada or its Star Alliance partner Lufthansa?
Lufthana’s own website proudly states ‘’…more than 80% of its
Canadian passengers connect beyond Germany to destinations in
Europe, the Middle East, Africa and South-East Asia.’’ Is it Canada’s
duty to protect Lufthansa’s hubs from competition?
Myth: The current Air Transport Agreement
between Canada and the UAE offers adequate
capacity on the routes given the size of the market
between the countries.
Fact: Passenger volumes between Canada and the UAE are large
(growing strongly year on year) relative to the number of weekly
flights and the point-to-point passenger numbers flown by other
international carriers from Canada (see above Lufthansa example).
Of the remaining traffic going beyond Dubai, almost all goes to
points not served by Air Canada. The current flight restrictions
also place a severe constraint on further export growth to the UAE
- Canada’s largest export market in Middle East and North Africa -
and impose considerable inconvenience on the 27,000 Canadians
living in the UAE and the 115 Canadian companies operating there
since existing flights are operating at capacity.
Moreover, the days of determining traffic rights based exclusively
on the size of the origin and destination market of countries
ended two decades ago for most countries. If this is still the
standard, then Lufthansa’s flights to Canada need to be measured
in the same way.
Myth: Since Emirates is state-owned the Canadian
Government should treat its request for additional
flights differently.
Fact: State-owned does not automatically mean subsidised.
Canada’s Blue Sky policy does not distinguish between non state-
owned versus state-owned entities. Canada has in recent years
negotiated many enhanced air access agreements with countries
whose major carrier is wholly or partly state-owned, including
with New Zealand, Singapore and Ireland - not to mention the
large number of EU States which have ownership interests in
their respective national carriers and will benefit from Canada’s
Air Transport Agreement with the EU.
Myth: Emirates’ entry into Australia had negative
economic and commercial consequences and
caused the exit of many European carriers from
the market.
Fact: Emirates has been a welcome addition to the Australian
aviation market. Currently Emirates flies 70 times to Australia
each week, resulting in significant trade, tourism and investment
gains. Decisions by other international airlines to exit the market
were prompted by their own alliance objectives and pre-dated
Emirates growth. At the same time Qantas has progressively
grown profits, jobs, market share and revenue since Emirates
entered the market in 1996. Key stakeholders have unanimously
endorsed the success of the Emirates-Australia partnership. In
2005, Australian Prime Minister John Howard said: “I would like
to see you (Emirates) fly here more often in the future.”
• In the year to August 2010, Emirates carried 1.5 million
passengers to Australia, 85% of whom came from points not
served by Qantas.
• The Australian Government forecasts that tourists from the
Middle East and North Africa to Australia will contribute
US$9.4billion between 2010 and 2020.
The same is true of other major markets like the UK, the US,
South Africa and Germany which Emirates flies to, where the
growth in Emirates’ services has been accompanied by trade and
tourism benefits - and the growth of markets for all respective
national carriers.
Myth: Emirates gets free fuel and discounted
airport fees.
Fact: Emirates procures fuel at market rates from multiple
suppliers at all airports to which it operates, including at Dubai
International Airport. Oil accounts for only 4% of Dubai’s GDP, a
figure which goes down every year. There is minimal oil refining
capacity in the UAE/Dubai, Emirates actually pays a premium
in Dubai for jet fuel, given Singapore is the closest major oil
refining centre - from where we source the majority of our fuel.
All carriers flying into and out of Dubai are subject to the same
airport fees and charges.
Who benefits from protectionism?
Certainly not consumers. Air Canada does not fly to anywhere in
Africa, the South East Asian subcontinent and only serves one city in
the whole Middle East region, Tel Aviv. It would rather its passengers
be diverted through hubs in Europe to access these destinations -
no matter how inconvenient, costly or time-consuming. Continued
protection of Air Canada means less choice, higher prices and
longer flight times for people travelling between Canada and some
of the fastest-developing economies of the world.
Why should Canadian consumers be dictated to by the narrow
interests of Air Canada’s and its fellow Star Alliance member
Lufthansa?
“Consumers, and most certainly governments, should be
extremely sceptical when the dominant provider of any service
in any market launches a vociferous plea for even greater
protection than it already enjoys.” - Bruce Cran, President,
Consumers Association of Canada, op-ed on open skies posted
to www.consumer.ca
Where was Air Canada’s opposition to open skies
with Switzerland?
Canada just concluded - without any visible opposition from Air
Canada - an open skies agreement with Switzerland. In spite of
very similar demographics, trade and travel patterns between
the UAE and Switzerland, the new agreement with Switzerland
enables far more air services than what is currently permitted
between Canada and the UAE.
UAE Switzerland
Number of allowed weekly flights 6 Unrestricted
to/from Canada
Number of operated weekly flights 6 21
to/from Canada (Summer 2010)
Home Population 8.2 m 7.8 m
Canada’s exports to (2009) CA$1.304 bn CA$1.188 bn
Canadians living in 27,000 6,000
Number of Canadian companies 115 45
operating in
What is the difference? Lufthansa owns Swiss International Air
Lines and along with Air Canada, as part of the Star Alliance,
they enjoy anti-trust immunity on Trans Atlantic routes - hence
this particular open skies deal exempts the airlines from price
competition and directly benefits these three companies. The
comparison certainly lends credence to recent comments from
WestJet’s CEO.
“If you’re not part of the Star Alliance, Air Canada’s alliance,
you’re pretty much shut out of the country.” - Gregg Saretsky,
President and CEO, WestJet.
Lost economic opportunity.
In 2009 the UAE was the largest merchandise export market for
Canada in the Middle East and North Africa Region. In fact, the
UAE was Canada’s 17th largest export market in the world - and
far bigger than many other countries with which Canada has
signed open skies agreements, including the latest example of
Switzerland.
In 2010 Emirates released a Canadian -authored economic study
which found Emirates’ additional flights to Canada would result in:
© Emirates. 2010. All rights reserved.
• CA$480 million in new economic activity.
• 2,800 additional jobs.
• CA$82.6 million in direct new tourism spending annually.
Emirates request for additional flights is supported by numerous
provincial governments, big city mayors, business and tourism
associations and consumer groups, who see Canada’s national
interests served by greater competition, choice and connectivity.