Business Strategy or Salt in the Wound?: Emirates adds A380 to Milan – JFK Route
As the major U.S. airlines continue to lobby the government for intervention when it comes to the Gulf Carriers – mainly Emirates, Qatar Airways, and Etihad – serving the United States, Emirates has announced that it will add the Airbus A380 to the controversial route between Milan, Italy and New York’s JFK Airport.The route, which starts in Dubai and then stops in Milan before heading to New York, is a “Fifth Freedom” flight, meaning Emirates is allowed to sell tickets to passengers flying on any or all segments, including solely between New York and Milan, even though the carrier is based out of neither Italy nor the U.S. Both the United States’ airlines and Italy have challenged the legality of the route, especially since it competes directly with Delta Air Lines and Alitalia, Italy’s flag carrier. The government of Italy actually ruled the service illegal last year, but that ruling has since been overturned after Emirates’ appeal. Now, just a short time later, Emirates has made plans to deploy the flagship Airbus A380 superjumbo on the route. This is arguably the fanciest commercial aircraft in operation today and will replace the smaller B777-300ER starting June 1st of this year. This is surely going to make the executives at the U.S. majors particularly upset, as they have been constantly lobbying the government to restrict the access that the Gulf Carriers have to the United States, citing the fact that they receive large subsidies from their government which makes it hard to compete with them on a cost basis. Emirates’ argument? The U.S. airlines –American, United, and Delta – should have a better product if they want to compete with Emirates. The airline is known for its onboard showers, first-class suites, state-of-the-art aircraft, and fine dining. What makes this even more interesting is that Etihad, which is based in Abu Dhabi, recently took ownership of 49% of Alitalia, one of the two other operators on the route between Milan and JFK. This means that Delta Air Lines is indirectly having to compete with two Gulf Carriers, both of which are known for their extravagant amenities, on a route between the U.S. and Europe. It is easy to see where Delta is drawing their arguments from. It should be noted, however, that Emirates isn’t the only one out there operating a so called “Fifth Freedom” flight. Delta even has several of the type, operating mostly from the U.S. to Japan and then on to other cities throughout Asia including Shanghai, Taipei, Singapore, Bangkok, and Manila. Although there is clearly a large demand for seats on the route between New York and Milan, it makes me wonder if the mammoth A380 is actually necessary to meet demand, or is being deployed as more of an “in your face” gesture. Either way, it will be interesting to see what happens next in the never-ending saga between the “U.S. Three” and the “Middle East 3”.