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10 Indian Airports Open The public affairs journal of Emirates Issue 14 | October 2012 Sky 1 Welcome 2 Emirates and Qantas: A global partnership 3 Canada’s aviation leakage problem 4 Emirates’ impact on the Indian economy 5 China’s secondary cities take flight 6 Tim Clark at the International Aviation Club 7 Australia’s Passenger Movement Charge 7 BRICS connectivity 8 They said it best 9 New Silk Road – African traders put down roots in China 9 Infrastructure at Incheon 10 Sector Insight: Chris Tarry, CTAIRA 12 Emirates Airline Foundation in Bangladesh 12 Fast Facts Welcome In this issue of Open Sky, we discuss the We also examine the increasing trend of partnership Emirates announced with border leakage in Canada, where millions Qantas last month. The deal will offer travel across the border each year to fly travellers increased choice and connectivity out of US airports. As numerous studies to and from Australia and the world. show, high airport fees do not fully explain this trend – instead, it is a lack of airline With such a significant partnership, the deal competition, including a scarcity of flights prompted questions whether Emirates was and options for travellers, and that helps to rethinking its approach to alliances. While keep airfares high – and forces travellers to Emirates will continue with its philosophy of seek cheaper prices from the US. not joining one of the big three alliances, we do evaluate and embrace specific bilateral Our guest analyst in this edition is Chris partnerships that add value to us and our Tarry of CTAIRA, an aviation consultancy, customers, and the Qantas partnership who looks at the state of UK infrastructure more than fulfils these criteria. policy and European airline strategies for China. Our philosophy is focussed on consumer interest, an ability to grow based on our own Finally, our regular look at the burgeoning business plan without seeking permission “New Silk Road” takes us to Guangzhou, from an alliance, and the economic value that where a resourceful group of African traders strategic geographical partnerships can add have established themselves in the city to each airline partner. Subject to regulatory known as the “factory to the world”, to the approval, we feel this is a perfect match – and benefit of the many African communities all without equity or takeovers. they serve. 1 Emirates and Qantas: A global partnership Last month, Emirates and Qantas announced a new global aviation partnership that will give customers a seamless international and Australian network. agreement that constrains either carrier’s Benefit Transfer Commission Frequent Flyer 1 2 3 future network growth, with incentives Trunk Routes Non-Trunk Routes aligned to investment and market growth. • Allows Skywards Europe Subcontinent members to earn/redeem LHR DXB points on Qantas’ Combined further the two carriers will Asia international services and DXB Middle operate 98 (84 Emirates / 14 Qantas) (KUL, BKK & SIN) East Asia redeem points on its Africa domestic network weekly services between Adelaide, Brisbane, AU Asia JQ Intra-Asia Melbourne, Perth and Sydney to Dubai and NZ • Qantas Frequent Flyer Trans-Tasman connecting to Emirates’ network of over 70 AUAU (QF/JQ) members to earn/redeem on the cities in Europe, the Middle East and Africa. Qantas metal Dom AU NZ Dom NZ (QF/JQ) (JQ) Emirates network Emirates metal Benefit Transfer Code share or interline commission For Emirates customers it will open up (i.e. incremental profits) payable on non-trunk routes Qantas’ Australian domestic network of more than 50 destinations and 5,000 flights Under the agreement, Qantas will move its per week. The carriers will also co-ordinate hub for European flights to Dubai with daily on their service between Australia and New A380 services from Melbourne and Sydney Zealand and Australia and South East Asia. connecting onwards to London-Heathrow and enter an extensive commercial Both carriers are focussed on improving relationship with Emirates. the consumer experience beyond the high standards both premium brands currently Subject to regulatory approval, the 10-year offer. Where there is a difference in product commercial partnership, commencing in the or service, the two airlines will align at the IATA Summer 2013 Schedule, will go beyond higher standard – one practical example is codesharing and includes integrated Qantas’ commitment to launch its chauffer network collaboration with co-ordinated drive service for premium travellers and pricing, sales and scheduling as well as a Emirates will soon announce major changes benefit-sharing model. Neither airline will to its Skywards product to align with Qantas take equity in the other. Frequent Flyer. The Emirates + Qantas partnership is pro- Trans-Tasman services are an important growth on every level – network, customer part of this partnership, and Emirates and base and business. There is nothing in the Qantas will include a capacity commitment on the Tasman - maintaining a baseline of The Hon Martin Ferguson – Minister for capacity over the course of the agreement, What others have said: Resource, Energy & Tourism: while allowing both carriers to innovate on “I very much hope that the proposed working scheduling with reduced wing-tip flying and Anthony Albanese – Minister for Infrastructure arrangement between Qantas and Emirates is more services across the peak, launch new & Transport: agreed to by the ACCC [Australian Competition city-pairs and better connectivity across the and Consumer Commission]. From an ”… this is a very good deal for the travelling Australian perspective, looking at tourism joint-network. public. These are two great airlines. Qantas bringing together that range of opportunities clearly, in the way that aviation’s organised from Europe and the marketing capacity of The Kangaroo Route is one of the most globally, needs to have partnerships. Emirates Emirates in partnership with Qantas, I think is a strong partner. It gives it one-stop access that is exceptionally important and that will competitive sectors in aviation, with more into a whole range of European destinations for create . jobs in Australia.” than 25 carriers already operating on the Australian travellers. It means the Qantas route route. The response from competitors can continue on to London. Emirates is also a Business Spectator: company that has an interest in Australia. It’s across the pricing and marketing spectrum not just flying in and flying out…..” “If Australia is to hope to retain a national has been instantaneous which includes an flag carrier of any substance Qantas has to expanded alliance relationship on European The Department of Infrastructure & Transport: be able to complete a deal with Emirates that, while it will improve Qantas’ competitiveness services from Singapore Airlines and Virgin “On balance, the Department sees the and financial position, doesn’t appear to Australia, the entrance of Qatar Airways proposed alliance as a positive and as being have meaningful implications for the overall into oneworld and Etihad’s code-share consistent with the Australian Government’s competitive intensity of the international aviation policy settings” dimension of the Australian aviation market.” agreement with Air France-KLM with an emphasis on Australasia. 2 Canada’s aviation leakage problem Three quarters of the Canadian population live within 90 minutes’ drive of the US border, and cross-border retail shopping has long been a competitive reality. Due to high airline fares and limited choice in Canada, that trend has been extended to air travel. In 2011, up to 4.8 million Canadians drove to the US to catch flights at dramatically lower prices, according to the Canadian Airports Council - just one of the several industry and academic groups that have been studying this issue. The economic consequences of this leakage are significant: airlines serving Canada lose out on an estimated C$1 billion in revenue each year. The blame for higher fares in Canada has traditionally been put on fees and taxes imposed by the Canadian Government, called Crown rents. However, several recent independent research projects have confirmed other factors are also at play. Researchers at the University of Maryland found that higher fees and taxes in Canada could only account for between 17% to 37% competiveness. Foreign arrivals dropped of the fare differential. A lack of competition from 20.1 million in 2002 to 16.1 million was also an important factor. in 2010, while Canada fell from the 8th top tourism destination in 2002, to 18th The authors argued that reductions in in 2011. In fact, Canada is one of only five taxes and fees will have a limited impact countries to experience a drop in visitor on fares and what is really needed are arrivals in the last 10 years. “policies that promote greater competition on air routes.” A study by Canada’s Fraser Institute also revealed the extent of the higher Ambarish Chandra, an economics professor The study recommended the Canadian ticket prices from Canadian airports. at the University of Toronto, also sees a lack Government re-evaluate its stance on Within Europe, fares between city pairs of of competition influencing the border leakage carrier antitrust immunity, which “leads approximate distance averaged $690, while trends. In a recent newspaper editorial in the Toronto Star, Chandra discounted the focus on airlines into alliances to share costs and comparable routes in the US cost $840 fees and taxes and said that the real driver of agree on prices.” and routes in Canada were even higher, price reductions in air fares is competition, and averaging $1,815. that “this is something that we have very little of” in Canadian aviation. “Simply,” the report said, “they don’t compete.” Comparing flights across borders in Europe Chandra pointed out that when Canadians The study also suggested that many sections versus those between Canada and the US want to fly abroad, “it is often difficult to do so on anything other than Air Canada or one of its of the travelling public were being left out resulted in similar trends: $1,277 in Europe Star Alliance partners.” The only way to drive while incumbent carriers served the highest- versus $2,266 between Canada and the US.
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