Emirates Calls Out Delta Over Their Dubai Claims

On Sunday I wrote about how Delta is cutting frequencies on their Atlanta to Dubai flight this winter. Presently Delta operates daily Boeing 777-200LR flights between Atlanta and Dubai, though as of later this year they’ll be cut to 4-5 weekly.

Dubai-2

What’s to blame for the frequency cut? Likely a strong US dollar and low oil prices. Delta is cutting international capacity significantly given weak demand from foreigners traveling to the US. The explanation for this frequency reduction should really be “the global economy,” which is the same reason they’re cutting frequencies to Japan, Brazil, etc.

But that doesn’t really fit all that well into Delta’s agenda. Delta of course used this to take a cheap shot at the evil, government-owned and subisized Middle Eastern carriers, claiming they’re the reason that Delta can’t even sustain once daily service to Dubai:

“The reduction comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and subsidized airlines,” Delta spokesman Trebor Banstetter said in a statement, noting that daily service would return in the spring of 2016.

There’s nothing quite like one of the world’s most profitable airlines playing the victim card over competition!

Fortunately Emirates has been doing a fantastic job articulating their stance in the debate between the Gulf carriers and US carriers (unlike the CEO of another Gulf carrier, who has been slightly less diplomatic). So as you’d expect, Emirates called out Delta over these shenanigans. Via The Hill:

An Emirates spokesman said Tuesday that Delta is making a “political play” with the accusation that it’s being negatively affected by the presence of Middle Eastern carriers at U.S. airports.

“Delta has no head-to-head competition as they are the only airline to operate non-stop on this route,” the official said in a statement provided to The Hill.

“Industry data shows that average seat loads on Atlanta-Dubai has been consistently more than 85 percent, which clearly indicates that consumer demand or overcapacity is not the issue,” the Emirates statement continued. “It is of course Delta’s prerogative how they wish to allocate their fleet to routes, but their attempt to pin the blame on the ‘Gulf carrier threat’ is plainly a political play, or a thin excuse to prop up fares at a higher level by limiting capacity.”

Checkmate

Yeah, it’s sort of hard to argue about overcapacity when your average load factors are more than 85%, eh?

Now in fairness, there are two important factors when it comes to the success of selling tickets on a route. There’s the actual load factor (how full a flight is), and then there are also yields (how much people are paying for each seat).

Is it possible that the Middle Eastern carriers have driven down Delta’s yields? Absolutely. But that’s not the argument Delta has been making. They’ve been arguing that the Middle Eastern carriers are stealing demand, and not that they’re driving down fares.

And for that matter, something tells me the average American wouldn’t be all that sympathetic to Delta whining about how they can’t charge higher fares, given how expensive airfare is, and given how Delta is turning record profits.

I guess Delta’s argument boils down to: “the Gulf carriers are causing us to lower our fares somewhat… we only made over a billion dollars profit last quarter… stop them now, in the name of patriotism, American jobs, and 9/11!!!”

Bottom line

Delta was probably completely justified in cutting frequencies on their Atlanta to Dubai route. They’re a publicly traded company, and they have an obligation to maximize shareholder value. So it’s possible that the route was profitable, but they could turn better profits on other routes.

But to suggest that cutting a couple of frequencies a week on a single route is a sign of how the Middle Eastern carriers need to be stopped is sort of preposterous. Kudos to Emirates for responding in such a classy, simple way.

Comments

  1. Isn’t ATL-DXB returning as a daily frequency in Spring 2016 anyways? Not sure how there’s overcapacity to the ME if Delta will be flying daily alongside QR and TK in S2016.

  2. Mind you Emirates’ response was purely in response to Delta’s hence their spokesman said “…consumer demand or overcapacity is not the issue”. Therefore yield is not the issue here Lucky.
    Delta hasn’t talked about it hence Emirates was smart enough not to refer to it as well.

    The raucous by DL was overcapacity EK responded smartly enough by saying your load factor is >85%.
    Well-played Emirates.

  3. Delta’s anti-government subsidy stance is an interesting change of pace. This must mean their backing off of their opposition to the Paulding airport expansion too.

  4. Well done ! Anderson needs to back out of this as quickly as he can before he becomes an even bigger @#$@$

    For me my next long haul flight is on EK

  5. Delta and the other American carriers don’t like it that government subsidized Middle Eastern carriers “steal demand”, but they sure are quiet about the fact that the US government keeps all of their foreign competition out of the US domestic market… sounds like a good subsidy to me. And the US flyer suffers the consequences of sub-par service and no alternatives.

  6. “We tested this page and blocked content that comes from potentially dangerous or suspicious sites.” From McAfee.

    Why does this keep happening on your blog?

  7. Except that ECON101 will teach you that reducing demand and pushing down prices are two sides of the same coin. If you reduce demand for a product, price will fall given the same level of supply.

    I agree that this is purely a political play and Delta should be arguing that decreasing yield makes the route unviable because there is no evidence that they are selling less (assuming the load factor is correct).

  8. What’s more ludicrous is Delta’s lobbying against Ex/Im Bank. It is paying [its most attractive] flight attendants to lobby HEAVILY against renewing Ex/Im Bank. Friend of mine is doing it. Emirates pays a little less interest when it buys Boeing jets due to Ex/Im loan guarantees. We figured it at about 8 cents per seat per flight. FAs of course weren’t given the math, simply told that the advantage Emirates gets from the loan guarantees costs Delta jobs.

    Not sure why Delta wants Emirates to buy Airbus planes instead, but that’s the likely result.

    For those who don’t know, Ex/Im Bank doesn’t cost taxpayers anything – last year it PAID $785 million to US Treasury. Yeah, it MAKES money.

  9. The reduction comes amid overcapacity on US routes to the Middle East operated by government-owned and subsidised airlines, Delta spokesman Trebor Banstetter told Reuters this week. Emirates said Delta has no head to head competition as it is the only airline currently flying direct between Atlanta and Dubai.

  10. Not really up on the economics/geopolitical issues fluently discussed here, but after flying ATL-DXB in BC/Delta One this year, it was easily seen, IMHO, that the product, old metal (especially), and overall comfort was not very good. Uncomfortable, narrow, and hard lie-flat seats, and a somewhat dreary interior spelled “no-more-for-me” on this flight. I’d easily now rather fly EY or QR to their M.E. hubs and transfer to DXB, notwithstanding having to fly to somewhere else in the USA, instead of ATL.

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