Delta Cancels Dubai Flights, Blames Gulf Carriers

The greatest battle in the airline industry this year has been between the “big three” US carriers and the “big three” Gulf carriers. The US carriers claim they can’t possibly compete with the subsidized Gulf carriers, and are demanding that they be “stopped” (whatever that means). The timing is ironic, as US carriers are presently experiencing record profitability, which makes it sort of tough for them to play the victim card.

Hands down the most egregious claims have come from Delta. Their CEO, Richard Anderson, has made ridiculous comment after ridiculous comment in this debate. Qatar Airways’ CEO has had some choice words for him, calling him everything from weak to unpatriotic to unethical. #TeamAkbar

Anyway, in August Delta announced that they would be reducing the frequencies on their Atlanta to Dubai route for the winter schedule, from daily to 4-5x weekly. Here’s what Delta claimed drove the decision:

“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.

So if you were ready for Delta to bring back daily service in the spring, you’re out of luck. Delta is discontinuing their Atlanta to Dubai flight altogether as of February 11, 2016. And not surprisingly, the press release with this announcement is titled Subsidized Gulf carrier competition forces Delta to cancel ATL-Dubai.”

Here’s part of the press release:

Delta will no longer fly between Atlanta and Dubai effective Feb. 11, 2016. The announcement comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and heavily subsidized airlines, and less than a month after Delta reduced service between the world’s busiest airport and the Middle East’s largest hub.

The 777 aircraft used to operate ATL-DXB will be redeployed to other Trans-Atlantic markets where it can compete on a level playing field that’s not distorted by subsidized state-owned airlines.

Between 2008 and 2014, about 11,000 daily seats were added between the U.S. and Dubai, Doha, and Abu Dhabi – more than 95 percent of which are flown by Gulf carriers Emirates, Qatar and Etihad airlines. Of the 14 daily flights between the U.S. and Dubai, only two are operated by U.S. carriers. Despite the increase in passengers traveling on these flights, the number whose journeys actually originate or end in the Gulf has essentially remained flat.

Right, the world’s most profitable airline was forced to discontinue service to Dubai. Funny enough this cancellation notice doesn’t actually come with an explanation for why the service was cancelled. Was the load factor too low? Were the fares not high yield enough?

Or does this just simply come down to the same reason that Delta is cutting many other international flights, which is that demand is weak due to the strong US dollar and the weak oil industry (which very well may explain the lack of demand for Dubai travel).

Dubai-2

SAS cut their Houston to Stavanger route due to “reduced activity in the oil industry,” so it’s outrageously disingenuous for Delta to suggest the cause for this route cut is anything other than the strong US dollar and weak oil market.

I’ll once again share Emirates’ (brilliant) response when Delta first announced they would be reducing capacity to Dubai:

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.”

Emirates-Dubai

Bottom line

The victim mentality from the world’s most profitable airline never ceases to amaze me. Markets are constantly changing, and Delta has been cutting international capacity across the board due to the strong US dollar. It should come as no surprise that a route to the Middle East might be cut after activity in the oil industry is greatly reduced.

But I suppose we don’t want to let that get in the way of Delta’s delusional attack on the Gulf carriers.

Qatar Airways is starting service to Atlanta next year, and something tells me that Emirates won’t be too far behind!

Qatar-Airways-A350-Business-Class-96

Comments

  1. What does their profitability have to do with anything? Airlines don’t get profitable by losing money on routes and if Delta is losing money on the flight, there is no reason not to cancel it, no matter how much they are making with their other 5,400 flights.
    Pointing out that they are profitable just shows the weakness of the argument since company profitability has absolutely nothing to do with ATL-DXB.

  2. Impressively strong conclusions on your part. Especially when you absolutely no data or inside knowlege of the route’s perfomance. Delusional is the correct assessment. You applied to wrong party.

  3. Lucky, did you hear the United will also be canceling their flight to Kuwait? Granted, not that you’d miss it, but still interesting.

    “Especially when you absolutely no data or inside knowlege of the route’s performance”

    Um, he quoted a source stating seating capacity at 85%…

  4. DL’s PR machine is going into overdrive today with their A4A departure. I wonder how much their side of the anti-ME3 rhetoric will increase now they aren’t burdened whatsoever by dissenters. I think DL’s citation of FAA privatization is merely lip service (this will never happen in a post-9/11 security environment), as it really seems the ExIm Bank battle combined with the subsidy accusations drove this.

    Also, I would be curious to see DL’s data citing flat tourism numbers between the US and the Gulf states – that seems ridiculous given how much tourism has grown overall in the Gulf market (add in the fact that a strong dollar means nothing for UAE-US travel given the AED is pegged…).

  5. Delta sucks… They always have. Do I still fly them when I need to? Sure… but this political play is just silly, especially eating that the data shows that the planes were typically flying at 85%+ capacity. Seems like a profitable route! Although with Qatar and probably other Gulf airlines coming to Atlanta, why would you WANT to fly Delta to Dubai? Everyone knows the flight experience on those airlines would be way better by a long shot! The elites will be bummed I guess, but that’s about it.

  6. So is this Delta’s brat-like tirade to pull out of direct DXB service so no one can compare them to a superior product from the soon-to-arrive ME3? Is Delta scared?

  7. @wwk5d says: “Um, he quoted a source stating seating capacity at 85%…”

    Please enlighten us all in how load factor equals profitability.

  8. I never said that had anything to do with profitability, nimrod. Especially since you never said Lucky didn’t provide anything about profitability. You said:

    “Especially when you absolutely no data or inside knowlege of the route’s perfomance”

    He provided data on the route’s performance. It was averaging 85% loads. The load factor is one aspect of a route’s performance. Maybe you’d understand it better if I used sock puppets?

  9. The over capacity mentioned in the blog-post, can be confirmed. I was traveling with SAS on one of the last flights out of Houston (IAH), and I overheard the ground handlers from EK (Emirates), and they were talking of approx. 50% free seats on the IAH-DXB departure with an A380, that should be approx. 270 available seats on a Sunday evening.
    I think maintaining the slots within the US airports, is far more important, than making huge profits on the flights.

  10. And this is the key point “Despite the increase in passengers traveling on these flights, the number whose journeys actually originate or end in the Gulf has essentially remained flat.”.

    With little or no feed in DXB DL is going to have a hard time competing with an another airlines home hub on this route.

  11. Delta do better! Your business class product is not up to par, and thanks to the reduction in the Alaska-Delta relationship, Emirates is looking better than ever.

  12. @No Name

    Exactly. Delta ‘opportunistically’ flew that route (since they have trivially inconsequential onward feed from that connection anyway) while oil prices were high and the region was resurgent. But, like UA from IAH to Lagos, as oil revenues have been clobbered, so goes the traffic. It’s economics and it makes sense that the ME3 will do better on that route anyway.

    Of course, Sir Richard the Gizzard-Hearted blames “uneven playing field” or whatever. Another Delta “Got Your Back” PR release…Right. All I hear is what Charlie Brown heard when his teacher talked…. “Blah-Blah-Blah.”

  13. If Delta was actually losing money on this route, they absolutely would have included that data in their press release. This is purely a political move to boost their anti-ME3 message. EK should apply to start service to ATL tomorrow. UA should also take this opportunity to show that they manage to fill a Dubai flight with 90%+ load factors (I fly IAD-DXB on UA frequently and it’s often oversold) despite having direct competition on the route.

  14. @Doug — So you’re suggesting that Delta would cut a profitable route just to make a point? Give me a break. Either the route is unprofitable outright, or it is marginally profitable and Delta believes it could make more money redeploying its 777 elsewhere. Delta didn’t become the most profitable airline in the world by acting irrationally.

  15. There are all kinds of factors involved here but I would say the most important is that the ME3 can all feed into DXB and run full flights to the ATL but Delta cant and its not like Dubai or anywhere in the region really is a big destination for americans either. Throw in subsidies, newer/nicer planes and whatever else and its just not an attractive route for delta.

  16. It sounds to me that Delta has a solid argument. People are flocking to gulf airlines because they offer more than delta at a lower price. Delta is saying that this better service is unfairly achieved thru subsidies. Therefore Delta argues that the playing field is not equal, which seems reasonable.

    If delta were to match gulf airlines in quality and cost, it would not be profitable for delta. They only reason it is profitable for gulf airlines to offer such high level of service at the current cost structure is beside they are being heavily subsidized.

    I believe delta is in the right here.

  17. I have tried for about 4 years to use my Delta Skymiles for a Business class ticket to Dubai. It has NEVER been available. I even called the Skymiles rez line and made the agent look forward at each day for the next 9 months looking for availability. She also found none. She told me the flight is usually sold out and they don’t have “many” free business class seats. Looks like whining about the ME3 carrier competition to me. Delta did just drop out of the Airlines for America Alliance after they didn’t support the US carriers complaints about unfair competition. Coincidence? I doubt it.

  18. @ Mark S

    I don’t see the correlation in that Delta had no competition on the route anyway. So it seems weird to blame the ME3 on a route that Delta had to itself. Now, I think the prospect that they MIGHT have competition on that route someday may have driven them to preemptively exit– And, bully for them for moving the 777 to another route than can make more money.

    But, to blame the ME3 that doesn’t even FLY that route today is surreal. Classic Delta. By which I mean “surreal”.

  19. @Edub

    “I have tried for about 4 years to use my Delta Skymiles for a Business class ticket to Dubai. It has NEVER been available. ”

    They don’t call them SkyPesos for nothing– pesos would be equally useful to you in getting a seat on that route.

    Which is another way to look at the lie-that-defines-Delta. They ‘claim’ the route was unprofitable, which translates into low load factors and lots of empty seats. Yet, the powers-that-be at Delta can’t see the wisdom of burning off some of the imputed liabilities on the balance sheet by letting SkyMiles members burn off a few miles (well, a lot) simply by occupying a seat that was going out empty anyway.

    “Delta” is Cajun for “Lose-Lose”.

  20. @Adam

    “It sounds to me that Delta has a solid argument. People are flocking to gulf airlines because they offer more than delta at a lower price. Delta is saying that this better service is unfairly achieved thru subsidies. Therefore Delta argues that the playing field is not equal, which seems reasonable.”

    You perhaps haven’t looked at the corporate finance behind this, but it boils down to some of the equity of the Gulf Carriers being held by sovereign wealth funds (so, it’s not actually an ongoing ‘subsidy’ in terms of allowing ME3 to run losses). It turns out those wealth funds like to make money too– the ME3 run very solid operations, with lower costs in some regions. The savings go into newer planes and better onboard amenities.

    Guess what? Some Delta stock is also owned by sovereign wealth funds.
    Delta flushed it’s common stock, with liberal bankruptcy laws, to fund its current operations on the backs of shareholders it sent down the toilet.
    Delta takes advantage of lavish tax treatment and very advantageous use of infrastructure funded by taxpayers at the local, state and national level.

    The ‘subsidy’ that Anderson prattles on about is far from a forgone conclusion.

    And, being the prosecuting attorney Anderson is, every one of these dramatic pronouncements sounds like a “if the glove don’t fit you must acquit” thing. If you follow the logic it’s always got holes in it. Big holes.

    So, you have to translate from Anderson-isms:
    “At Delta I’ll make sure we always have your backs” really means, in un-legal form,
    “If we could stuff you d-bags in the cargo hold and haul goats up here to make more money, we would”.

  21. This argument is close to my heart as I fly between the middle east and U.S every six weeks and have been doing so for 5 years. I have tried many different routes on many airlines. The bottom line is this. I choose not to fly with U.S carriers because of awful standard of service old ‘crappy’ aircraft and straight up rude staff. If Emirates quit flying daily to SFO or LAX I’m sure Delta would not fill the slot. And one last comment on Delta’s international routes: I also fly to the Philippines, compare Cathy Pacific to Delta! I’ve seen fare differences of almost 800USD more on Delta.

  22. I was reading the Khaleej Times in Dubai this evening and there was an article about the European airline industry complaining about the Gulf carriers. I wonder what your take on that would be.

  23. I have been flying ATL-DXB for over 10 years and mostly on Delta. Emirates provided the regional connections.
    Delta’s CEO is just not telling the truth. Their planes run a near 100% load factor. You can’t get upgrades and you can’t get points seats unless you give delta 300k plus points. When asked the answer is always “revenue hasn’t released any seats”. This 10 mounths out. If Delta is losing money on this route. They can’t blame the load factor or the ME3.

    Delta has dropped AMM, CAI. CPH and other places I fly. They also don’t care anything about longtime, million milers. It is all about how much have I made off you today. The “new” three class service, trying to turn Economy Comfort, or what ever they have rebranded it today, into the next business class is just another example of charging more for less.

    Enough of my rant. Delta has done this to themselves. They can’t blame ME3. All the Government employees and contractors that provide guaranteed revenue are not a subsidy the ME3 get.

    My February trip is now on Emirates.

    Wizzo

  24. Well said Wizzo and I agree 100%! I too live in this part of the world and the Delta flight from Dubai to Atlanta is ALWAYS full, as in almost no seats available. We have been flying this route for six years, multiple times a year. I don’t see how Delta is losing money.

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