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Thu 24 Jun 2010 02:17 PM

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Air France KLM chief warns Emirates over expansion

Peter Hartman says Dubai-based airline could face challenges on traffic rights.

Air France KLM chief warns Emirates over expansion
NEW PLANS: Emirates has signed a $11.5bn deal to buy 32 additional A380 ‘superjumbo’ aircraft from European manufacturer Airbus. (Getty Images)

Emirates Airline’s global expansion plans will be increasingly challenged by governments' reluctance to agree more traffic rights, a senior executive at Air France KLM reportedly said in New York earlier this week.

The Dubai-based airline is likely to face "more and more reluctance [by governments] to grant traffic rights," Peter Hartman, chief executive of the KLM unit of Air-France-KLM, and a member of the airline's governing board, told the Dow Jones Newswires in New York.

At the Berlin Air Show earlier this month, Emirates announced it had signed a $11.5bn deal to buy 32 additional A380 ‘superjumbo’ aircraft from European manufacturer Airbus. This was in addition to the 48 Airbus 380s, 70 Airbus 350s, 18 Boeing 777-300s and seven Boeing air freighters on order, totaling 143 wide-body aircraft worth more than $48bn at list price.

However, the carrier’s ambitious expansion plans are encountering obstacles around the globe, as governments implement increasingly protectionist policies to safeguard their own national carriers.

Recently, an unsourced report in the French La Tribune newspaper said the French government had rejected requests to allow Emirates to obtain more landing slots in Paris and had only agreed to one new landing slot, between Dubai and the French city of Lyon. Emirates has also been refused permission to increase its capacity to Canada and South Korea and is also embroiled in a fare dispute with the German government, which last year forced it to raise its rates on some routes to Germany so that it did not undercut EU carriers.

An Emirates spokesperson told Arabian Business in an emailed statement on Thursday that “the decision on airport slots are negotiated by the Dubai Civil Aviation Authority (DCAA) and the aeronautical authorities of the governments involved.”

The chances of European countries blocking route applications from Gulf carriers are slim because of the impact that would have on Airbus, said Richard Aboulafia, vice president at Fairfax, Virginia based consultant Teal Group.

The planemaker has plants in France, Germany, Spain and the UK, has 280 orders for its A380 and A350 models from Emirates, Qatar Airways and Etihad Airways of Abu Dhabi.

“The Middle East is grabbing market share from legacy airlines and European governments seem willing to make that sacrifice," Aboulfia added.

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Original Joe 10 years ago

These legacy carriers are worried about Emirates and should be. But hot on their heels will be Qatar Airways and Etihad. There may be some push back from countries but I believe after time these airlines will get the landing slots they want. There are too many other business interests at stake not to give the landing slots. European governments cannot afford to hurt other business interests just to make their airlines happy.

Frank Forsberg 10 years ago

This is what free market is all about. What the heck do you think that Gulf Air is revamping its organization and operations for? They know they won't be able to compete against Etihad, Emirates, and Qatar for domestic (GCC) market share. they are gearing up for a piece of the rest of the world. I rather pay $500 more for these airlines than travel with British Airways for free. Airline and Airport operations of most of EU nations are nightmare. Just improve and people will fly with you. You don't need protectionism ideas. I love KLM but I hate Amsterdam airport. Lufthansa is bad but I love Frankfurt Airport methods and staff (best in the world). That is why people love Dubai if you tell them this is not good it is gone next day. Look how Jeff Immelt CEO of GE is thinking. He loves world coming to USA, that means he knows he can defend his turf and keep his customers and enter your turf with $100 bn cash. People that worry are companies that abused customers and know as soon alternative arrives they will leave.

Paolo C 10 years ago

Be onest. If there is a strong airline company which would like to take traffic shares from GCC states would any arab state open their runways to them?

asif ahmed 10 years ago

GROWTH IS INEVITABLE..MARKET FORCES DICTATES THE TREND AND THE DIRECTION...RESTRICTIONS, CONSERVATIVE APPROACH AND PROTECTIVE POLICY & APPROACH WILL BE ERODED BY THE FREE MARKET AND LIBERALIZED GLOBAL ENVIRONMENT. DISALLOWING ONE AIRLINE WILL NOT MAKE THE OTHER COMPETITOR PROFITABLE OR REDUCTION IN LOSSES...IN TODAYS COMPETITIVE WORLD SURVIVAL OF THE FITTEST WILL SUSTAIN TO THE MARKET FORCES....BESIDES IT IS NOT THE DOMAIN OR THE MANDATE OF AN AIRLINE TO MAKE SUCH PUBLIC STATEMENTS, BECAUSE THIS SUBJECT IS DEALT BY THE RESPECTIVE AERONAUTICAL AUTHORITIES OF THE TWO CONTRACTING STATES.....BILATERAL AIR SERVICES ARRANGEMENTS IS A TECHNICAL SUBJECT WHICH IS TO BE DEALT BY THE CONTRACTING STATES........HOWEVER THE FACT IN TODAYS COMPETITIVE ENVIRONMENT THE PROTECTIONISTS WILL BE LOSERS IN THE ECONOMIC RACE.....ASIF AHMED..AVIATION MANAGEMENT ECONOMIST

Original Joe 10 years ago

To answer your question...YES! Virgin Atlantic started flying to Dubai maybe 2 or maybe 3 years ago. They have 1 flight a day to Heathrow. Virgin has said they are considering adding a second daily flight. If you go online and look at Virgin's prices they are always lower than Emirates, always! You don't hear Virgin complaining that Dubai will not give them another landing slot because Dubai WILL give them another landing slot even though Emirates may be losing a few customers to Virgin. I have never read an article about any airline being refused landing rights in Dubai or anywhere else in the Middle East except for airlines with poor maintenance records where the airlines safety has been questionable. If there is an article out there please let us know but I believe the Middle East is open for business whereas Canada, France and others are running scared because Air Canada and Air France are rubbish airlines trying to hang on the few customers they have left.

Alan 10 years ago

I have flown on KLM - their aircraft are old and uncomfortable, the in flight 'service' is the worst I have ever encountered. To the CEO of AF & KLM here is the news....Emirates will blow you out of business. Why? Because they have the vision, investment, business skills, the passion of aviation, the best pilots and attendants, a great hub and most important of all the coolest cost effective aircraft and reliable service. BA, KLM, Air France & Lufthansa you are all doomed because you are fat, bloated and greedy - your CEO's and governments are a joke. I support aviation and not out of date broken business models and policies that deserve to fail spectacularly. Well done Emirates - go for it!

rene eijkenboom 10 years ago

So you see ??? Do you believe it now ?? It is not about global economy and efficiency, it is all about the money, taxes on taxes and protectionism !!! Now I know why the Emirate rates have jumped on Holland en Geman destinations. I thought it was illegal to keep your rates artificially high in colaboraton with competitors. Shame on you EU. Nellie Smit Kroes, there is work to do for you here !! I am Dutch and I am forced to fly with KLM now (first time since 3 years) due to these artificial financual reasons!! Back in traffic jam and delays of Amsterdam again. It is rediculous and I will keep promoting Emirates for best service, quality, comfort and modern airplains. The favor should be for the people who flay and pay and not for governments and shareholders !!! Go Emirates, go !! You have what it takes.

sandprince 10 years ago

Few decades ago there has been a separation of airport, ground services and airline ownership which to me is like separating like separating car sales form car service in a automotive dealership. Both these activities compliment each other and it is the ultimate common owner of Dubai Airport and Emirates that is one of the two important reasons for Emirates successes. What is the Landing charge that Emirates pays to Dnata? What are the ground service charges that Emirates pays. Does Emirates get a volume discount? What does Emirates in flight catering charge other airlines? These inter company charges are a non issue when there is one ownership. This is the key strength of Emirates. The other of course in non unionized labor.

Sam 10 years ago

Without a doubt, legacy and national airlines and carriers are mostly bloated fat old organizations that can no longer compete with progressive customer-oriented airlines like Emirates, and I totally support the comments that were to that end. BUT, it is indeed unfair that Dubai airport places exhorbitant charges and limitations on all airlines other than Emirates, and from insider information the airport and Dubai aviation authorities have been low-balling all the airlines with taxes and stacking charges, otherwise nullified or re-imbursed to Emirates. This practice is mostly illegal anywhere else in the World and it is because of that Emirates has an advantage. If other airport authorities figure out a way of levelling the playing field, Emirates airlines will indeed suffer, and its much increased ticket prices will no longer allow it to be competitive..

Sven Jacobs 10 years ago

Emirates does a great job at delivering a good product. However: of course you can offer a great product at a low price when your airplanes and fuel are paid for pretty much in cash by sources outside the company. How come traditional companies cannot afford to buy 100's of new aircraft at once and Emirates can? This way, Emirates can afford spare aircraft and have them available even with tech. grounded airplanes and late arrival aircraft due weather, thus reducing delays and non-connection flights. These circumstances, in combination with low wages and little rights (unions) for employees, assist in outcompeting other traditional airlines. The (necessary) protection of the employees and policies forbidding state support to airlines by the EU for EU-based airlines have in fact helped Emirates so far.