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Sun 30 Jan 2011 09:45 AM

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Fighting talk

Emirates says Lufthansa is lobbying against it. The German carrier has hit back with claims of unfair treatment in Gulf

Fighting talk
Fighting talk
Joachim Steinbach, Lufthansa’s MENA vice president of sales and services says that Emirates is more free in Germany than Lufthansa is in the UAE.
Fighting talk
Emirates president Tim Clark has accused Lufthansa of trying “to take the Gulf carriers down.”

Any good poker session, courtroom drama or scrap needs equally matched opponents ready to fight and eager to strike the deadly blow.

Across the globe, two heavyweights of the aviation industry have been circling each other in recent months and a full scale clash of the titans is becoming increasingly likely.

In one corner is Dubai-based Emirates, which, from Korea to Europe to Canada, has a fight on its hands convincing governments its expansion plans are not a threat to local jobs and are driven purely by local demand.

In the other corner is Lufthansa, Germany’s national carrier and Europe’s largest airline.

Late last year, Emirates’ vice president Maurice Flanagan told Arabian Business he believed Canada’s refusal to permit more landing rights to his airline — a decision that has escalated into a diplomatic dispute between the two countries — was fuelled by opposition from the German carrier.

“They are targeting Emirates, being egged on by Lufthansa… It is purely for the protection of Air Canada,” he said.

Lufthansa dismissed the accusation and pointed out matter-of-factly that bilateral flight agreements are negotiated by countries and not by individual airlines. Lufthansa had no influence over the negotiations between the two governments, officials claimed.

But Flanagan was not left standing alone for long and, in a classic thriller-style twist, the next accuser was uncomfortably close to home — step forward Harald Wolf, the mayor of Berlin.

“The Berlin government was, and is, in favour to open the airport to Emirates and give them the possibilities to have direct flights,” mayor Wolf told Arabian Business of his plans for the German capital’s new airport when it opens in 2012.

“But the difficulty is the federal government. They are very restrictive. They [the federal government] have had a very strong lobbying from Lufthansa not to strengthen Emirates.”

Unsurprisingly, after the mayor’s comments the global media was soon filled with reports that Lufthansa was operating a dirty tricks campaign to stop its fast growing Dubai rival from getting its hands on landing rights in Berlin.

And before the German carrier could muster a comeback, Emirates president Tim Clark landed a solid right hook when he accused the Cologne-based airline of trying to “take the Gulf carriers down.” He pleaded that the German government “see sense” on Emirates’ seven-year-old requests for landing rights in more German cities.

But having hitherto largely kept its counsel, Lufthansa seems now to have become weary of the accusations. Metaphoically rubbing its jaw after Clark’s direct slug, it has decided it is time to talk, to set the record straight. With that in mind, Arabian Business was summoned for an espresso.

No sooner had the conversation begun than it became clear Lufthansa officials are sticklers for semantics. They have taken major offence to the use of the word ‘lobbying’, and accusations of trying to sway the German government.

So, has Lufthansa been ‘lobbying’ the German Federal Government to stop Emirates getting more slots in Germany?

“I can absolutely deny that,” Joachim Steinbach, Lufthansa’s vice president of sales and services for the region says straight out, before trotting out the company line about landing rights “being discussed and negotiated between countries and not airlines.”

Has Lufthansa spoken to the German government about Emirates expanding further into Germany?

“In every economy of the world, there is a certain exchange between government and industry players, not just in the aviation sector. These consultations take place everywhere, even in the UAE,” he says.

Surely Lufthansa has told the German government it doesn’t want the current agreement between the UAE and Germany expanded?

“I think what we have to make clear is that the relevant authorities act independently. They might listen to what Lufthansa is saying but it is an independent decision.”

But is it fair to say that Lufthansa would not be pleased if Emirates was allowed to fly to more than four German cities, which is the maximum the current agreement allows?

“We are not excited about it… There won’t be an office party,” Steinbach deadpans.

The Oxford English Dictionary defines lobbying as “seeking to influence legislators on a particular issue”. Lufthansa might prefer “discussions between parties”, but it boils down to the same thing: trying to protect market share.

Much of the media furore centred on accusations Lufthansa was trying of trying to stop Emirates obtaining landing slots in Berlin’s new airport when it opens in 2012. However, the fact is under the current agreement, Emirates could start flying to Berlin whenever it wanted. The agreement — which Steinbach describes as “the most liberal one that exists between the UAE and Europe” — allows the airline to operate as many flights as it wants to any four German cities.

The catch, of course, is that the Dubai carrier currently fulfills its city allocation by operating to Dusseldorf, Frankfurt, Hamburg and Munich. If it was to start flying to Berlin or Stuttgart, then, it would have to give up existing routes, which have proved lucrative.

Lufthansa’s claim that the current agreement is liberal enough is given credence by the fact traffic between the UAE and Germany is very much weighted in the Dubai-based carrier’s favour. At present, Emirates operates around 49 flights to Germany a week, while Lufthansa operates only 21 connections to the UAE.

Steinbach says its Dubai-based rival is pushing for more landing rights in both Canada and Germany because it wants to re-route international traffic moving from West to East away from traditional hubs in Europe through Dubai instead. He says Emirates needs to do this to fill the 200 aircraft they currently have on order.

He says: “The [Gulf] hubs are trying to develop their hubs with [small] home markets. For all these carriers it is extremely important to fill the capacity with transit flows that can only be acquired with additional traffic rights. The hubs in Europe are, and will be, competing even more in the future with hubs around the world.”

Not only will that have “an impact on natural flows and direct routes,” but it could also lead to “over capacity in the market,” he warns.

As far as landing rights in Canada are concerned, Emirates has accused Lufthansa of “egging” on the Canadian government to refuse it more landing rights in Canadian cities. Lufthansa is doing this, Emirates maintains, in order to ensure Canada-bound traffic continues to fly east via Frankfurt.

“(Air Canada) would rather its passengers be diverted through hubs in Europe to access these destinations; no matter how inconvenient, costly or time-consuming… Why should Canadian consumers be dictated to by the narrow interests of Air Canada and its fellow Star Alliance member Lufthansa?” Emirates said in a press brochure issued last November.

Of course, Lufthansa is not the only European carrier to call for curbs on the expansion of Gulf carriers for long-haul routes. Air France, KLM and British Airways have also recently expressed reservations. The carriers say Gulf airlines benefit from subsidies they claim are unfair to finance aircraft deals. They say they are excluded from taking advantage of the same subsidies by a ‘home market’ rule which precludes domestic airlines in countries where Boeing and Airbus are built from being granted export credit facilities.

Sympathy for the European carriers from their Gulf rivals seems thin on the ground. Last week Etihad CEO James Hogan said they need to adapt or get left behind.

“Protecting a national carrier from open competition is a net negative policy setting for any economy. Any benefits to those airlines yielded from a protected aviation market are far, far outweighed by the loss of traffic growth and associated job creation to the wider economy,” he said.

“They would be well advised to focus less on how unfair they perceive the world to be, and more on how to adapt to take advantage of emerging opportunities and changing operating conditions… those that cling to the old order of things will be left behind,” he added.

With all this talk of unfair advantages and lobbying, Lufthansa recently pointed out it does not have equal footing on Emirate's home turf in Dubai. In a Rocky-style late manoeuvre, it seems Steinbach has taken the beating from Emirates while keeping his best punch till last.

He says: “[Emirates] can walk freely and move freely in Germany. We, Lufthansa, according to the local laws of the Arabian sponsors, are very much limited in the way we do business in Dubai because we have to adhere to local sponsorship agreements.

“We cannot do business as a legally independent company. We are really restricted. We have to overcome these ancient trade obstacles in the way we do business here, which is a lot of cost.

“I think before we fight, you have to recognise that on one hand there is the discussion about traffic rights but on the other hand I think what we [should] claim as Lufthansa is also equal treatment here in the Arabian Emirates.”

What will the German government decide? Who knows, but it seems both sides are nowhere near finished in the public relations war. The fight goes on to see who will eventually be crowned the biggest and best international aviation hub in the world.

Ding, ding — let the fight continue.

Matt 8 years ago

It is all clear now, Lufthansa is admitting it did & still is "lobbying" the federal government to halt Emirates' expansion plans in Germany. I can understand they do not want any competition. It is no brainer that Emirates will create jobs when it expands & trade will increase both ways, Lufthansa is a huge company & I find it hard to beleive they ran out of straegies & counter plans to compete with Emirates, maybe they beleive this is the shortest way to fight instead of being creative. Last point "live by the sword, die by the sword", whatever they (Lufthansa) are doing will evetually come back to haunt them.

Zafar Abbas 8 years ago

Germans should be ready to face visa restrictions like canadians. Eventually Emirates fights will bear fruits.

Z. Ali 8 years ago

If they want a fight let it be in the shape of fair business competition not using available authority to curb others rights. What Canadians did is also such a shame.

John 8 years ago

Whatever one believes is going on behind the scenes about Berlin, the simple facts are that Lufthansa has a completely different business model to Emirates and Etihad. Lufthansa has to deal with European trade unions, is expected by its shareholders to make a profit and also protect employment of German nationals. The Gulf carriers don't have any of these concerns, Eithad never yet making a profit and a virtual hall of smoke and mirrors surrounding the financing of Emirates. It also doesn't help the UAE carriers that their spokesmen talk too much. Qatar Airways quietly goes about its business, signing up new landing rights in Canada and so on. There is a lesson from Doha in this.

Ramin 8 years ago

Excuse me? "also protect employment of German nationals"??

Germany is not UAE. Foreigners living in Germany enjoy the same rights, besides being able to vote, as German citizens!

Ramin 8 years ago

hahaha, yeah right!

and EVEN IF it did happen, it would hurt UAE, not Germany!

abra 8 years ago

1) Etihad is not Emirates. While Etihad exists solely as a marketing tool to bring people to Abu Dhabi, Emirates actually is a very profitable entity. There is no smoke and mirrors surrounding its finances; they are readily available for all to see on its website, as audited by PwC.

2) Qatar is a mix of Etihad and Emirates; its a marketing tool but it does serve a purpose. Its not yet profitable, so whats the lesson to be learned there?

As for Ramin; foreigners are foreigners, citizens are citizens. Germany does not have foreigners who are treated as citizens. You may see german citizens of non-germanic origins as foreigners, but they are citizens just like you are, with all the rights and obligations that you have.

Paolo C 8 years ago

I agree. They are protecting their business in a fair way, whereas UAE is protecting their own by changing the laws after making many promises, many of them never kept. Be honest about that.

procan 8 years ago

canada, germany, france and most asian countys really have no common ground ground with these middle east destinations othere than the oil!So you guys sell the oil and we will send you lots of toys to play with . but stay in your own play ground and be nice eh.

HD 8 years ago

as a Canadian I am disturbed by your ignorant comments. It does however show how we can we have a fool voted in as prime minister. You should be ashamed of yourself.