An Italian Court handed Dubai-based Emirates a stinging defeat yesterday, holding that the carrier could not operate its Fifth Freedom Route between New York and Milan.
It all boils down to this–there is a very real (and valid) fear amongst U.S. and European carriers that the Gulf carriers will eat up yields on profitable routes, adding excess capacity and driving down prices while offering a superior product and greater ease of connectivity in fortress hubs. With low labor costs and seemingly unlimited capital, carriers like Emirates and Etihad are mulling over an aggressive Fifth Freedom expansion (flying between two foreign countries during flights while the flight originates or ends in one’s own country, such as New York to Dubai with a stop in Milan). Airports in Germany, Spain, Great Britain, Sweden and Denmark have all approached Emirates about stopovers on North America – Dubai routes.
Perpetually cash-strapped Alitalia and even healthy profiteers like Delta Air Lines don’t want the competition. Delta, avoiding being honest, masks the issue as a plight for the workers of Italy and America, saying Emirates continued presence on the New York – Milan route “could significantly harm U.S. and Italian airline employees by adding unneeded capacity on an already-competitive market.”
Unneeded according to who? I think consumers like the cheaper prices and increased options between JFK and MXP. I think consumers like having a better business class product than Delta and a true first class product. I think consumers might prefer even coach service on Emirates to that of American, Delta, and Alitalia, which also offer non-stop service on this route.
Not surprisingly, Alitalia has been quiet on this. Alitalia is bleeding red ink and Abu Dhabi-based Etihad has stepped forward to purchase a 49% stake in the Italian airline.
Ironic, isn’t it? The very carriers that are charged with destroying jobs might be the savior of Alitalia, even if it means some FAs and pilots will lose their jobs to lower-paid workers from the UAE.
Emirates does have redress options. The likely course of action is appealing yetserday’s decision to Italy’s Supreme Administrative Court. It is not clear whether Emirates must immediately suspend the route or can continue to operate it while the appeal is pending.
I am not yet an expert in EU Aviation law, but what seems odd to me is that Emirates did not just start operating this route in the middle of night. Rather, they obtained permission from the Italian government to run it–
On the 8th of April , the Italian Civil Aviation Authority (ENAC) has authorized the proposed services on an extra bilateral basis, thus granting the fast growing UAE carrier rights to land in Italian territory, and board passengers travelling on to a third state, the U.S., where the passengers disembark (also known as “beyond rights”).
The Italian Civil Aviation Authority has the statutory power, as far as I can tell, to do what it did last April in granting permission to Emirates to operate the New York to Milan route. So, the court’s reasoning doesn’t make it sense–not that I can read Italian. But the court seemed to agree with a purely protectionist argument that–
“These authorizations, technically “free air ” are in fact reserved to national carriers by international treaties, EU and the countries of destination. In no state is even conceivable concession to the non-EU companies…In Italy this was done without any consideration for national carriers and in addition on routes, such as between Malpensa and New York, already abundantly served by Italian and U.S. airlines.”
So Emirates expansion plans may be stalled and the people of Milan might soon face one fewer choice and more expensive airfare between the U.S. and Italy. And who is going to want to do business with a country that encourages infrastructure investment then kicks the investors out?