Qantas (QUBSF.PK) and Emirates Airline propose to form an alliance that could serve as a bit of...

Qantas (QUBSF.PK) and Emirates Airline propose to form an alliance that could serve as a bit of a disrupter in the sector. The 10-year deal would move past code-sharing to include cross-selling seats on each other's flights. It could also spark more complaints from Delta Air Lines (DAL -1.5%) and Lufthansa (DLAKY.PK) over the high level of subsidies that Emirates receives from the Dubai government as the carrier broadens its reach.

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  • Pony01
    , contributor
    Comments (324) | Send Message
    The largest threat to international flag carriers in a free market is a flag carrier competing in the free market while being manipulated by their respective government. Emirates growth (and variable costs) is/are subsidized by its government (and ours - the U.S.A. - with cheap loans through the import export bank, effectively making their fixed costs cheaper than U.S.A. flag carriers). It is difficult for any flag carrier to compete under these conditions. Ultimately, economies of "non-scale" (shrinking capacity to increase per seat costs - see UAL, DAL, and USAIR, post bancruptcy) will zero-out and lead us into the next stage of flag carrier destabilization. Canada has figured this out and has restricted Emirates access commensurate with their population. Tinkering with the free market is dangerous and I don't support it. However, allowing Emirates and "Emirates type" business plans to compete on the same playing field is inherently destabilizing to ALL flag carriers without the same access to subsidies that these "Emirates type" carriers enjoy. With Qantas now code sharing + with Emirates, you can see the destabilization of the free market moving into the next stage. We shouldn't wait to see how this ends.
    6 Sep 2012, 04:48 PM Reply Like
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