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Taking the sixth

CommentListen to the debate between Airbus and Boeing and you might think that the only issue about the future of long-haul routes is whether everyone will fly between big hubs in big jets like the A380 or between smaller cities on thinner routes with hub-busters like the 787.

But both sides ignore an equally important way to move traffic between country A and country B – that is the sixth freedom carriers that link A and B through their home hub in country C. Emirates illustrates how a sixth freedom airline can turn its location into a profitable long-haul hub and spoke operation. Using Dubai as the hub, Emirates collects traffic from India, South-East Asia and Australasia, connects it through its home base, and sends it on to Europe, Africa, and North America. Just as hub-and-spoke networks transformed domestic routes, sixth freedom carriers breathe new competition into long-haul markets.

Sixth freedoms have been around a long time, but have received scant notice. Carriers such as Singapore Airlines (SIA) and Thai Airways have flown sixth freedoms for years on the Kangaroo route between Australia and Europe; Japanese airlines use them between the rest of Asia and North America.

The strongest sixth freedoms are over hubs that draw plenty of origin and destination traffic, such as Singapore and Tokyo. But Panama’s COPA has found its niche on thinner sixth freedom routes between the Americas by resorting to regional jets. As China’s traffic grows, its carriers will have big opportunities to exploit sixth freedoms from parts of Asia and Australasia over Chinese hubs to Europe. Any country that watches lots of contrails cross its skies has the potential to operate six freedoms.

Yet, they have detractors. Australia’s Qantas complains that sixth freedom carriers such as SIA and Emirates explain the plunge in its overseas market share from 41% to 28% in the past decade. With Emirates now seeking to double its flights into Australia to 84 a week, Qantas claims it cannot match the advantages that Emirates enjoys.

In some ways this is a valid point. Even if Dubai agreed to host an offshore hub for Qantas, the Australian airline would still need fifth freedoms to operate beyond Dubai – not to mention the costs of setting up a foreign base. Singapore has also invited Qantas to set up a hub there, but it would suffer from the same obstacles. A point-to-point carrier can rarely gain enough fifth freedoms beyond an intermediate point to match a sixth freedom carrier’s network. The fifth freedoms owned by some US carriers over Japan are the exception that prove this rule. A sixth freedom carrier can offer more city-pairs than any point-to-point airline, even with the best hub-busting aircraft.

Qantas says it wants parity, not protection, but it is hard to know what parity means in this context. If it means that Qantas should have the same traffic rights beyond Dubai that Emirates has, that is an impossible goal, at least so long as world aviation functions under a system of bilateral air service agreements based on reciprocity.

Point-to-point airlines also complain that sixth freedom carriers divert or siphon off traffic. But is this really true? Again, take Australia as an example. Of the 650,000 passengers Emirates carried in or out of Australia in the past 12 months, more than 80% flew to or from cities where no Australian airline lands – such as Paris, Zurich, and Vienna.

Qantas has traffic rights to some of these cities, but does not use them. In Europe it focuses almost exclusively on London Heathrow. Yet, London represents the origin or destination of less than 15% of the Australian passengers who fly Emirates.

Emirates chastises Qantas for being “obsessed” with a “minimalist network” that concentrates only on big gateways such as Heathrow and Los Angeles to the detriment of smaller cities. But this is largely due to the inherent differences between a sixth freedom and a point-to-point carrier. Because Qantas cannot match a sixth freedom carrier’s ability to collect and redistribute volumes of traffic over its hub, the point-to-point carrier cannot operate as profitably on secondary routes.

This is not an argument for limiting sixth freedoms. It is a reason to applaud them for creating opportunities we otherwise would never have. ■

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