By David Knibb in Brisbane
Market access is at the centre of the debate in Australia as Emirates steps up its campaign to operate more services down under
Carriers such as Emirates and Singapore Airlines face a unique challenge whenever they seek traffic rights. Because they rely so heavily on sixth freedoms - carriage of passengers and cargo in transit over their own hubs - their governments cannot offer point-to-point airlines comparable rights. Rivals use this as an argument to block them, sometimes with success. "Level playing fields" has a nice ring to it, but reciprocity is a harder concept to apply.
Such a dispute is moving centre stage in Australia, where Emirates has launched a campaign to gain additional rights between its Dubai base and Australia's four largest cities. The impetus for this move is that Emirates will use the last of its Australian rights by September when it starts a new service into Perth. The United Arab Emirates-Australia bilateral was last revised in 1998, and last amended in 2001. Rather than seek another amendment, Emirates hopes to set the stage for a new bilateral that would cover the next decade, allowing it to make longer-term plans.
The UAE flag carrier has made no secret of its goal. It wants the right to add capacity on a phased basis as traffic grows, so that by 2014 it could be operating four daily flights each to Brisbane, Melbourne, Perth and Sydney. By its own estimate, this would boost its share of Australia's international traffic from 5% to almost 11%.
Emirates has launched a campaign to convince the Australian government to start bilateral talks. Emirates Airlines president Tim Clark, who visited Australia for this purpose in June, hopes to see government-to-government talks start later this year.
On the eve of Clark's arrival in Canberra, it became clear his job would not be easy. Two weeks earlier, Australia's bureau of transport economics released a report detailing a decline in international market share by Australia's airlines. Qantas has lost 11 percentage points in the past decade, falling to an all-time low of only 28%. On the heels of this report, a spokesman for transport minister Warren Truss announced that Australia would not grant more rights to Qatar Airways, another sixth-freedom airline, unless they were balanced by more rights for Australian carriers beyond Qatar's Middle Eastern hub.
A week before Clark's arrival, Qantas chimed in. Chief financial officer Peter Gregg said: "The issue is about reciprocity. The Dubai government can't offer [this] because they can't allocate flights into the UK for us. They can offer us flights to Dubai but they're useless. If you can't go out of Dubai, what's the benefit?"
The day before Clark arrived in Canberra, transport minister Truss said that retaining and encouraging the growth of Australian-based airlines was a key economic and strategic concern. In granting air rights, he said: "Our priorities will be determined in part by Australia's broader trade and economic interests, including a balanced package of air service rights."
Truss warned: "Hub carriers wanting access to the Australian market need to be aware that in exchange for access, we will continue to seek the rights for Australian carriers beyond a hub point in the same way hub carriers can already do."
Truss did not explain how this would work. Dubai has an open skies regime. Although Qantas does not choose to fly there, as far as Dubai is concerned, Qantas could have unlimited fifth freedoms beyond Dubai to anywhere. Any limit on those freedoms would come from third countries, not Dubai.
"If Qantas can't fly to London from Dubai because of caps imposed by the UK, we can't deal with that," says Clark. "I have suggested to the transport minister that he talk to Qantas and find out what it's going to do. It's up to Qantas."
Both sides face an obvious dilemma. Emirates, the sixth-freedom carrier, enjoys an advantage over Qantas, the point-to-point carrier. It is an advantage Emirates and its government can do nothing about. They cannot give Qantas what it needs - more rights into Europe. Only the Europeans can do that. The question is whether, until they do, Australia should limit Emirates' rights. It is a dilemma that stands the concept of reciprocity on its head. ■
Source: Airline Business