April, A Month of Surprises and Controversies

April has been an interesting month for Etihad and the region. No surprises, well maybe a few small ones.

The big news is Etihad's 24% equity stake in Jet Airways for $379 million, no surprises here.
This will increase Etihad's reach in India which was only 2% of India's international traffic in 2011/2012. It will also provide Jet Airways with an international hub in Abu Dhabi. The equity stake will come with the usual joint fuel purchases, insurance, maintenance and ground handling, etc. to save both airlines money.
 
The surprise is, two days later, the Indian Government signing an agreement with the UAE allowing for 50,000 seats weekly for each side from the current 13000 between India and Abu Dhabi phased in over 3 years. A move that miffed Indian carriers, and Jet airways wants 41600 seats (its current share is 4285 seats). So far so good, except Air India is now faced with a problem much bigger than Emirates. A GCC airline with a tremendous Indian market reach and feed. Air India is expected to get its act together and start competing, ah well more likely they will ask for more government subsidy, at a cost to the taxpayer which is much more than Etihad's FDI.

FDI was intended to inject foreign investment in the existing airlines to allow them to expand.
Well maybe not, earlier the Indian government approved a joint venture between Air Asia and the Tata Group, Air Asia India. A low cost airline that will compete with Spice Jet and Indigo. The two airlines least affected by the Etihad/Jet Airways deal. That will keep the aviation market in India in a state of flux.

Another surprise is a code share agreement between Air Canada and yes Etihad. Two years back a request for additional frequencies and destinations for Etihad and Emirates had Air Canada up in arms to the point that it strained diplomatic relations to the point the UAE government revoked the entry visa at arrival for Canadians among other things. Things have been improving and Canadians got their visas on arrival privileges back. It seems Air Canada realized there are Canadians living in the UAE.

Abu Dhabi was in the center of some controversy, a DHS proposal for a US Immigration and Customs pre clearance arrangement in Abu Dhabi. This had US Carriers, A4A and others complaining, putting it mildly, that this will provide an advantage to a foreign carrier in a city where no US carriers operate. Well, that prompted Dubai to put itself forward as an alternative, after all both Delta and United operate to Dubai and Emirates has more USA frequencies. I am sure we will be hearing about this in the coming few weeks.

Of course the old complaint of EXIM bank financing of foreign airlines' aircraft purchases came up again. Delta and others do not like it, according to them it affords foreign competitors owned by governments an undue advantage. These days competing aircraft are almost technically and operationally similar, so financing tips the balance. Europe has ECA to support Airbus, go figure Delta. Considering that US carriers don't even consider the MENA market worthwhile, taking the amount of direct flights to the region as an indication, the only thing it will achieve is loss of jobs at Boeing and their suppliers. US carriers have to learn to compete on service, I mean service comparable to GCC and Asian airlines and of course it would help if they increase the frequency from a daily flight to Dubai to a few other destinations in the region.

Last but not least, Qatar is demanding and Canada is resisting a request to move the ICAO headquarters from Montreal, where it has been since 1947. The reasons are location (too far for Europe and Asia), harsh winters, high taxes and of course visas, Canada makes it hard for delegates to get visas. Qatar proposed Doha as an alternative and is ready to build the new head quarters and fund the UN agency's running costs starting from 2017 (the lease for the HQ ends at the end of 2016)

On the lighter side of things passenger traffic increased in MENA and a few airlines were profitable!

Canada's Air Transport Competitiveness

On 20 January 2011 in an address in Montreal Mr.Giovanni Bisignani the Director General of IATA called on the Government of Canada "to improve its global competitiveness in air transport, travel and tourism" Government policies has eroded Canada's competitive edge to the extent that Canada became the 15th most visited country in 2009 from the 8th in 2002 and the World Economic Forum Travel and Tourism Competitiveness in 2009 has ranked Canada (106) behind Japan (86), UAE (50), India (46) and China (20).
As a result the government protects Air Canada at the expense of the tourism industry by preventing airlines from   freely operating into Canada or allowing Canadian operators the freedom to compete with Air Canada.
Claims of loss of jobs if Emirates and Etihad operated additional flights into Canada are not supported by the realities on the ground. On the contrary, these additional services would have increased the number of visitors to Canada and probably generated additional jobs.
The short sightedness of these policies has resulted into more barriers and a rift with the UAE which is affecting Canadian Businesses and Citizens.  

For the full Press Release click here

The Saga Continues, Air Services Agreement between Qatar and Canada

Canada has signed an Air Services Agreement with Qatar (here to read more) weeks after both the Canadian Government and Air Canada opposed it. It seems Mr. Al Baker's alluding to the possibilities and impossibilities of investments and trade had helped people in Ottawa make up their mind.

"This agreement responds to the needs of the Canada-Qatar travel market and is a first but important step in developing Canada-Qatar air relations," says John Babcock, a spokesman for Canadian Transport Minister Chuck Strahl.

Sounds great and should equally apply to the UAE which is almost 4 times a larger market with a much larger Canadian Community however Air Canada is still self delusional and dragging the government with it

Recently Air Canada chief executive Calin Rovinescu said the carrier "is not supportive of turning over our hard-earned network and flow traffic to state subsidised carriers of countries where there is no such reciprocal demand".

So in his eyes all of a sudden Qatar Airways is not a subsidised carrier and there is more reciprocal demand with Qatar than the UAE.

I respect the need to protect a "hard-earned network" including its feed to and from Star Alliance partners. It appears that Air Canada has an objection to a Dubai Global Hub and it fears that if Emirates, not Etihad per se, dumps capacity into Vancouver for example it will deter all other airlines from competing out of Vancouver and generating 275,000 new seats per year will decimate Vancouver as a hub and make it into a stub in Emirate's Dubai hub.

Air Canada has indicated that they oppose any increases in frequency or addition of flights to the UAE and Qatar, in order to protect their traffic to Frankfurt. Lufthansa (Star Alliance) will operate from there onwards to MENA and the GCC. Basically it boils down to a capacity issue coupled with a level of service. Air Canada does not have the lift to operate additional flights or to operate directly to the UAE and Lufthansa probably has different plans.

Canada is a popular immigration destination for professionals from MENA, GCC and the Indian Sub Continent. It is also a popular destination for higher education from the region. Hence, this is a growing market for "Visiting Friends and Relatives"

Air Canada needs to leverage its Star Alliance connections to tap more into this market or start operating its own flights to the region.

The unfortunate escalation between the UAE and Canada over this issue so far has been low key, even though to Canadian residents in the UAE it has an impact on the mobility of their non resident family members.

Hopefully, the issue will be resolved to the mutual benefit of all concerned.