MIAMI — Emirates Chairman Sheikh Ahmed Bin Saeed Al Maktoum threw down the gauntlet in a recent interview with Bloomberg, responding to U.S. carriers’ complaints about Middle Eastern carriers taking away passenger thusly: “improve your offering and they’ll come back.”
But is it really that simple? Emirates, along with its Middle East competitors Etihad and Qatar Airways, have been on an aircraft buying spree and have been rapidly expanding their route networks into the United States.
Emirates currently flies to 142 destinations in 78 countries in Dubai, including eight routes in the U.S. Etihad serves 63 destinations in 42 countries, including six U.S. destinations. And Qatar Airways serves 146 destinations on six continents, with seven U.S. cities.
In a past story, Senior Business Analyst Vinay Bhaskara argueed that U.S. carriers “do not `want’ to make passengers miserable; in fact quite the opposite. Airlines are simply giving customers what they want.” “That most passengers would prefer a nicer, more premium travel experience is what most people mean when they discuss what customers `want,’” he wrote. “A better definition of “want,” is what consumers are willing to pay a profitable price for.”
And U.S. carriers have been rolling out passenger experience initiatives with great fanfare, with several noting they are using record profits, partially driven by lower fuel prices, to pay for the upgrades. In December, Alaska Airline unveiled its Alaska Beyond concept, which includes a brand-new inflight entertainment system, new Recaro seats and improved food and beverage options.
In the same month, American Airlines announced plans to invest $2 billion in passenger experience items including new seats across all cabins, satellite-based Internet access and upgraded Admirals Club lounges with new food and furniture.
Delta Air Lines followed suit on the same day, unveiling its Comfort+ cabin, a slight upgrade from the current economy comfort product. The new Comfort+ product features the four extra inches of legroom and priority boarding, along with including new seat covers, free beer, wine and spirits, premium snacks on flights more than 900 miles, premium inflight entertainment and inflight Wi-Fi on domestic flights.
And United Airlines announced plans in November to spend $120 million to do a major upgrade of Terminal C at its Newark Airport hub, including upgraded food options and more than 6,000 iPads for ordering food and beverages, surfing the web and checking on flight statuses.
Daniel Levine is a global trends expert and frequent flyer who believes that airline competition is a great thing. “I know business people complain about unfair competition between American and Gulf carriers. But what we’re actually saying to American carriers is shape up and offer better service,” he said. “American carriers complaining about competition smacks to what we were hearing back in the day when U.S. auto manufacturers cried about competition and asked the federal government to help level the playing field with subsidies and loans.”
But it is tougher challenge for American carriers to compete, Levine admitted. “Unlike the Gulf carriers, American airlines have to answer to Wall Street,” he said. “The Street is looking for higher earnings every quarter and the Gulf carriers don’t have that pressure. They are not constrained by a quarterly earnings report.”
Paul Wilke, CEO Upright Position Communication and a frequent flyer, agreed with Levine. “The Gulf carriers have advantages in a few areas. One, they are government-subsidized airlines,” he said. “They are flying out of a region that’s a central hub that allows travelers to get to places around the world easier.”
U.S. carriers have a different business model, said Wilke. “They are more about having smaller planes, and they can’t sustain luxury in their first class and business class like Emirates can,” he said.
U.S. carriers are going to have to invest more in their cabins as they face more competition from the Gulf carriers, said Levine. “American carriers are somewhat protected now because the Gulf carriers aren’t flying to may U.S hubs. But Emirates opened a nonstop route from New York to Milan,” he said. “And the Gulf carriers are getting stronger. At the last Dubai Air show, Emirates ordered 100 Boeing 777Xs, long-range aircraft that can fly around the world. And Etihad and Qatar Airways placed their own large aircraft orders at the show.”
But Wilke said he’s encouraged by what he’s seen from U.S. carriers. “American Airlines is taking big steps to step up its game in its first and business class cabins,” he said. “But U.S. carriers still playing catch-up and have a long way to go against Gulf carriers and operators like Cathay Pacific and Singapore Airlines.”
Levine notes a big change he’s seen in travel habits because of the Gulf carriers. “Passengers used to fly westward to go to Asia, but people are now flying eastward through the Gulf hubs to get there because of better prices and better service,” he said.
Wilke believes that Gulf and other international carriers have done a good job in marketing themselves as premium carriers. “U.S. carriers are trying to be all things to all people,” he said. “When you do that, it’s harder to market [that product] and get people to pay for a truly luxurious service.”
So this can be a threat to U.S. carriers from a brand perspective, said Wilke. “The big three Gulf carriers and other international airlines can market that premium brand,” he said. “U.S. carriers can’t compete with that and maintain their business model of being all things to all people,” he said. “That’s the space that the big three Gulf carriers don’t even pretend to operate in.”