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Italian Court Rules Against Emirates’ Milan – New York Route

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Italian Court Rules Against Emirates’ Milan – New York Route

Italian Court Rules Against Emirates’ Milan – New York Route
April 11
15:25 2014

MIAMI — Earlier today, an Italian regional court found that the Italian Civil Aviation Authority (ENAC) improperly granted permission to Emirates to serve Milan – New York JFK nonstop. According to an administrative court in Rome, Emirates was improperly awarded the rights to serve Milan – New York JFK because it violated the bilateral air services agreement between Italy and the United Arab Emirates.

The suit was filed by Assaereo, a trade group representing Alitalia and other Italian carriers, who filed last year. Emirates is considering whether to launch an immediate appeal to Italy’s Supreme Administrative Court, and it is unclear whether they will be forced to cease service on the route.

Milan – New York JFK is operated by Emirates as an extension of one of its thrice daily flights between Dubai and Milan, Italy’s largest city by gross domestic product (GDP). The airline commenced service on the route back in October of 2013. Despite having the largest market for high yielding business travelers in Italy, Milan had been notoriously underserved in terms of trans-Atlantic capacity. Indeed, much of Milan’s long haul O&D business traffic feeds into nearby Munich on Star Alliance carrier Lufthansa’s network.

On Milan – New York JFK, Emirates competes with beleaguered Italian flag carrier Alitalia, American Airlines, and Delta Air Lines, while Star Alliance rival United Airlines offers flights to Milan from its global hub at Newark. Other North American services include Air Canada to Toronto, American Airlines to Miami and Delta to Atlanta.

The Milan – New York offering by Emirates has been extremely lucrative for Milan’s airports, with the market growing nearly 50% according to Italy’s SEA Milan Airports COO Giulio De Metrio. Naturally, this has angered the existing players on the route including Delta, who made the following statement in response to the ruling:

The Emirates route provides no additional benefit for travelers, who are already well-served by Italian and U.S. carriers between Milan and New York, and could significantly harm U.S. and Italian airline employees by adding unneeded capacity on an already-competitive market.

History would suggest that Delta’s fears might be a tad overblown. Despite the persistent myth that the Middle East Big 3 (MEB3) are run as prestige projects by rich oil oligarchs in the Middle East, in reality, Emirates once served New York JFK via Hamburg (in competition with Continental) and did not hesitate to cancel that route when it under-performed financially.

But in the long run, the rise of the MEB3 does present some interesting questions as to the future of trans-Atlantic and trans-Pacific service. The largest traffic flows that the MEB3 cannot effectively serve over Dubai are in fact Europe – North America and East Asia – North America (as well as Asia – Australia and Europe – South America). It makes sense that in their global ambitions, Emirates, Qatar, and Etihad would look for a way to capture a share of those markets, if at the very least to increase their relevance to customers in North America.

How governments will respond is a very interesting question. By and large, the US government has focused on de-regulation of bilateral ASAs over the protestations of domestic carriers, whereas European and Asian governments have been slightly more combative. But neither the US nor the EU can afford to come down too hard on the MEB3 because of the jobs that those carriers create with massive orders for Boeing and Airbus airplanes. At the same time, airlines, and more importantly their unions are a significant stakeholder and power source for the present governments in the US and EU. The tension between these various factors will only continue to play out over things like this route and the Export-Import Bank.

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A Global Review of Commercial Flight since 1994: the leading Commercial Aviation publication in North America and 35 nations worldwide. Based in Miami, Florida.

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