Emirates fights for Canada – Chapter 2

Last year I blogged about Emirates’ displeasure at not being given unlimited access to the Canadian market. In the time that has passed their stance has not changed. They remain adamant that they are being treated unfairly and that there are adequate reasons for Transport Canada to comply with their requests demands for greater access.

In an attempt to strengthen their case Emirates commissioned a study to detail the economic impact of further flights between the Canadian market and Dubai. That study was released earlier this week by InterVISTAS Consulting who curiously do not list Emirates amongst their airline clients.

Before getting to the content of the study it is important to understand that there is a fundamental disconnect here. Emirates does not accept that Transport Canada reevaluates existing agreements based on whether they satisfy current demand between Canada and the other signatory country – in this case the UAE. This mindset flatly snubs Emirates’ desire to transport passengers between Canada and third party states using its Dubai hub. For this reason there is a total impasse.

I held high hopes that the study was more than just a public relations stunt. By the time I got to the end of the executive summary my hopes were totally dashed. The document was littered with conveniently favorable assumptions, vague extrapolations and specious reasoning.

Let’s examine the Base Case:

Three times weekly service to Toronto
• 99,288 existing passengers annually on the route
• 515 direct full-time jobs (951 total full-time jobs in Canada including spin-off impacts)
• $17.2M in direct economic activity at Toronto Pearson International Airport ($41.3M in total
economic activity in Canada including spin-off impacts associated with economic activity at the
airport)
• $37.8M in direct tourism spending annually from non-resident visitors ($76.3M in total
economic activity in Canada including spin-off impacts associated with non-resident visitor
spending)
• $10.7M in direct annual tax revenues to Government

“99,288 existing passengers” caught my eye right away. [Update/Correction] Based on information provided to me by Andrew Parker (see comments)  this represented an 89% load factor in 2008 using 77W equipment and a whopping 91% in 2009, the year in which the change from 77w to A380 was made. With numbers like that it’s not hard to see why EK wants more access. [The executive summary of the study did not articulate that the data was from 2008 causing my erroneous calculation.] Given that EK operates a 489 seat A380 on the route that offers a total capacity of 76284 seats (489x3x52). As this number is smaller than the stated traffic this leads the reader to believe that this total accounts for traffic in both directions. If that is the case capacity then is 152568 seats (76284×2). 99288/152568 demonstrates a rough load factor of about 65%. This hardly demonstrates a lack of capacity. To be fair Emirates did not put the A380 on the route till mid last year so the actual load factor is likely marginally higher. Let’s move on.

Scenario 1: Daily service to Toronto
• 61,027 stimulated incremental passengers on the route annually over the base case

I find the language of this point to be (intentionally) misleading. It suggests that these additional passengers would not travel to and from Canada unless Emirates were to be given additional frequencies. That is to say that these passengers would not be poached from other carriers however this goes against a statement made in the methodology section:

InterVISTAS based its analysis on the premise that new air services will stimulate travel because
the product offered is an improvement over what is currently available and consumers choose to fly because of that enhanced air travel product.

This assertion is completely unsupported by any data leading me to believe it is simply not true or at the very least lacking in sufficient detail to be deemed true. Let’s settle on non-true for now. If we accept this figure – 61,027 – that would demonstrate a near linear growth in seats sold against new capacity, 61.46% (61027/99288) more seats with a 57.14% (4/7) increase in capacity. This would suggest a 45.03% load factor – not exactly anything to write to the emir about. Here’s where it gets interesting.

Scenario 2: Double Daily service to Toronto
• 154,818 stimulated incremental passengers on the route annually over the base case

I’m confused. With a daily YYZ-DXB run sitting at 45.03% LF where would the additional 93,791 passenger justifying the second daily frequency come from? I don’t know either.

Emirates have enjoyed a lot of success with cargo to and from Toronto. The document states that Emirates’ “cargo space on its Canadian flights is currently sold out months – even years – in advance.” Considering that Emirates only started flying to Toronto in October of 2007 I have a very hard time believing that. Even if that “fact” was accurate the same impasse exists. Dubai is mainly a re-export market. Goods going from Canada to say Sri Lanka could travel any number of ways without ever touching the ground in Dubai.

I could go on endlessly discrediting discussing the study but it’s easier for me to keep quiet and let UAE politicians make my point for me with their bellicose statements. The latest being a threat to close a Canadian military base. Sad. From the very beginning of this saga Emirates have claimed that the Canadian Government was overstepping their bounds and unfairly going to bat for Air Canada. I really hope that those in the Emirates corner can appreciate the irony of the situation we now find ourselves in.

The document in question is available for download from Emirates’ website in the “Emirates and Canada” section. My gut feeling tells me it won’t be up there for very long.