Aeromexico, Emirates and the Service to Barcelona

Recently, Emirates announced a new route from Dubai to Mexico City. Emirates had been working towards this new service for more than a year. So it hardly came as a surprise.

However, the news came with a twist. Emirates expressed its inability to fly direct on this route due to the altitude of Mexico City airport. Instead, Emirates said, it would stop at Barcelona. Thus, another fifth freedom route was added.

There is another airline which offers direct service from Mexico City to Barcelona. Aeromexico is not happy with the development.

Aeromexico Disappointed with Emirates, Urges Government to Withdraw the Fifth Freedom Privilege

On July 17, 2019, Aeromexico had an earnings call with investors and research analysts. Coming just a few days after the announcement by Emirates, this was a hot topic. In fact, Andrés Conesa Labastida, CEO & Director, Grupo Aeroméxico referred directly to Emirates no less than five times during the call.

This is what he had to say

“During the second quarter, we started direct flights from Mexico City to Barcelona, broadening our network proposition to Europe, where we now operate to 5 cities. We have made a decision to increase our operation to our daily service. Firstly, because we have seen strong demand on the route, but also as a response to the Mexican government’s disappointing decision to grant fifth freedom flying rights to Emirates, to fly from Dubai to Barcelona to Mexico City, in spite, of the state subsidies, Emirates receives from the UAE government. To provide the additional aircraft we need for the increased frequencies to Barcelona, we have decided to cancel our services to Shanghai.”

I am no expert on the financials of Emirates airlines. Neither am I aware if Emirates gets any sort of subsidy from the UAE government or not. However, there are a three issues worth noting.

First, the US airlines have been raising the subsidy issue for several years. And it has led to absolutely nowhere.

Second, if you compare the fares of Emirates and Aeromexico, it tells a very different story.

In fact, on most of the routes that Emirates operates, it is not the cheapest fare provider. I am not an economist, but this does not sound like a heavily subsidized airline.

Finally, Aeromexico has been operating the Shanghai route for quite sometime now. And the service to Barcelona was started only in June 2019. Why would Aeromexico withdraw a route they have been operating for 11 years in favor of one they have been doing for a month? And that too to directly compete against a so-called ‘subsidized’ airline? It does not make sense.

Andrés Conesa further adds,

“We feel that it’s not fair (fifth freedom rights to Emirates), that is not the right policy, and we will, again, do everything in our hands, including taking legal actions to try to reason that not to happen. And this is part of our job what we should do, and we will continue to do. And hopefully, everything improves and we have a better industry going forward in Mexico.”

These are some interesting choice of words. I feel the story does not end here. Let us wait and watch.

Note: Transcript sourced from Yahoo Finance