Gulf Carriers’ Subsidy-Fueled Expansion Is Not Stimulating New Demand

The Gulf carriers say that their rapid expansion into the United States is stimulating passenger demand and increasing tourism in the United States. However, the new Gulf airline capacity flooding the U.S. market is not stimulating passenger demand between the U.S. and international destinations.

Subsidy-Fueled Expansion Only Shifting Passengers from Other Carriers

  • An analysis of passenger bookings from 2008 to the third quarter of 2014 shows that the presence of the Gulf carriers on U.S.-international city-pairs (all passenger service between one city and another) did not have a statistically significant impact on overall traffic levels.
  • Approximately 11,000 daily seats were added between the U.S. and Dubai, Doha and Abu Dhabi between 2008 and 2014 – more than 95 percent of them by the Gulf carriers – yet origin-and-destination traffic between the U.S. and the three Gulf carrier hubs has essentially remained flat.
  • Because the Gulf carriers have failed to meaningfully stimulate additional traffic in the U.S. market, their passengers have come at the expense of other carriers, including the U.S. airlines. On average, the presence of a single Gulf carrier on a U.S.-international city-pair reduces the number of passengers carried by U.S. airlines by approximately 8 percent.
Change between average daily seats and average daily O&D bookings between U.S. cities and Dubai, Doha & Abu Dhabi, 2008-2014

  • Change in Average Daily seats
  • Change in Average Daily bookings to/from behind U.S. gateways

Daily Bookings Remain Flat

Despite the addition of over 5,000 daily seats by Emirates between Dubai and the carrier’s nine current U.S. destinations between 2008 and 2014, the combined daily bookings by local passengers across all airlines on these routes has remained flat. This lack of booking growth shows that there was little—if any—increase in passenger demand, despite all of the new subsidized capacity added by Emirates.

Average Daily Bookings For All Airlines Between Emirates’ U.S. Gateways And Dubai, 2008-2014

chart-6-key-header

  • Chicago
  • Boston
  • Washington
  • Seattle
  • Dallas/Ft. Worth
  • San Francisco
  • Los Angeles
  • Houston

No evidence Gulf carriers are increasing tourism in the United States

  • Gulf carriers have had no significant effect on international traffic into the United States. No additional traffic means no additional tourism.

  • If the subsidized Gulf carrier expansion continues unabated and U.S. carriers are pushed off of international routes, it will have a harmful spillover effect onto domestic routes. This may jeopardize domestic passenger service to many small
    and medium-sized U.S. communities.

  • With 84 percent of direct travel spending in the U.S. coming from domestic travelers, reduced domestic passenger service could have long-term implications for domestic travel in the U.S.

Read the full story here.

When the MIDT booking data shown in the first chart is adjusted to capture passengers that made their travel plans using non-GDS channels by scaling bookings in MIDT to the U.S. DOT’s T-100 passenger data, there was a net addition of only 178 passengers between the first three quarters of 2008 and the first three quarters of 2014 (i.e., less than two percent of the seats added over this period).

When the MIDT booking data shown in the second chart is adjusted to reflect passengers that made their travel plans using non-GDS channels by scaling bookings in MIDT to the U.S. DOT’s T-100 passenger data, there was a net addition of only 57 passengers between the first three quarters of 2008 and the first three quarters of 2014, reflecting a compound average annual growth rate (“CAGR”) of only 1.0%. By way of comparison, Emirates grew its average daily seats between Dubai and its nine U.S. gateway cities between 2008 and 2014 at a CAGR of 22.7%. Source: OAG