Middle East airlines 'unstoppable'

People walk with their baggage trolleys near the entrance to the Emirates Airlines departures terminal at Dubai International Airport, Feb 6th 2012

By Tim Hepher

PARIS | Mon Mar 12, 2012 6:37am EDT

(Reuters) - A top Emirates executive has delivered a warning to Europe's struggling airlines that they could lose more business to booming Middle East carriers as they pay the price of years of political neglect.

Thierry Antinori, who walked away from the top job at Austrian Airlines to join the largest Arab carrier last year, said airlines such as Emirates were well placed to continue expanding while some rivals lurched into a downward spiral of investment.

"I think with our geographical position and the quality of products and networks we are offering, there is clearly an opportunity for the Middle East airlines to strengthen their position on the global industry map," he told Reuters.

"I even consider the next years as an opportunity for Emirates to increase the gap with some of our competitors, because we are just looking at what the customer wants."

The Frenchman dismissed the possibility that Dubai-based Emirates would step in to bail out or buy European airlines and repeated its reluctance to join one of the major alliances.

In December, Gulf rival Etihad Airways of Abu Dhabi took a stake of almost 30 of Germany's Air Berlin (AB1.DE). There are also reports that Etihad is interested in holding talks with the Irish government over the sale of its 25 percent stake in Aer Lingus (AERL.I).

"We prefer to rely on our product, so we prefer to buy airplanes than airlines," the Emirates official said.

"We do not lose time in discussion with alliances, which are not very clear for the customer to understand. They say 'we offer you seamless travel' but in the end they offer seamless trouble," said Antinori, who joined Emirates as Executive Vice President, Passenger Sales Worldwide, in September.

Antinori's decision to defect from Lufthansa came days before he was due to become chief executive of loss-making Austrian and took the industry by surprise. Six months later, he has a blunt assessment of the malaise gripping European airlines, half a dozen of which have gone bankrupt this year.

"Aviation was made a strategic industry in Dubai 20 years ago. In Europe it is not strategic and it is not important for politicians to win elections. That is why airline lobbying is not heard, investments are blocked, taxes are increasing and as a result airlines do not have modern fleets and then they save money on products."

Recent aircraft improvements have put most of the world's population within a direct flight from the Gulf, resulting in airport and fleet expansion and shifting more of the global network map to large hubs such as Dubai from the U.S. and Europe.

"You cannot stop the Middle East airlines because they are in the centre of the world; they have the best infrastructure... and never save money on product," Antinori said.

"That is the big difference with Europe (where) there is no strategy, and because of that they reduce the quality and the infrastructure, and the fleets become older."

EMISSIONS COST

The critique of European aviation policy comes as the industry faces tough battles over airport expansion in the UK or a new system of European Union charges for jet emissions -- two issues that also affect airlines in the Gulf and elsewhere.

Antinori said the EU's emissions trading scheme would cost Emirates 40 million euros in 2012, rising to half a billion in 2020, and this would ultimately mean higher ticket prices.

Emirates meanwhile remains locked in a battle over access to Germany, where it has long sought to secure landing rights in Berlin and Stuttgart, as well as access in Canada.

Emirates' decision to choose the Berlin Air Show in 2010 to order 32 extra A380s was seen as a reminder of its importance for Airbus jobs, many of which are in Germany. But the airline is still unable to add to four existing German entry points.

"We understand that governments need time to think. We are patient; I am sure we will find a solution," Antinori said.

Emirates is the world's largest buyer of A380s, with a total of 90 on order, and Boeing's 777 mini-jumbos.

European airlines accuse Emirates and others in the Gulf oil region of expanding on the back of subsidies.

Emirates denies this, saying it pays a full price for its fuel and that critics like Air France, which unveiled steep losses last week, should examine their own business models.

Antinori said Emirates was outperforming the industry but was not immune to record fuel prices.

"We were able in the last months to increase our load factor in comparison with previous years. The revenue increase at Emirates is higher than the percentage increase in seats."

Middle East passenger traffic grew 14.5 percent in January, versus 5.3 percent in Europe, according to airlines body IATA.

(Editing by Reed Stevenson)