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European airlines have cut back on routes to Asia since the pandemic, bowing to tough competition from state-backed Middle Eastern carriers that have convinced passengers to fly via their hub airports with cheaper fares.
Airlines flew 22mn seats between Europe and Asia last year, down 26 per cent on 2019 and the lowest number in at least 14 years, other than during the coronavirus pandemic, according to industry data provider Cirium.
Travel between Europe and Asia has been complicated by the slow reopening of many Asian economies following the coronavirus pandemic. European airlines are also banned from flying over Russian airspace, resulting in longer journeys to much of east Asia.
But the bosses of Lufthansa and Air France-KLM said their airlines have slashed their direct flights to many major Asian economies because of competition from Gulf airlines, which often offer cheaper fares for passengers willing to catch a connecting flight in the Middle East.
“We have minimal service now to south-east Asia. We’ve lost all that traffic to Middle Eastern carriers, and in the financial situation we have today and our cost structure, and the advantage those carriers have, we won’t get it back,” Air France-KLM chief executive Ben Smith told an industry conference last month.
Lufthansa’s Carsten Spohr agreed, and added that the German carrier used to fly directly to 14 destinations in Asia, but now only flies to Singapore and Bangkok.
“It’s not just talk, we lost connectivity to Asia, because it’s all now going through . . . government-owned hubs,” he said at the conference.
Dubai’s Emirates, Qatar Airways and Abu Dhabi’s Etihad are all government owned and have revolutionised intercontinental flying over the past 25 years by turning the Gulf into a main stopover destination.
As well as competitive pricing, they have also invested in premium products and services that have set new standards for in-flight hospitality.
Abdul Wahab Teffaha, secretary-general of the Arab Air Carriers Organization, told the Financial Times that the Gulf airlines were more competitive than their European rivals because of their “better cost base and better holistic product”.
“The airlines [Smith and Spohr] are referring to are profitable, consumer centric and with hubs that keep being improved and expanded. The compounded result of that is very attractive to customers,” he added.
Turkish Airlines has also grown rapidly in recent years by following a similar model, while Saudi Arabia has unveiled state-backed plans to grow its own aviation sector.
European airlines complain that their Middle Eastern rivals are not subject to rapidly tightening EU environmental rules on the second legs of journeys to Asia that begin outside of Europe, including a looming requirement to blend jet fuel with cleaner substitutes that are more expensive.
Spohr and Smith also said their higher operational costs meant they were not competing on a level playing field.
“The prices they offer . . . no chance we can [match with] our labour contracts, our social standards, French or German flight attendants and pilots — no way,” Spohr said.
Industry experts said that while many costs, including fuel and aircraft ownership, do not substantially differ by region, labour costs, including maintenance, can vary significantly.
“It is harder for European carriers to compete against the lower costs of operations for some international carriers,” said Edmond Rose, an aviation consultant who works in the Middle East.
Some European airlines are opening a small number of new routes to Asia, including British Airways, which will restart flights to Bangkok and Kuala Lumpur this winter.
But Spohr said European businesses would benefit for a fuller restoration of direct links to major Asian economies.
“There’s European industries who probably would live better if there were lots of connections to those very dynamic markets,” he said.
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