In October of 2013, Emirates Airline became the first “Fifth Freedom” carrier to fly between New York City and Milan in Italy. This allowed a stop between New York and Dubai in the Italian city would help to increase services between not only Italy and Dubai, but also the United States and Italy.
Unfortunately, that service has barely been in operation seven months, and Emirates has come under fire from competing airlines, leading to the possible cancellation of the route.
For those of you not familiar with the fifth freedom, it allows airlines to fly from one city in their home country to another city in a different country, while making a stop in a third country along the way. Passengers are then able to purchase tickets for any of the legs. An example is Air New Zealand’s flight from Auckland to London, but stopping over in Los Angeles, where tickets can be purchased all the way through or via one of the legs.
On April 10th, 2014, the Lazio Regional Administrative Court (TAR) in Italy upheld an appeal to the fifth freedom rights granted to Emirates by the Italian Aviation authorities (ENAC) to operate between Milan and New York.
TAR upheld an appeal to the rights, stating that fifth freedom rights should only be offered to other EU countries, not the Gulf carrier. Fifth freedom flights are one of the most common ways for airlines to utilize extra capacity on routes between third-party countries. Opening up the route from New York to Milan to Emirates brought about a fare drop that saw true competition for the first time. Of course, the airlines that currently fly this route were not all that happy about it.
Although no specific airlines were named in the court appeal, Assaereo, the Italian Association of Air Transport Operators, applauded the outcome. Who does Assaereo represent? Well their biggest member would be their largest airline, of course; Alitalia. But this is where things get confusing.
Alitalia has been in financial difficulties for many years, with plenty of deals to sell the airline failing at the last minute. At one point, KLM/Air France were going to buy them out, but that failed. The current suitor for the distressed Italian airline is Etihad, the Abu Dhabi-based Gulf carrier. So this new ruling by the court would effectively cut off any benefits that Etihad might have sought in the future, using fifth freedom rights between countries to add revenue.
Of course, the US-based airlines such as Delta are also applauding the outcome, but that is not at all surprising. Delta wants to protect their interests on what can be a highly lucrative route, and with the Gulf carriers expanding rapidly, legacy American carriers want to block this as much as possible, in order to protect their bottom line.
Since the TAR ruling was made, Emirates has already released a statement that they have appealed the ruling, and as ENAC have not yet overturned the fifth freedom flights, they will continue to operate until further notice.
Is this the end of a great fare battle between legacy carriers and a new entrant? Or is this just the opening salvo in what could be a fairly substantial battle between Emirates and the Italian government?