Tuesday, October 12, 2010

Say no to UAE blackmail

Every once and awhile I’ll agree with Stephen Harper on something, and this is one of those times: when the United Arab Emirates decided to link Canadian military use of the not-really secret Camp Mirage (used to support our forces in Afghanistan) with landing rights for their state-owned and subsidized airlines, my answer would also have been to tell the UAE to stick it.

“For the UAE to hold Camp Mirage up for ransom was the last straw for [the Prime Minister],” a source close to the issue told The Globe.
And when they stopped a plane with the defence minister and chief of defence staff from entering their airspace enroute to Afghanistan, I would call them up and remind them, once again, where they can stick it. Such linkage is bush league thuggery, not diplomacy, and we’re right not to play ball on this. I’m disappointed that my Liberals, instead of calling a spade a spade here, decided they couldn’t resist a chance to disagree with Harper on something:
The Liberals are blaming Tory "incompetence" for an embarrassing landing-rights dispute between Canada and the United Arab Emirates.

The two countries were in talks to allow UAE airlines more flights to Canadian airports, but the deal was called off.

As a result, Canada has lost access to a major staging ground for troops headed in and out of Afghanistan.

Liberal Leader Michael Ignatieff said that resulted in the "absurd spectacle" of Canada's top soldier and two cabinet ministers barred from landing in the UAE on their way out of Kandahar.

He called it a "simple story of incompetence" and said it's another sign the Harper government is out of touch on the world stage.
Michael, I will agree that Stephen is out of touch on the world stage. But this isn’t another example of it. The UAE is out of line on this, and we should be saying so. There’s plenty to attack them on with the UN thing already.

Now, what about the larger issue of greater landing rights for Emirates Airlines in Canada? I seem to be with the government on this one as well: they’re not warranted at this time.

The fact is, there isn’t near enough direct Canada to UAE direct traffic to warrant an increase in capacity. And Emirates knows that. They’ve been pouring billions of government dollars into making their airline and their brand new $32 billion airport a transit hub: funnel traffic through Dubai and on to Asia and other destinations. They don’t come out and say it, but their goal is to siphon off transit passengers that now transit through Europe with other airlines. That’s their entire business model. It has nothing to do with UAE-Canada direct traffic.

Negotiations over landing rights are about reciprocal access, and opening up markets to the benefit of each country. But the fact is Canadian airlines have little interest in flying to the UAE (even if UAE were willing to offer equal access) because there is little market for direct traffic. Like the big hotels and indoor ski hills built on a mountain of debt, it’s a mirage. The UAE simply wants to siphon off business from Canadian airlines, with little to no benefit to Canadian airlines or consumers. Why should we agree to that?

Now, there are those that argue we should have open skies, fair competition, let the market win and consumers benefit from lower prices. Let foreign airlines fly point to point within Canada (it’s called cabotage in airline lingo). Is that the answer? I say, not really. Proponents of this argument like to point to Europe, land of super-low fare airlines such as Ryan Air and Air Berlin. But they miss a few key points.

Key among them is that Europe is a highly and densely populated compact region. You have a lot of people travelling within a smaller space. Canada is more sparsely populated, with significantly fewer people. If we threw open the doors tomorrow, I don’t doubt I could get home to Vancouver from Toronto for a heckuva lot less than I could today on Air Canada or WestJet. That’s a high-traffic route with lots of high-value business traffic: new entrants would be quick to jump on that.

But unless you live in Vancouver or Toronto, and maybe Montreal, you won’t see any benefit. You think Lufthansa will be servicing Fredericton? Will JAL be flying to Saskatoon? Not a chance. They’ll pick off the high-value, high-traffic domestic routes that feed into their international routes. And it’s on those international routes that the airlines make what money they do make.

The domestic routes are actually subsidized by the international traffic, and are more important as a feeder into the international network. So what happens when you allow Emirates to siphon off high-value international business, and let international airlines fly domestically within Canada on the few high-traffic routes? You siphon revenue from Canadian airlines with no reciprocal business opportunity, and force them to drop low-profit domestic routes in a futile attempt to compete on price. So, yes, your flight from Toronto to Sydney via Dubai will be cheaper. But you’ll need to drive from Winnipeg to Toronto to catch the flight. Or see your savings evaporate because of an astronomical Winnipeg to Toronto flight.

And, of course, the “open, fair competition” argument presupposes a level playing field. With the debt-ridden UAE government pouring billions into both its state-owned airlines and its airport infrastructure, the playing field is anything but open, fair and level.

The Harper government hasn’t gotten much right on foreign policy lately. But they’ve made the right call here: say no to UAE blackmail.

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9 comments:

ridenrain said...

Since we're in election mode... my name is Ridenrain, and I agree with this message.
The UE, along with other middle eastern nations hold significant sway with developing countries and I'd guess this was an example.

Noronic said...

Maybe Harper is worried about capital flight? Somehow I don't think we're getting the whole story here.

Speaking of, not a lot of talk about Westjet's flights to the Turks and Caicos these days, aside from a few ads in high-end magazines, and a mention in the website if you look for it...

Gayle said...

I agree with you.

twistedtory said...

it's not the UAE who is blackmailing the Canadian government, rather Air Canada and the unions who are defrauding Canadian consumers.
Canada continues to bury its head in the sand and remain isolated in an age of globalisation, pandering to protectionism and bullying by incompetent, ineffective unions. Think about it: when i was growing up in Vancouver in the 70s, we heard the exact same arguments from Air Canada and Transport Canada.
Canada needs to wake up or continue to be left behind.

twistedtory said...

it's not the UAE who is blackmailing the Canadian government, rather Air Canada and the unions who are defrauding Canadian consumers.
Canada continues to bury its head in the sand and remain isolated in an age of globalisation, pandering to protectionism and bullying by incompetent, ineffective unions. Think about it: when i was growing up in Vancouver in the 70s, we heard the exact same arguments from Air Canada and Transport Canada.
Canada needs to wake up or continue to be left behind.

CanadianSense said...

This sounds like the Bell Canada defense against deregulation of its monopoly and Greyhound last summer.

Business is not a socialist construct and subsidizing smaller markets to keep best markets does not wash.
Unfair competition via state funding are valid criticisms against UAE.

I don't agree with your pile on via the U.N. seat. Did the PM do enough cheerleading vs real substance vs Portugal?

Are you kidding me? Any comparison to them being equal players is a joke.

I look forward to your analysis of Portugal's contribution compared to Canada.

In the end Liberals like to blame CPC when we lose "face". I understand team is a concept no longer in practice by Liberals.

Scanner said...

Boy are you wrong about the UAE and base Mirage. This has been going on for a long time and the harpies have been trying to string it out. We have paid $0 for the base, used it for years and then tried to negotiate in bad faith over landing rights in Toronto. The Emerates are notoriously hard bargainers and famous for using everything in a fight - unlike what business? Rogers? Give me a break.
Loosing Mirage is a very bad thing - first we look like idiots to the rest of NATO, second - have you ever had to move in 30 days after being in a place for years? IF we are actually going to pull up stakes from Afghanistan in a years time, the loss of Mirage has just made that infinitely more difficult. It's never a good idea to bargain tough-guy style when the other side has your nuts in his clutches. What were they thinking? John Baird really f*cked this one up.
Way to support the troops.

Scanner said...

Oh and @twistedtory? This bunch of thugs would pay attention to the UNIONS? Are you asleep?

CanadianSense said...

I am not familiar with the specifics of the UAE deal but WE don't have open skies and doubt in this minority parliament the NDP or Bloc would have went along.

Will it cost more yes! Timing for UAE is to inflict maximum damage before we draw down our military.


The difference how we react show the partisanship. Jeff states UAE deal would be bad. Some of us suspect with other examples from UAE (they are going to default) this may have been a distraction/desperation move to win a concession.

It failed. Will the Unions in Canada demand we open our skies to a heavily state funded airline? No.

Other than the "usual suspects" showing up to beat the Government with the "incompetent" stick or pile on who cares?

Fact vs Myth
We were "freeloaders" and ISAF had to bail us out in Afghanistan because we were stretched to thin.

The Liberals in 1993 cut spending on our military by 23%. The AG scathing report we needed $ 5 billion and Liberals gave 1.5 billion in 2003.

This government has been slowly restoring our capabilities with their spending.