The great fares rip-off?

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By Katherine Azmeh  www.kippreport.com

Ever noticed how cheap it is to get to Dubai – and how expensive it can be to get away? Kipp investigates the forces at work behind Emirates’ fares to and from Dubai.

It’s hard to be surprised anymore at the seeming randomness of airfares. Consider a recent fare inquiry placed with a Continental airlines representative. Interested in a one way flight from Missouri to Texas, I located a $350 flight with a stopover in Houston. Upon closer inspection, I learned that purchasing the direct flight to Houston would cost more than $500, while traveling to a more distant destination – via Houston as a stopover – would save nearly $200.

This kind of wanton disregard by airlines for what the rest of the world sees as rational behavior is hardly news anymore. And the explanations for the mysterious forces at work behind airline fares are never quite satisfactory.

Some chalk it up to bad business – a situation where the corporations have become so large, that they struggle to stay on top of all the variables that ultimately determine profit – fuel prices, airport prices, legislation and regulatory matters, intense competition. The result at times resembles a chaotic wild west, where inconsistencies and poor business strategies are around every corner. If you’re like me, though, you assume there’s a method to their madness – some deeper genius embedded in those contrarian fare prices – a rationale that industry outsiders can never fully discern.

The air fares to and from Dubai, however, have long defied explanation. At least they have in the case of Emirates. The Dubai-owned airline is a proud success story in the Emirate and region, and tends to receive favourable reviews from those who fly on it. And yet, it only takes a bit of research on the website to notice a frustrating pattern in the pricing.
“It’s no secret to anybody,” commented a business owner to Kipp. “It’s cheap to fly to Dubai, and expensive to fly away. It’s like they’ll do anything to get you here – and everything to prevent you from leaving.”

To UAE-savvy travelers, this won’t come as a surprise. One-way fares to Dubai, departing major European and North American airports, are frequently a pittance compared to the return trip back to the city of origin. For example, at time of writing, traveling from Houston to Dubai on Emirates in early September would run you $920 one-way. For the return flight, add an additional 20 percent or so, nearly $200. Travel the same day from Heathrow to Dubai, and you can expect to be out $587. The same trip in reverse – Dubai to Heathrow – will set back more than $750. That’s an increase of more than 25 percent.

New York-bound flights out of Dubai on Emirates run a hefty 60 percent more than their inbound counterparts ($830 versus $1,339). But the biggest discrepancy by far was noted on departures from Paris or Rome. Dubai-bound flights from these cities are a real bargain at just under $642 and $550, respectively. But travel the other way in you’re in for a rude awakening – a hefty $1,550 price tag for one-way travel to these cities – more than double the departure from Charles de Gaulle, and nearly triple that for the Rome departure.

Sometimes, the fares out of Dubai are so expensive, it’s cheaper for an expat to buy round trip tickets from home to get to Dubai, and then just pay the fee to switch the return leg later on. This is a trick used by one of the Kipp staffers – the next trip back to Europe for a week will begin with the second part of a return ticket. The flight back to Dubai after seven days is the first part of the next return ticket, with the second portion booked for some arbitrary future date. Kipp’s writer will pay the admin fee to move the flight when they know the date of their next trip home.

Just for comparison, we took a look at the way another airline prices fares out of its hub, versus fares from other airports. British Airway’s one-way fares departing Heathrow (its home base) are a mixed bag when compared with the airline’s return fares from the European and US airports it serves.

For example, the one-way from Heathrow to Rome on BA is more expensive than the return ($291 versus $183), but fares to Paris and Frankfurt are comparable on each leg of the trip. The one-way departing Heathrow to Paris or Frankfurt will set you back just over $90; the return fares are $97 and $82, respectively.

But BA does offer a bit of a break when leaving Heathrow and headed to the US. One-way flights to New York and Houston are priced 5-10 percent cheaper than their returns from JFK and Houston International airports.

In other words, departing BA’s Heathrow stomping ground does not guarantee a better or worse fare, unlike the case with Emirates and Dubai where you seem guaranteed a higher price. In essence, it can be a bit cheaper, a bit pricier, or roughly the same to return to London from abroad with BA – a reflection of the normal competitive constraints on airlines, airports, and all the auxiliary services involved in air travel.

So, is Emirates mark-up madness or genius? Kipp asked representatives at Emirates air. A spokesperson said: “Like every commercially-oriented business, Emirates regularly reviews its fares to reflect market dynamics including, seasonality and demand. Emirates prices its tickets competitively in all markets we serve. We remain committed to providing our customers with excellent service and a strong value-for-money proposition.”

No, we didn’t think it was particularly illuminating either. But perhaps that’s because Emirates is not in the business of teaching Economics 101. A lack of competition among airlines departing Dubai and a wealth of competition departing European and North American cities are most likely the driving factors behind the glaring fare discrepancies noted above.
Of course it could be some clandestine effort by the Dubai government to keep people from leaving, but that’s a little far-fetched for us.

We put it down to lack of competition, pure and simple. Though given Emirates silence on the matter, we might not know for sure until Al Maktoum International Airport reaches full capacity (along with the expansion of Abu Dhabi’s airport) and the UAE becomes a much more competitive environment.

At least we assume it will become more competitive – there’s always the possibility that Emirates will expand to fill the capacity, and will have even more scope to hike fares. For the sake of every expat, let’s hope not.

The facts:
Emirates, first weekend in September
1. Dubai to Houston $1,113, Houston to Dubai $920.60
2. Dubai to London $752, London to Dubai $587
3. Dubai to Paris $1,550, Paris to Dubai $642
4. Dubai to Rome $1,550, Rome to Dubai $550
5. Dubai to New York $1,339, New York, to Dubai $830.10
6. Dubai to Frankfurt $752.40, Frankfurt to Dubai $711

British Airways, first weekend in September
1. London to Rome $291, Rome to London $183
2. London to New York $1,031, New York to London $1092
3. London to Houston $1,249, Houston to London $1389
4. London to Paris $94, Paris to London $97
5. London to Frankfurt $92, Frankfurt to London $82
6. London to Dubai $2,585, Dubai to London $617

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