Delta complains that Qatar Airways owns 49% of Air Italy and so Italy’s number two carrier is really a stalking horse for the Doha-based airline. Meanwhile Delta owns 49% of Virgin Atlantic, and most of the rest of Virgin is owned by Delta’s partners. Delta is also a huge fan of subsidies but only when the subsidies are going to them.
So is it any surprise that Virgin Atlantic is ceasing its three to four times weekly London Gatwick – St. Lucia flights June 8, 2020 because the island wouldn’t pay Virgin $2.5 million in subsidies?
Virgin Atlantic’s decision to scrap the Saint Lucia route was linked to a stalemate over the payment of subsidies to the airline.
According to the sources, Virgin Atlantic was ‘demanding’ a $2.5 million injection to maintain the flight, which the Saint Lucia government refused to pay.
They said it was felt that subsidising the airline would open the floodgates for other carriers to request similar treatment.
Copyright: boarding1now / 123RF Stock Photo
It costs Virgin Atlantic basically nothing to declare they’re cancelling flights 11 months in the future. While package holidays book farther out than business travel, they can let the threat loom over the St. Lucia government for a little while to see if they’ll pay up.
Meanwhile British Airways operates the route daily and would benefit from reduced competition. Customers may even prefer BA’s irregular operations policy on the island.
I wonder if Delta CEO Ed Bastian no showed the meeting with President Trump to complain about airline subsidies because he was busy strategizing with Virgin Atlantic over how to get some?
The difference is that ME3 are undercutting prices below cost in markets that could sustain market prices and be profitable, thus forcing airlines like United out of the market entirely. ME3 uses government subsidies to do that. These subsidies are illegal, especially when using open skies agreements. You don’t see the Qatar government offering American an incentive to fly there. They only offer their own airline, thus creating unfair competition.
There are markets out there, however, that cannot be profitable and governments offer subsidies to incentive additional service so that they can have adequate transportation from their cities. This is what most carriers do. Any airline can take advantage of these offers. This helps small cities or islands, for example, to be able to have reasonable service to their location.
@Ryan +1
Spot on Ryan. The other major difference is that this St. Lucia situation is actually an open market mechanism. Virgin had put a number out there in the market saying it won’t do it for less than 2.5 million incentive. So now the market can determine what the right level is because a competitor can bid to do it for 2.4 million, and another can come in at 2.3 million and so on, until we find the market clearing price. If it were a profitable route, there would be no incentive payment needed to entice anyone.
$208500 per month, or roughly $6,600 per day. 4 flights per day. Maybe 600 to 800 people per day from London, or $10/arriving passenger. Is my math right? I dont have time to look up the round trip airfare or quality of the airline/customer satisfaction experience. Maybe Delta thinks that if people cant fly VA and have to take BA they are less likely to go?
Or, do they think that 400 people (2 flights) will travel regardless of small price difference, but to rationalize the other two flights, they need one of the flights to be paid by the govt. And that may be wise. By having excess capacity, VA can accommodate late passengers, flights cancelled due to weather, mechanical, etc, lost luggage, etc.
It sounds cheaper than resort fees.
Or maybe VA can advertise low pretax fares, St Lucia will increase per ticket passenger fees, and wallah, customers pay exactly the same amount with this classic bait and switch maneuver. That wont offset if the planes are half full, so the govt has incentive to be nice to the tourists. Which is usually a good idea anyway.
Compared to non-optional resort fees, customers may not even care as long as wi-fi works.
The airline ticket prices from St. Lucia to London are already exorbitant. This is only going to lead BA to hold a monopoly on the route and thus an increase in airfares once again. The St. Lucian economy will suffer. It’s already so difficult for the average St. Lucian to pay for tickets to the U.K. The government should have paid this fee, because it is the average person who will now have to foot the bill in the long run.
@Ryan and Rob- Lol except the President told the US3 to go pound sand because the argument is baseless and Qatar does more to support the US economy than the US3 (Delta and Airbus for example).
Now, the pro US3 arguers please provide specific examples where Qatar is undercutting competition? You love to trumpet this without any facts or fare comparisons, what say you?
The funny thing is generally Qatar is the most expensive business fare I find from US to India which is frankly the only major market the US3 can reasonably feel undercut by the ME3.
More DL vitriol…please make it stop! The arguments are weak. Feel free to point me to one person or business that would NOT do all it could in the prospect of furthering its personal/business interests. We all take advantage of every tax loophole or deduction we can, we all look for the best deal, to better our position. DL is doing exactly that.
Now, if other airlines/businesses/people aren’t savvy enough to do that then the onus is on them. Quit with so much DL hate
I suspect if AA wanted to fly from some of its hubs to Qatar, they would get a pretty good deal from the DOH airport.
I get why UA and DL complain about the ME3 but QR and AA make a very good combination to the Middle East and Africa. They should both shutup and start building a close relationship