The global airline that has, in recent years, been most aggressive in growing capacity and gaining market share is Dubai, UAE-based Emirates. With compound annual capacity growth expected to be at least 10% for the foreseeable future, we believe this pace of expansion far exceeds underlying demand growth. In recent years, UK-based British Airways and Virgin Atlantic, German Lufthansa and, especially, Australia’s Qantas have, in our judgment, been hurt the most, but there are signs that Asian stalwarts Cathay Pacific and Singapore are beginning to feel Emirates’ pressure. Notably, we see little impact on US carriers from Emirates’ growth, simply because its Dubai hub is on the “other side” of their primary international markets in Asia and Europe.
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