Emirates - Taking a new direction

Emirates recently posted a 69% drop in profits for 2018 on the back of higher fuel prices and increased competition but it is still very much an airline in the premier league.  I caught up with President Sir Tim Clark at the recent Arabian Travel Market and questioned him on his current business priorities.

Geo political challenges abound, with Sir Tim seeing the EU “European Project” threatened by the ongoing Brexit uncertainties.  Reaching a conclusion in the US-China trade tensions “is important”, though this doesn’t appear likely any time soon.  Meanwhile sensitivities remain with regards to the US “Big Three” complaints against the Gulf carriers.  Sir Tim was forthright in stating that Emirates has made no undertaking not to launch any more Fifth Freedom routes, aside from its existing Athens and Milan services to New York, even though it has no immediate plans for more.      

On the fleet side of things, Emirates has long been the trail blazer for the Airbus A380 and the big recent news was the announcement of a reduction in its outstanding orders for the ultra large aircraft.  In effect, this news marked the death knell to future production of this very passenger popular aircraft. Sir Tim says ruefully, that the composition of airline Boards has changed in recent years with a more risk averse mentality which has worked against the aircraft.  Interestingly, part of his rationale in reducing outstanding orders was that it has become harder to defend deploying ’90’s engine technology as environmental concerns grow.   He makes the point however that when the time does eventually come for the A380 to bow out it will create a massive problem for capacity constrained airports in the absence of an equally large replacement aircraft.  He illustrates this with the example of Heathrow, where currently Emirates operates 6 daily A380’s.  Taking account of the near 30% drop in capacity of the yet to be delivered Boeing 777-9 (512 seats down to 370) and building in market growth, Emirates would need to significantly grow frequency or fly much larger aircraft, neither of which will be an option! As it is with large orders now in for large twin jets, Sir Tim says network size and shape is currently under the microscope, looking ahead for the next 13 years or so.

Commenting on the current Boeing 737 Max grounding he highlighted that there are limits to the number of times that derivatives of existing airframes can be effective, pointing the finger at both sides of the Atlantic in saying so.  He nevertheless describes Boeing as “game changers”.         

Touching on commercial partnerships, Sir Tim still sees significant advantage in its collaboration with Qantas which has been renewed for another 5 years. Emirates still gets the benefit of much Australia-UK/Europe traffic being funnelled via Dubai, especially with reduced Qantas capacity on Heathrow, following the introduction of the nonstop 787 Perth service (replacing an A380).  Qantas gets the benefit of using more of its metal in developing Asian markets.  The  cooperation with Dubai’s other airline, Fly Dubai continues to roll out, offering many more itinerary opportunities for customers as well as providing new efficiencies on the planning of schedules and capacity deployment for both airlines.

A really interesting product step by Emirates, is the introduction late next year, of a premium economy cabin.  The airline has been reluctant to make such a move until now.  It’s increasingly becoming a lucrative cabin for many airlines, allowing them to tap into customers who can’t afford the step to business class but who are prepared to pay a margin over economy, for some extra comfort and service.  Sir Tim has himself evaluated, using virtual reality goggles, a number of design options and believes it will provide a good trade up revenue stream from economy rather than a trade down from business.  The challenge for roll out is reaching a critical mass,  having enough aircraft fitted out, to maintain a consistent product offer on initial routes.

We covered a lot of ground and it’s clear that there is plenty on Sir Tim’s plate.  As ever Emirates stands ready to take a new direction. 

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