FLUG REVUE May 2004: Emirates eyes further expansion

Timothy C. Clark, President of Emirates Airlines

“TAKEOVERS, ALLIANCES, MERGERS SIMPLY BRING PROBLEMS”

With orders worth billions for 45 A380s alone and uninterrupted annual growth of 30 percent, the Dubai-based Emirates airline is one of the pioneers of the industry worldwide. We talked to Emirates president Timothy Clark about markets and aircraft of the future.

FLUG REVUE: You have enjoyed apparently effortless growth for the past 19 years. When are you going to come up against your limits?

Clark: If people can be kept happy on board our planes for 16 or even 20 hours, we will be able to change the traditional ways of travelling. We can then bring the airline to the market rather than the market to the airline. Global demand for air transport has been artificially held back in recent years due, among other things, to local conflicts and battles for market share. If you were to remove these obstacles to growth and offer the man on the street affordable ticket prices, I think the growth we've see so far would not amount to even the tip of the iceberg.

FLUG REVUE: Already there are signs of an oil shortage looming. Can you continue to grow when oil is running out?

Clark: The high price of oil today is not so much the result of any difficulty in extracting it as the consequence of an artificial shortage brought about by the OPEC cartel and a few others. The price of oil should be 22 dollars a barrel, and it will inevitably move toward that figure. If the price goes any higher or lower than that, things become difficult.

FLUG REVUE: The two large aircraft manufacturers are in disagreement over the best size for an aeroplane. What is the ideal size?

Clark: The fragmentation of the market has always been a concern to me. Boeing currently seems to be among those advocating the fragmentation theory. We have twelve 777-300s in service and have ordered 26 Boeing 777-300ERs. Our 777-300s take 434 passengers, more than a 747. I don't understand how Boeing can say size is not something good.

FLUG REVUE: So is the planned Boeing 7E7 out of the question as far as you are concerned?

Clark: Boeing really wants us to accept it, but I told them we are getting rid of 250-seaters and replacing them with 300- or 350-seaters. The 7E7 is too small for us. On the other hand, it is exactly right for the high frequencies of the Japanese market. So they then asked me what I would say if they reduced the costs by 17 to 25 percent. If they can guarantee us that, perhaps I'll say yes after all. Because for tertiary markets such as Dubai to Las Vegas the 7E7 would be attractive.

FLUG REVUE: In the middle of a thinly populated desert state you have established a major new global hub. How do you explain this success?

Clark: In the late Eighties, when the 747-400 appeared, it was forecast that Dubai would die. At that time planes only landed there to refuel. Dubai owes its success not to Emirates but the government. In the calendar year of 2003 we had six million visitors – to a city with a population of one million. Thirty percent more planes landed here than in Australia in the same period. We have experienced explosive growth, and that will not change in the next ten years.

FLUG REVUE: Is it not true that this hub will soon be just as congested as the hubs of your competitors?

Clark: The Dubai hub is critical to our business model. We are currently building two new terminals and an underground baggage claim area. By the end of 2008 the airport will have an annual capacity of 80 million passengers. What restricts further growth are our two runways, which are to be set further apart from each other so that they can operate independently in parallel. In order to cope with slot problems such as those at Heathrow, Sydney, Frankfurt, etc., we need larger aircraft. These priceless surfaces should only be used by aircraft with over 300 seats.

FLUG REVUE: On the one hand, there is increasing price pressure in the market for air travel, but, on the other, you recently presented a spectacular new First Class with suites or separate sleeping compartments. What does the market want?

Clark: We have relatively high demand for First Class and earn 15 percent of our revenue from it. Although it's not growing at 30 percent a year, it is stable. We also wanted to offer a product that was appropriate to our prices. Business Class is more difficult. We cannot charge Euro6,500 to Europe, as BA does over the North Atlantic, more like only half of that. That's why we don't offer any beds, which take up a lot of space and which couldn't always be filled after SARS and 9/11. But we are planning something new. And in the Economy Class we already have 10-inch screens and video on 100 channels. You can't do much more than that.

FLUG REVUE: Where do you recruit the many new experts that your rapidly expanding company needs?

Clark: We make no distinctions of any kind based on religion, nationality or colour. We do not discriminate against anyone. That opens up the global job market to us. Traditionally, Germans have always looked for Germans, the British for British and Americans for Americans. We, on the other hand, are a cosmopolitan airline based in Dubai. Our stewards and stewardesses alone come from 100 countries. Last year we received 26,000 applications in six months over the Internet, 2,000 of which were from pilots.

FLUG REVUE: How significant is the German market for you?

Clark: Germany is very interesting to us. You can see that merely from the fact that we are a sponsor of the World Cup in 2006 and are advertising with icons such as Franz Beckenbauer. The German market, which we are currently serving with five flights a day, means full planes. Everyone asks me how we manage to achieve 90 percent capacity utilisation from Düsseldorf? Well, the Netherlands and Belgium are also right next door. We are very well supported by the travel industry and are expanding our networks.

FLUG REVUE: When will the time come for a large network airline like Emirates to enter an alliance or even form a new one?

Clark: This airline stands alone. Year after year and month after month we have to make a profit. In spite of SARS, the Asian crisis, currency turbulence and so on. There is no other way forward for us than to grow profitably. That is laid down in our business concept. Takeovers, alliances, mergers simply bring problems. We will constantly reinvent ourselves and make Dubai into one of the world's largest hubs for scheduled flights. By 2012 we will have a fleet of nearly 150 planes and be carrying around 30 million passengers a year.

Sebastian Steinke was asking the questions.

From page 19 of FLUG REVUE 5/2004

Last updated 15 April 2004

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