Emirates rides the regional boom

Emirates airline has ordered a jaw-dropping 245 new wide-bodied planes, but the company's president shuns suggestions that he wants to create the world's biggest airline.

"I'm not bothered personally if that makes us the biggest or not," Emirates president Tim Clark said in an interview with the Associated Press.

Aviation analysts say that in fact the airline's unprecedented rate of growth would make it the world's largest within the next decade.

At last month's Dubai Air Show, Emirates ordered 120 Airbus A350XWB jets, 11 additional A380 super-jumbos - increasing its total order to 58 - and a dozen Boeing 777-300ERs - which more than double its current fleet of 112 planes.

The orders, amounting to $34.9 billion at list price, bring the value of the airline's total order book to an unheard of $60 billion.

Clark, who helped establish the company in 1985 and has served as its president ever since, says his main aim is for the airline to keep its focus and remain an industry trendsetter in terms of quality of service.

"The business model saw us focusing on the geocentricity of Dubai, focusing on the fact that within that eight-hour flying zone we had four billion people," he said.

Emirates currently serves 99 cities in 62 countries with new ones being added on an average of one every two months. A second US route, between Dubai and Houston, was inaugurated this month. Other North American destinations are New York and Toronto, and Clark said routes to two more cities in the US, which he declined to name, were planned for next year.

At a time when many airlines around the world are feeling the pinch of high fuel prices and a declining dollar, Emirates expects to top $1 billion in profits in the fiscal year ending March 31 on revenues of $8.1 billion. That would represent an 18.5 per cent increase over last year's figure of $844 million.

This is partly due to the currency peg between the UAE's dirham and the US dollar. Emirates reports in dirhams but a large proportion of its earnings is in euros and pounds sterling, and the dollar's slide "actually makes us look good," Clark noted.

Emirates also has benefited from the general economic boom in the UAE, whose thriving economy has been fuelled by high oil prices and a rapidly growing tourism industry.

Statistics show that nearly half of its passengers nowadays are people making connections in Dubai.

Over the past 15 years, Dubai International Airport has developed into one of the largest hubs in world aviation. A new airport, said to be the world's largest, is now under construction near Jebel Ali, a massive complex comprising a port, airport, residential areas, hotels and a free trade zone about 12 miles from the city centre.

Emirates airline is currently wholly government owned, but Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman of Emirates Group, last month indicated that 30 per cent of the company may be sold in public markets.

Emirates' operating costs are significantly lower than those of its European or US rivals, according to Michael Dyment, an aviation analyst at Nexa Capital Partners, a Washington DC corporate finance group.

He credited Dubai's zero tax rate, the airline's ability to tap credit markets to buy new airplanes because of Dubai's good credit standing, and the fact that legacy costs like pension burdens are low.

"One of the key advantages they have over others is that the airline itself is not subject to the same labour rules," Dyment said. "They are able to keep organised labour away, so they don't have a unionised environment that has been detrimental to other carriers."

John Strickland, director of JLS Consulting, a London-based aviation consultancy firm, noted that the airline is almost unique in civil aviation because it has kept the same top management team since inception. They have developed a product that has allowed Emirates to capitalise on high-end fares in business and first class on long-range routes.

" Dubai has a very good geographic location in terms of offering services to European consumers going on to Asia, and this has been a strong selling point for the airline," he said.

"But Emirates has also been very good at developing traffic flows that bypass Europe, like from China to Africa. This irritates European carriers who also perceive Emirates, rightly or wrongly, as subsidised by the government."

Clark denied criticisms that the carrier was receiving preferential treatment from the Dubai government in terms of lower fuel costs and other benefits. "Categorically, unequivocally and emphatically, we have never been subsid-ised," he said.

Clark, a veteran of the now-defunct British Caledonian airline, joined Emirates the day it was founded after spending a decade working for Bahrain's Gulf Air, once the pre-eminent carrier in the region.

He welcomed the rise of other airlines in the Gulf , such as Etihad, Qatar Airways or Oman Air. Those airlines, along with a host of budget carriers, have been set up since the 1990s to take advantage of the unprecedented boom in travel via the Gulf. The Middle East's three main budget airlines - Air Arabia, Jazeera Airways and Atlas Blue - have grabbed five per cent of the region's air travel market, and analysts say that portion is set to increase in coming years as booming Gulf economies attract more fliers.

"On the basis that the global market is an ever-growing thing, and as long as they go about doing things the same way we do," Clark said, "there's no reason why they shouldn't be as successful as we are without getting at each other's throats."

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