TBY talks to Sheikh Ahmed Bin Saeed Al Maktoum, Chairman & Chief Executive of Emirates Airline & Group, on consistent profits, rising fuel prices, and Dubai as an aviation hub.
TBY What have been the key elements that have led consistent profit year after year?
SHEIKH AHMED BIN SAEED AL MAKTOUM The 2011-2012 financial year was a challenging one for Emirates. To have achieved a profit in spite of record fuel prices and unprecedented economic pressure is testament to our tenacity. Our success is governed by our long-term strategy of reinvesting our profits directly into our product. In the last financial year alone we invested heavily in new products that will help us maintain our position as one of the world’s fastest growing and most innovative airlines. In addition to new on-board and on-the-ground innovations, Emirates received 22 state-of-the-art aircraft last financial year; a wide-bodied mix of A380s and Boeing 777s. Each of these new aircraft is already playing a key role in our future growth and expansion plans.
How interconnected is the Emirates success story with Dubai’s own as an aviation hub?
The incredible success of Emirates and Dubai are intricately linked. Dubai is a dynamic and vibrant city, and it has played a key role in shaping Emirates into the carrier that it is today. In the last 27 years, Emirates and Dubai have grown alongside each other. With its vast network of global destinations, all connected via its Dubai hub, Emirates has helped to showcase the unique vitality of the city. Dubai is centrally located between East and West, with access to two-thirds of the world’s population via a maximum eight-hour flight. This geographical positioning has served to provide us with a unique advantage and one that we have certainly capitalized on.
The ever-increasing development of local airlines, as well as global giants, has created a highly competitive environment, and Emirates attracts its fair share of envious glances. How has the company’s strategy adjusted to deal with the increased competition?
At Emirates we believe that competition is good for the industry, and importantly, it is even better for the customer. Competition between airlines serves to stimulate demand. It keeps airlines on their toes and ensures that they work harder to win a customer’s patronage. Emirates operates from Dubai International Airport, which operates under an unconditional open-skies policy. This policy has ensured that we remain competitive. Emirates does not benefit from any form of government subsidy, and this has proved to be a key measure of our success. Standing on our own we continue to thrive, remaining profitable through challenging times and remaining the carrier of choice for the 34 million passengers that travelled with us in the 2011-12 financial year. Our strategy for success remains the same, no matter how many competitors there are. We continue to stay true to our proven business model, growing organically with new, modern aircraft and carefully selected destinations that we know will provide a strong return.
Rising fuel prices, regional political unrest, and global economic woes are creating challenging times for the airline industry. In what ways are these factors impacting the airline?
Business conditions this last year have been challenging for the entire aviation industry. Emirates is fortunate enough to possess an excellent product line that has helped shield it from the brunt of last year’s difficult operating climate. Our young fleet of aircraft, growing network, world-class service, and competitive prices have helped to ensure that we continue to attract new customers as well as retain those who already fly with us.
Emirates lifted the fuel surcharge from the price of tickets last year. What was the driver behind this, and how long do you see it remaining in place?
Unfortunately, like all airlines, we are reliant on fuel to operate our business. With no sign of oil prices decreasing, a fuel surcharge was implemented on tickets in February 2012 to help mitigate these increased costs.
The first flight landed into Al Maktoum International Airport in 2010. How will the development of the second Dubai airport change the dynamics of the city?
Dubai World Central—Al Maktoum International Airport—is being developed in Jebel Ali to cater to the future aviation and logistics needs of Dubai. There is no doubt that the new airport will play an increasingly important role in the Emirate’s long-term aviation goals. Emirates aims to move to the new Dubai World Central airport between 2022 and 2030, and with plans to add hundreds of aircraft and destinations over the coming decades, we are the main driver behind its construction and will be the principal customer.
You are currently establishing the world’s biggest fleet of A380s. How large will the fleet be, and what is the plan for its deployment?
Emirates is currently the world’s largest operator of the A380. We have 21 in our fleet today and a further 69 on order, more than any other carrier. The A380 is an excellent aircraft, and feedback from our customers continues to be incredibly positive. Premium and overall seat factor for our A380 aircraft sat even higher than the rest of our fleet in the 2011-12 financial year, highlighting a continued demand in the product from passengers. Every single one of the A380s we have ordered is carefully planned for Emirates’ present and future requirements. Our A380s are specifically deployed on high-density routes where extra capacity is needed. The A380 can carry more passengers further, thus maximizing the use of slot-constrained infrastructure and reducing the number of required take offs and landings. In the coming months we have several new A380 destinations that will be launched, including Tokyo, Amsterdam, and Melbourne. In total we now fly to 17 A380 destinations across our network. The A380 sets a new standard for aviation and the environment and it plays a key role in our mission to operate an internationally renowned airline while maintaining a high degree of social responsibility. Based on fuel and emission efficiency, Emirates’ A380s are some of the most environmentally advanced aircraft in the sky. The A380 is quieter than any other aircraft, both inside and outside the cabin.
What is the airline’s ongoing strategy in the quest to establish a robust global presence?
Our passengers’ expectations only continue to get higher, and it is imperative that we continue to move forward with them. Growth is an important part of any company’s survival, and for Emirates our growth is directly attributable to the number of passengers that choose to travel with us. It is for this reason that we invest billions of dollars each year in expanding our service offering by way of new destinations, new aircraft, and innovative, customer-focused products. In the last five years Emirates’ route network has grown by nearly 40%, and in the 2012-13 financial year we have already announced new services to four destinations, including Ho Chi Minh City, Lisbon, Barcelona, and Washington, DC.
What were the main lessons learned during the global liquidity crisis, and to what extent would you say the economy is recovering?
There has been a marked shift in business travel movements from East to West. We have witnessed incredible growth throughout Asia, Africa, and the Indian subcontinent and we continue to capitalize on this with new links, additional frequencies, and upgraded capacity. The global economic situation has improved, but it is not uniform across all markets and is again showing volatility in the eurozone. Our development plans for all areas of our business remain on track and we are confident that our robust business model will continue to reap rewards.
© The Business Year