The Rise and Rise of Emirates
25 years after its launch, Emirates has established itself as a pioneer in the aviation industry and has set a benchmark for other airlines to follow. Connecting 105 cities across 6 continents, it has emerged as one of the leading airlines in terms of revenue, fleet size, international passengers carried and quality of service in a relatively short span of time. With a fleet of 150 aircraft and 204 aircraft on order which include 90 Airbus A380 aircraft, Emirates has been one of the few bright spots for the struggling aviation industry and seems well on course to achieve its aim of connecting any two destinations in the world with one stop at its hub in Dubai.
Prior to the birth of Emirates, the major airline serving Dubai and other Middle Eastern cities was Gulf Air, an airline formerly owned by the governments of Bahrain, Oman, Qatar and Abu Dhabi. However, in the early 1980s, Gulf Air started cutting down its flights to Dubai owing to the government’s Open Skies policy. Gulf Air feared that its flights to Dubai merely served as a regional feeder for bigger international airlines and the Government of Dubai refused to grant it protection from foreign competition. This move prompted the Dubai government to consider launching its own airline. In October 1985, five months after a feasibility study was conducted, Emirates was officially unveiled. The airline started off with a fleet of 2 leased aircraft and an initial capital of $10 million, which was not considered a significant sum to run an airline even back in 1985. The government also announced that the airline would not receive any further government funding. Few would have given the airline a chance back in 1985. However, by 1988, Emirates had already added 12 destinations and was well on target to add many more. By the early 1990s, Emirates had established itself as one of the fastest growing airlines and was carrying over 2 million passengers annually, a figure that grew to 27.5 million in 2009. It had become increasingly evident that Emirates was a tremendous success story of the aviation industry.
One factor that distinguishes Emirates from other airlines is its solid financial performance. It has registered a loss only once in its 25 year history. Despite significant expansion and investment in infrastructure, Emirates’ bottom line has been largely robust. Within 8 years of its launch, Emirates’ revenue stood at $500 million and by 1998, operating revenues had crossed the $1 billion mark. The airline announced a net profit of around AED 3.5 billion ($951.6 million) for the fiscal year 2009-2010. Despite significant economic hardships faced by the aviation industry at large, Emirates has proved to be highly profitable.
Emirates has also raised the bar for its competitors as far as quality of service is concerned. The airline is credited to be the first airline to introduce personal in-flight entertainment systems after it installed video systems for all seats in all classes in 1992. Emirates is also one of the few airlines that allows passengers to use cell phones to make in-flight calls. Emirates’ success also stems from its ability to offer a wide range of non-stop flights from its hub in Dubai to destinations such as New York, Los Angeles, Sydney and Sao Paulo. Currently, it operates the most number of ultra-long-haul flights with seven flights. It also offers more seats on intercontinental routes than Air France and British Airways combined. This is a rather staggering statistic given that Emirates does not have a large home market compared to other European airlines.
Over the years, the airline has been able to build a strong brand and has developed a loyal customer base. A sizable chunk of its success can be attributed to the emergence of its hub city, Dubai as a global tourist and financial hub. As the number of tourists to the city has increased significantly over the past decade, a large number of them have preferred to travel by Emirates. The airline also offers attractive holiday packages and hotel stays at the Burj Khalifa to lure passengers. Emirates is often seen as a symbol of Dubai’s progress and this has also been acknowledged by Sheikh Ahmad bin Saeed Al Makhtoum, Chairman and Chief Executive of The Emirates Group, the parent company of the airline. In an interview with Gulf News, a Dubai newspaper, Sheikh Ahmad said, “Together with Dubai, Emirates has grown and prospered. Working in tandem, the city and the airline have defied expectations, building an international business and leisure destination, alongside a highly successful and profitable airline.”
Another key feature of Emirates’ global presence is its continuous zeal to expand operations as adds more destinations to its already vast global network. The Airbus A380, the world’s largest passenger airplane, has been a focal point of this expansion strategy. Emirates has been the largest buyer of the A380. Its $11.5 billion order for 32 A380 aircraft at the 2010 Berlin Air Show which raised its total order for the aircraft to 90 is ample testimony of its expansion plans. In addition, it also placed a $9.1 billion order for 30 Boeing 777 aircraft, which can seat over 300 passengers, at the 2010 Farnborough Air Show. The airline sees international aviation being dominated by large aircraft in the future as passengers’ preferences become more inclined towards non-stop commercial flights. It thus aims to be equipped with the capacity to handle this demand well in advance.
However, the path ahead for Emirates is not entirely turbulent-free. Competitors have become increasingly wary of the airline’s progress and have often accused it of benefitting from government subsidies, a claim that Emirates has constantly denied. This accusation has prompted the airline to publish audited financial statements on its website. International carriers argue that they are unable to compete with Emirates on a level playing field. European carriers, in particular, fear that Emirates’ penchant to connect cities with long-haul flights may reduce the importance of European hubs. Lufthansa has been lobbying the German government to restrict landing rights offered to Emirates. Similarly, Canada has also restricted the carrier’s landing rights in Toronto and has refused to approve flights to Vancouver. Meanwhile, Emirates has said that international fears are unfounded and considers these recent developments to be a ploy to hinder its growth and expansion. Given, the large number of orders placed with Airbus and Boeing, Emirates will not want to be left with excess capacity when the orders are fulfilled. It can ill afford to underutilize its fleet of large aircraft and its future success will be partially dependent on the effective utilization of its capacity.
Though geo-political and economic challenges remain, Emirates seems well poised to take further leaps in the industry and consolidate its position as a leading airline.