Emirates Reaches for the Sky With Growth Plans
Jad Mouawad | February 13, 2011
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Dubai. Beyond the artificial archipelagos shaped like palm trees, not far from the tallest skyscraper in the world, stands another monument to this city-state’s stubborn ambition.
Even in this oasis of extravagance, Terminal 3 at the Dubai International Airport startles. It is not merely the world’s largest air terminal. It is the world’s largest building, period. And all 370 acres of it — all 82 moving walkways, 97 escalators, 157 elevators, 180 check-in counters and 2,600 parking spaces — were built with one very well-connected company in mind: Emirates, Dubai’s fast-growing flagship airline.
Emirates is pressing ahead with an ambitious expansion, despite the city’s financial near-collapse in 2009. Its executives, with the help of Dubai’s rulers, want to place this Persian Gulf city at the center of a transportation network linking vibrant economies like India and China to Europe and the United States.
It might sound like bravado from the bubble years, another case of overreach in this sandy fantasyland.
Tim Clark, the president of Emirates, says his airline represents the future of mass air travel. In an era when many international carriers are struggling to sustain themselves, Emirates has filled its planes, raised fares and consistently turned a profit. It earned $925 million in the six months ended last Sept. 30, up from $205 million in the year-earlier period.
To win over customers, its executives want to bring a bit of glamor back to air travel. On the double-decker Airbus A380s, full bars are standard in business class, and the first-class cabin includes showers. No one pays for food or drinks on any Emirates flight.
So far, Emirates’ success is partly an accident of geography.
Roughly four billion people live within an eight-hour flight from here.
But to the consternation of rivals, Emirates also enjoys the patronage of Dubai’s rulers, in particular, Sheik Ahmed bin Saeed al-Maktoum, who is its chairman. While home-grown airlines in places like Singapore and Hong Kong have also turned those cities into global hubs, Emirates stands apart for the scale of its ambitions.
“The legacy carriers still see us as the monster of the Middle East, the bete noir of civil aviation in the 21st century,” says Clark, 61. “But they won’t accept that the business we are carrying wasn’t theirs anyway. The 21st century is very different from the 20th century.”
Emirates, for instance, offers 184 flights a week from Dubai to India, to cities like Ahmedabad, the commercial hub in the state of Gujarat. It flies to 17 cities in Africa and, in China, to Beijing, Shanghai, Hong Kong and Guangzhou.
Craig Jenks, an airline consultant based in New York, says Emirates threatens established carriers in the one market where these airlines are making money: long-haul international trips. “There’s nothing better than a highly motivated cowboy airline in a small country.” he says.
Rivals express grudging admiration for Emirates. “Emirates recognized the value of a global hub,” says British Airways’ chairman, Willie Walsh.
Clark says: “If you want to go from Africa to Asia, or from South America to China, the straight line is through the Middle East.”
Government support has also been essential. From the start, Emirates was seen as integral to the government’s ambitions of building Dubai into a commercial, financial and tourism center in the Persian Gulf.
Emirates, critics say, essentially receives government subsidies, in the form of low tax rates and shiny new facilities like Terminal 3, where another expansion is under way to accommodate Emirates’ growing fleet of A380s.
Emirates disputes this characterization. The airline publishes audited financial reports and its executives say Emirates gets no government subsidies.
“Emirates works like a corporation,” says Ram C. Menen, who runs the company’s global cargo operations. “We’re a business unit of Dubai Inc. And it’s a happy relationship.”
Emirates has proved remarkably resilient to recent financial shocks — the economic slowdown did not hamper its growth. The question now is whether Emirates can sustain its momentum without jeopardizing quality and service.
So far, Emirates has benefited from the weakness of some airlines in China, India and African nations as it establishes its presence in those and other developing countries.
But that advantage may one day come to an end. In India, the advent of a new generation of quality carriers, including Kingfisher Airlines and Jet Airways, now offers some appealing domestic alternatives for India’s vast expatriate population, long one of Emirates’ growth engines.
Another threat is on the horizon. As more airlines start using long-range planes now in development, like the Boeing 787 Dreamliner and the Airbus A350, they will be able to fly more people nonstop to most any other place in the world. That could pose a problem for the Emirates model: its reliance on the Dubai hub.
“One survey that is consistent is that people simply do not like to change planes,” says Richard Aboulafia, an aviation consultant at the Teal Group, a consulting firm in Virignia. But, he added, “Underestimating the competition is a time-honored feature of the airline business. Is it confidence or is it hubris? It is only hubris if you lose.”
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