Maurice Flanagan, Group Managing Director of Emirates, the Dubai-based international airline, believes the general public is being badly-served in many parts of the world for a variety of reasons
Q: Have alliances grown too strong?
A: I think alliances, if they're not controlled, would be the same as cartels. The results, if they're not controlled by pro-competitive legislation, will be eventually to increase price and reduce choice. Cartels have been with us since Roman times. Regulators come down on top of them eventually.
There are signs of regulators flexing their muscles now in Europe and the USA.
But they allowed a very strong alliance to develop, the Star Alliance, dominated by Lufthansa and United. This makes British Airways pretty nervous about what's going on, particularly as it feels that the competition regulators in Europe have been rather more lenient on some other guys than they've been on oneworld, which is confusing. It's not straightforward.
Look at Canadian and Air Canada. The future of the Canadian air transport business is not being decided by the Canadian government; it's being decided by the outcome of a battle between two big alliances. It shows how powerful the alliances are.
Smaller airlines might be feeling certain nervousness when they see these things going on.
Canadian's in trouble anyway, whatever happens.
There's too much capacity in the Canadian market. And I think that's to do with tight regulation. In a free market situation like we have here that would never happen.
Q: As a small to medium-sized airline, are you at Emirates always looking over your shoulder?
A: We sense predatory activity by the big alliances aimed at one or two of our vulnerable points.
We're not too concerned by this. Maybe this is just what they do in the normal course of planning, bilateral arrangements and that sort of thing. I don't want to get remotely paranoid about this. It might make commercial sense, in the future, for us to join an alliance if that is the way the world is going.
Q: Would you see yourself forced into an alliance?
A: We'd go into an alliance. We don't feel weak. We're continuing to grow stronger.
In financial terms, like all other airlines, this year is not as good as last year. We're all seeing the same thing. Yields continue to decline.
Fuel is costing a lot more than we thought it would - $500,000 or $600,000 a week more than we forecast. That's straight off the bottom line.
That's not as much as some airlines - I hear that Virgin expect to finish the year £40 million out on their fuel price forecast.
We have a good relationship with United and Lufthansa, we code share with British Airways. Since we have these good relationships with alliance partners, why should we join the alliance if we're doing all right? .
Q: As a privately owned airline, there is no threat of being swallowed up in a stock market takeover?
A: Our position is all the stronger because we're not remotely subsidised and protected against competition. We've had to make our way the hard way. We've grown very fast. In the first 10 or 11 years we grew at an average of 30% a year, which meant we were doubling in size every three-and-a bit years. Now on a much higher base that growth has slackened off. The pressure is to get more capacity of course. So we're going in for the 777-300 now, we get two of those within the next couple of months. We've increased the size of the 330-200 fleet beyond what we planned originally. We're becoming increasingly ambitious with the sort of pencilled-in plans that we have for the 340-500 for Sydney and New York in September 2002. Los Angeles is possible. So is San Francisco.
Q: Dubai's open skies policy means others can do the same thing. Does that worry you?
A: They could fly in with no restriction - we welcome them. We've never found that having unrestricted competition in our home market has been a problem. It means you've got to be smart to survive. Look at Singapore Airlines and KLM; both airlines much bigger than their population base would seem to justify, as we are. That's what happens with relative freedom of air traffic rights.
Q: Is Emirates involved on any new aircraft developments as you were on the 777?
A: We've talked to Airbus about the -3XX. The -3XX is a very interesting possibility. I hear rumours that Boeing is thinking seriously of a completely new aircraft.
The benchmark in terms of seat-mile costs of big aircraft at the moment is the 777-300 where the seat economics are great. The -300 is a good seven-hour aircraft, it doesn't go beyond that. Boeing are now talking about the 777-300X with 115,000 thrust engines, and even looking beyond that. That would be an interesting development.
Q: Do commuter services have a future in the Middle East?
A: In our position we look at it every now and then. We're not thinking of commuter sized aircraft. We're just thinking of aircraft - just thinking, no definite plans - of the sort of 737, 319/320/321 range. It's just a pencilled-in thing. We know we have aircraft that are too big for certain routes, but the economics for doing that work out better than getting a new type into the fleet.
Q: Any comments on the general state of aviation worldwide?
A: I think aero-political constraints are much too tight. I think the public worldwide is being badly served by restrictions on airlines' ability to fly from place to place. I never cease to be astonished by the way in which certain destinations which rely heavily on tourism restrict foreign airlines from flying there in order to protect a resident airline whose place in the economy is much lower than tourism.
Source: Flight Daily News
