Max Kingsley-Jones/DUBAIEmirates had a handful of routes and aircraft when it began in 1985 - now it is a major force and is eyeing the A3XX
The Past 14 years have been an exciting ride for Emirates. The airline has topped the growth tables for national carriers almost continuously since its launch in 1985. Since then, the airline has grown from a regional player with three routes and two aircraft to be a major force, flying 30 aircraft to 47 destinations. A global network is next on its agenda.
"We are larger than Gulf Air," says chief director, Tim Clark. "We will carry 5 million passengers in the next financial year [1999-2000], exactly in line with our forecast made in 1990," he adds.
The airline was formed in 1985 to serve the increasingly important Gulf trading post in Dubai, one of the United Arab Emirates' seven kingdoms. Dubai's rapid growth is linked directly to the state's decision in the 1960s to wean the economy away from the oil business and to focus on tourism, services and business. This effort was supported by free trade and open skies policies. The expected continued growth of the state is illustrated by Dubai's rapidly expanding hotel business. "There are 13,500 hotel rooms available in Dubai. This will increase to 77,000 by 2010," says Clark.
Like other air transport issues in the region, the background to the Emirates' creation is politically sensitive. Clark concedes that "aeropolitical issues" led to the need for an independent airline to serve Dubai.
Air links were seen as a cornerstone to the state's economic growth plans. During the 1970s, the Dubai Government was able to persuade local carrier Gulf Air (in which it had no financial involvement) to serve Dubai. As the city became increasingly important during the early 1980s, however, more foreign airlines began serving the state, which elicited a defensive response from the local carrier.
spur to launch
Gulf Air, apparently concerned that it was serving only as a regional feeder for other carriers' international flights, began to reduce its services to the city, providing the necessary spur to launch the state's own airline. After considering various options, the Dubai Government decided to adopt local airport operator DNATA (Dubai National Air Travel Agency) as the vehicle for the new airline's launch.
Maurice Flanagan, a veteran of British Airways' predecessor BOAC, had been running DNATA and was appointed to run the new airline operation, reporting to chairman Sheikh Ahmed bin Saeed Al-Maktoum. Flanagan has been managing director throughout the airline's 14 years of operation.
Services were launched in October 1985, with two aircraft, a Boeing 737-300 and an Airbus A300B4, leased from Pakistan International Airlines. The airline's first destinations were across the Gulf to Karachi, Delhi and Mumbai.
In 1987, the airline introduced the first of its own aircraft, two Airbus A310-300s, and has not looked back - averaging a 30% annual increase in passenger traffic in its first 10 years. Growth has since settled at around 15-20%.
By the early 1990s, Emirates was carrying over 2 million passengers a year, serving more than 30 destinations with 15 aircraft and earning 2.2 billion dirham ($600 million). The Airbus widebody fleet was expanded with the introduction of more A310s and some larger A300-600Rs. In 1992, the airline put an important marker down as to its long-term growth plans, when it placed orders and options for up to 14 Rolls-Royce Trent-powered Boeing 777s.
Deliveries of these 300-seat twinjets began in 1996, with the airliner spearheading the carrier's network growth - providing greater capacity for existing routes and longer ranges for new destinations in Asia-Pacific and Australia.
The next phase of expansion has begun, with the delivery of the first of 17 Airbus A330-200s. The airline has options for seven more. These long-range, Trent-powered twinjets will seat 243 passengers in a three-class layout or 285 in two classes, depending on their deployment. They are slotting in below the 777-200s to replace gradually A300/A310s over the next two to three years.
The added capacity provided by the 777s helped Emirates to pass the 3 million passenger mark in 1997/8, with 3.7 million being carried. Emirates forecasts 4.5 million passengers in 1998-9 and expects the 5 million mark to be passed in 1999-2000.
The airline's network now spans four continents, with 47 destinations serviced by 25 widebodies. Destinations include points in Europe, the Indian subcontinent, Africa, Asia-Pacific, and Australia.
"We will grow at 20% next year and continue to expand until we hit 50 aircraft," says Clark. He says the route network will have been extended to 60 destinations by 2004 "or sooner". He describes the airline's growth strategy as "an entrepreneurial business syndrome where opportunities are taken. We have lots more to do yet." Clark says the airline's direction is supported by the Dubai Government's "hard-hitting, go-ahead approach and long-term thinking".
Rapid growth has not hurt profits. In its 1997-8 financial year (to 31 March, 1998), Emirates' operating revenue shot up 24% to just over $1 billion (4 billion dirham), while its operating margin grew from 7.2% to around 10% ($109.5 million/4.2 million dirham). This double-digit operating margin makes Emirates a leading performer within the airline industry.
The growth drive continues. With the 777-200s operating at capacity on certain routes, Emirates arranged to lease two larger -300s from Singapore Aircraft Leasing Enterprise for delivery from October. Clark says these aircraft will be equipped with 380 seats (three-class) or 434 seats (two-class), depending on the route.
"We are looking quite seriously at ordering some more -300s for delivery in 2000," says Clark. At this stage it has not been decided whether this will be achieved through the exercising of its four 777 options, or through another operating lease deal, he says. The airline is considering the acquisition of "one or two" more A330-200s for 2000, on top of the seven it is scheduled to take next year.
So far, Emirates has taken a relatively broad-minded approach to partnerships, concluding codeshare deals across a spectrum of carriers and alliance groupings. It is no accident that the airline has ignored offers to fill the void that the Gulf represents in the strategic alliances.
Last year, the carrier is known to have turned down an offer to join the United Airlines/ Lufthansa-led Star Alliance. Clark says he is "perplexed at the current bout of alliance-mania". Clark is a proponent of codeshares, which Emirates has with members of both global groupings (Star and oneworld), but he has turned down offers to join a major alliance as he believes that "aligning with one bloc closes too many doors". This attitude to the alliances has evoked "hostile reactions" by some carriers, says Clark, when approaches to sign on have been declined.
To extend its global reach on its own terms, Emirates last year agreed to take a minority stake in Sri Lankan flag carrier Air Lanka. The deal calls for Emirates to manage Air Lanka for 10 years, with Emirates agreeing to maintain a minimum holding of 30% for the period. Emirates has already revamped its partner's fleet strategy, placing an order for six Trent-powered A330-200s to replace Airbus A320s and Lockheed L-1011 TriStar 500s, and providing commonality with its own A330s.
Despite the competitiveness of the region, Clark believes that co-operation between the Gulf carriers does make sense in certain areas. "Gulf Air, like us, and [our partner] Air Lanka, is building a large fleet of Rolls-Royce-powered A330-200s which provides opportunities for joint maintenance," he says. A tie-up is being discussed with Oman Air which could see it taking over Emirates' Dubai-Muscat operations.
Independent global network
The decision to stay outside the major alliance groupings will result in Emirates building an independent global route network. The airline is putting the finishing touches to its frequent flier programme (FFP), which should be launched early next year. Clark admits that he is an "FFP sceptic", but believes it is time for the airline to launch its own programme as it prepares to begin ultra-long-haul operations and globalises its thinking.
Clark's "to do" list includes adding to its sole Australian destination (daily to Melbourne via Singapore) with services to Sydney, Brisbane and Perth - ideally with daily frequencies - as well as new points in western, central and southern Africa, and North America. Efforts to build on the initial venture in Australia have been held up by aeropolitical problems.
Last year, Emirates finalised a long evaluation of a new ultra-long-haul jet to operate on non-stop services to North America and to Australia. Airbus' A340-500 got the nod over Boeing 777-200X. A $2.4 billion order was placed for six aircraft, plus 10 options, for delivery from July 2002.
Although Clark would prefer to add the North American component of the airline's expansion sooner than later, those services will not come on line until the A340s arrive in 2002, when non-stop flights can be offered. Topping the list of destinations for the new aircraft is New York, which Clark envisages as a twice-daily frequency. A non-stop Dubai-Los Angeles service, that would be a 13,400km (7,250nm)/15h flight sector, is high on the list, as are flights to Chicago and Atlanta. Clark suggests there are "possibilities in Canada".
The high-growth rate has helped to drive expansion at Emirates' home base. Dubai's airport, the sixth fastest-growing airport in the world, experienced a 6.8% growth in passenger traffic last year, to 9.7 million, while aircraft movements rose by over 9%. Clark says the airport's expansion plans are aimed to handle 50 million passengers a year.
A new terminal opened last year and a new 27-gate terminal is due to open next year. Clark says a decision on the go-ahead for yet another new terminal of similar size is "very close". This could open in 2002, dedicated to Emirates.
Significantly, Clark says that three gates at that new terminal will be designed to handle aircraft the size of Airbus' planned 480/660-seat A3XX. Emirates hopes to join the A3XX airline consultative group this year. It believes that it could fill the 560-seater on its denser routes, such as to London.
Clark would like to see the first A3XXs join the fleet from the middle of the next decade. To be in serious contention as a launch customer for the ultra-large aircraft just 14 years after its creation says as much about Emirates' rapid growth as it does about its ambitious plans.
Source: Flight International