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Emirates needs to 'adjust' business: chief

Emirates Airline is undertaking what its president Tim Clark terms a "major exercise" to adjust its business amid changing customer demand.

But he insists: "This is not a revolution... Our business model is fundamentally sound."

Between April and September 2016 – the first half of its financial year – Emirates' profit fell 75%, though revenue was stable.

Speaking at a media briefing during the ITB travel fair in Berlin on 9 March, Clark conceded that the full-year results would be below those of 2014 – which were exceeded by 2015's.

He says adverse currency effects have been a significant factor. An appreciation of the dollar has itself created pressure for the Dubai-based carrier, and also triggered secondary effects as weak currencies in other markets decline versus the US currency.

Clark notes that markets in Emirates' home region – such as Iraq, Libya and Syria – have disappeared as a result of political conflicts. "The Middle East is a different place now to when we started to fly in 1985."

However, he argues that wider geopolitical, socioeconomic and industrial developments have made the business environment less certain. Following the UK's decision to exit the European Union, Emirates took an "18% whack in the summer" in that country, which Clark describes as a "high-production market".

When US president Donald Trump in January signed an executive order temporarily banning citizens of seven majority-Muslim countries from entering the USA, Emirates' rate of ticket sales growth fell by more than a third versus previous years, asserts Clark.

He says efforts by European airlines to establish low-cost long-haul subsidiaries are also having an effect on the industry and on Emirates' business.

"Airline communities are reacting to, basically, much lower yield," is how Clark sums up the overall development. "We are trying to... understand better what has been going on [and] why it has been going on.

"I honestly believe that the nature of demand... in regional, domestic and long-haul is going to change over time, and therefore we have to adapt and adjust our business model accordingly."

Clark does not rule out possible job cuts as part of efficiency efforts. But he says redundancies are "not in our nature" and that he would rather "reshape" the airline.

He declines to provide detail on the restructuring efforts. But he asserts that Emirates still has one of the lowest unit costs among long-haul operators, and that any changes will be made in a "clinical and professional" manner.

On the subject of capacity growth, he acknowledges that there is a "degree of flat-lining" by Middle Eastern airlines. But he insists capacity is still being increased and still sees no danger of overcapacity in the long term.

Where Emirates has in previous years boosted capacity by as much as 20%, its available seat-kilometres will this year be increased 7-8%.

Clark reflects that airlines in the past had to respond to one or two critical events per year, such as economic slowdowns in individual markets or flying bans due to volcanic ash clouds. "[Now] the pace of change is accelerating and is quite destabilising," he says. "The world is in a high degree of volatility for all sorts of reasons. And the way people travel, their decision to be travelling, the amount of money they are prepared to pay, new entrants coming to the market... this is all changing."

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