As sports fans will have noticed, Emirates has attached its name to just about
everything it can involving a bat, ball or movement faster than a walk. The
Dubai-based airline spent £100 million on sponsoring Arsenal Football Club
and giving its name to the club’s new, postHighbury North London home and it
followed this with sponsorship of world cups for football, rugby and cricket
and a dozen or so professional sports teams. The carrier is on a branding
mission to rival Coca-Cola or Nike.
This strategy is part of Emirates’ ambition to become the world’s largest and
most profitable airline. In recent years growth has been dramatic, doubling
every four years, while the legacy carriers of Europe and the United States
are stagnating.
Emirates carried 16.7 million passengers last year, making it the
ninth-largest international carrier. This year it will transport about 20
million, taking it past Singapore Airlines, and if this trend continues it
will pass British Airways’s 29 million passengers by the end of the decade.
Its growth is built on an idea that is fundamental to understanding Dubai:
create supply and demand will follow. The airline has launched services that
no European carrier would consider, such as a daily flight between Newcastle
and Dubai. The route seems to defy logic, but Emirates believes that by
making it available, passengers in the North of England will begin to see
Dubai as a possible business and tourist destination. However, the gamble is
not cheap: this one route will require access to three aircraft, at a cost
of $180 million (£87.7 million) per plane. Newcastle is, therefore, a
half-billion-dollar bet for Emirates.
However, as a state-owned carrier, the profitability or otherwise of the route
may never be known. Indeed, it is sometimes difficult to establish where the
airline’s strategy ends and that of Dubai begins: one reason that Emirates
has started the Newcastle route is to feed tourists into Dubai’s hotels and
leisure attractions. Exactly how they all cross-subsidise each other, if at
all, is unknown.
It is this lack of clarity that worries many Western airline executives. They
are not too concerned about routes such as Newcastle-Dubai, but they do have
concerns about competition on routes once considered cash cows for European
airlines – London or Paris to Dubai, for example. Is Emirates dumping seats
on these routes to fill Dubai’s hotels? Is the state-owned carrier receiving
financial aid to buy its vast new fleet? Airline bosses whisper privately
about the subsidies and benefits enjoyed by Emirates and they are lobbying
governments to block access to airports.
Although Emirates denies being subsidised, the airline and its home town are
closely linked. Emirates’ growth feeds Dubai’s growth, and vice versa –
precisely what the rulers of the Gulf state envisaged when they launched the
airline in 1985.
For many years Dubai had been a stopover on the long journey east from Europe
to Asia and Australasia, but new technology enabled aircraft to fly directly
to destinations such as Singapore, Bangkok and Hong Kong. Dubai was in
danger of being overflown and ignored. But if Emirates could bring people to
the city, perhaps they could be encouraged to get off and spend.
Sheikh Ahmed bin Saeed al-Maktoum, uncle of the present Emir, who was asked to
take on the challenge, says: “It is happening much faster than anything that
had been planned for, but it is only happening this way because Dubai took a
calculated risk in terms doing things in such a big way. We had to diversify
our economy because Dubai had limited resources. We are a part of the Gulf
that has a lot of oil, but Dubai itself has very small quantities of it. We
had the idea to develop tourism and it all started at that time, thinking
about the future. What we at Emirates have achieved today was thought of
back in the 1980s.”
Emirates serves 94 destinations in 60 countries, allowing Dubai to attract
millions of tourists to its luxury hotels and businessmen to the mini-cities
that it has created for media, technology and healthcare specialists. Zero
income tax has further enhanced the city’s appeal to the rapidly growing
community of expatriates from Europe, other parts of the Middle East and
Asia.
Sheikh Ahmed said: “We believe we have been supported by what is happening
here in Dubai. The development of hotels and shopping malls and other
infrastructure has attracted people here. If we didn’t have Dubai and this
lovely city, it would not be easy to promote the place as a destination. We
go hand in hand with Dubai.” This ability to lure tourists and businessmen
has been aided by geography. The city is in a unique position as a pivot
between the continents of Asia, Europe and Africa. The economies of Asia and
India are growing fast and Dubai believes that it can be the hub that
directs services and goods between the booming East and the rest of the
world – and Emirates will be the means by which these goods and people will
travel.
“We are lucky in our location,” Sheikh Ahmed said. “Between many destinations,
the shortest route is via Dubai. We have been very lucky with that and we
use that in terms of the services we decided to launch. For example, if you
want to go to Japan from South America, then Dubai is the shortest route in
terms of journey time. There are many countries in this position, but they
did not take advantage of their geographic position.”
Western airline executives are not impressed by the geographical argument and
complain that Emirates’ success is built on unfair government loans, cash
injections, help in financing its massive aircraft acquisitions, cheap fuel
and a labour regime that does not allow trade unions.
Sheikh Ahmed rebuts his competitors’ allegations. Emirates received $10
million launch financing, enough to lease two aircraft, and has received not
a dirham more, he insists: “If we started with subsidies every year, we may
not be able to compete in industry today. We had to learn the tough way. The
instruction from the Government was that we would have freedom to do
business whatever way we wanted, but we don’t get to come to the Government
for financial support.”
Gulf airlines also point out that while they do benefit from labour laws that
enable them to avoid the sort of wage and pension bargaining that dogs
British Airways on an annual basis, other costs have to be factored in.
Emirates, Etihad and Qatar, the three main Gulf carriers, must import their
pilots, engineers and cabin crew. The companies must provide housing and
perks to attract thousands of staff while at the same time keeping costs low
enough to return profits.
Sheikh Ahmed said: “Always people say that it is easy for us because they
think every Gulf state is rich. They think everyone is a billionaire and
this is the perception for the average person. They say these things because
it makes it much easier for them when they don’t reach their own goals.”
Despite the gripes about special circumstances and financial assistance,
Western airline executives admit that Emirates is well-run. Its aircraft are
new, its crew attentive and its service among the best.
Emirates’ growth has had a wider effect on the aviation and aerospace industry
than merely bringing tourists to the Gulf. The airline is buying so many
aircraft to feed its growth that it is in a position to force the aerospace
giants, Boeing and Airbus, to modify their designs according to Emirates’
specifications. The airline has 108 aircraft worth more than $30 billion on
order and it continues to flaunt an order for a further 100 under the noses
of Boeing and Airbus. Whichever manufacturer wins this order, likely to be
worth about $20 billion, will have done so because it has delivered an
aircraft made almost exclusively for Emirates. No other airline has this
sort of power.
Emirates has a very real chance of becoming the world’s largest airline within
the next ten years, particularly as it will start to take delivery of a
fleet of A380s next year. The 55 A380s that Emirates has on order will give
it by far the biggest fleet of this aircraft and the double-decker giants
will substantially increase the number of passengers that it can carry out
of congested hubs such as Heathrow.
Yet there is a caveat to the growth projections. Airlines are notoriously
susceptible to outside shocks, whether it is an economic crunch, a
catastrophic accident or the outbreak of a disease such as Sars. Terrorism
and political instability are also significant threats to the future of a
Middle Eastern airline and whatever the predictions for growth, Emirates is
not entirely in control of its destiny.
If the airline succeeds, sports teams and cities such as Newcastle will
benefit. If it fails, 55 of the world’s largest aircraft will be parked in
the Arabian desert – and going cheap.
Seven wonders
1 The United Arab Emirates has a population of four million but two airlines –
Emirates and Etihad – that will carry about 25 million passengers this year.
Both have aggressive expansion plans, leading analysts to question where
they will find future customers
2 Qatar has built an airport terminal just for first- and business-class
passengers, although the main terminal building lacks air bridges
3 Dubai is building an elevated metro system that eventually will be 70km
long. The first phase will cost $4.2 billion and run 35km. Its undulating
route has led to it being nicknamed “the rollercoaster”
4 Dubai’s Jebel Ali port is the largest manmade harbour in the world. It is
134 sq km in area and handles eight million containers a year. This is
expected to rise to 67 million by 2030 after the port is expanded
5 Dubai World Central is a new airport being built near the Jebel Ali port. It
will be 140 sq km in area, the same size as Cardiff, and have the capacity
to handle 150 million passengers a year. It will also become the world’s
biggest cargo terminal, handling 12 million tonnes a year
6 Qatar and the UAE are proposing to build a 300km causeway to link the two
countries. Qatar and Bahrain are already working on a $4 billion project to
construct a 40km causeway
7 Dubai’s traffic congestion is notorious. According to the Roads and
Transport Authority, there are six rush hours a day. During rush hour, 15
minutes out of every 25 is spent in congestion
CV Sheikh Ahmed bin Saeed al-Maktoum
Born in a traditional Arab fort in Shindagha, an area of Dubai located between
Dubai’s Creek and the sea. After attending school in Dubai, he studied in
England and went on to university in the United States
Chairman and chief executive of Emirates Airline and Group, which includes
Dnata, the sole ground handling agency at Dubai International Airport and
the biggest travel agency in the Middle East, as well as subsidiary
companies
President of the department of Dubai Civil Aviation, a governing body that
oversees the activities of the Dubai International Airport, Dubai Cargo
Village, Dubai Duty Free, Dubai International Hotel and Dubai Aviation Club.
He is also deputy chairman of the Executive Council, the chairman of the
Dubai Airport Free Zone Authority, chairman of the Supreme Committee of the
Dubai Shopping Festival and Dubai Summer Surprises, director of Dubai Golf
Club and director of the Dubai Creek Golf & Yacht Club and chairman of
Alliance Insurance Co., Dubai International Marine Club, the British
University in Dubai and Dubai Power and Energy Committee
Sheikh Ahmed belongs to the generation of young and influential Emiratis who
are building the bridge between Dubai’s traditional past and its future in
the century ahead. The younger brother of the late ruler of Dubai, Sheikh
Rashid bin Saeed al-Maktoum, Sheikh Ahmed embarked on his journey in the
aviation industry in 1985 when he became chairman of Emirates Airline on the
company’s establishment
Recipient of the French award Commandeur de l’Ordre de la Legion d’Honneur,
December 2003
