Emirates Ambitions Worry European Rivals| 12
Abstract:This Report is on based on the case study Emirates
Ambitions Worry European Rivals, by Jad Mouawad, where the case is
summarized and analyzed. The report highlights on the service of
Emirates Airline and how its poses threats to its competitors and
its strategy which leads to its success as the world largest
airline carrier. Moreover the report also applies the concepts of
services marketing to this case and explains various factors of
Emirates with respect to those concepts.
Table of ContentsIntroduction to Case:3Case Analysis:5History of
Emirates:5The Business Model and Strategy of Emirates: An
Overview:6Customer Service at Emirates:7Value Creation at
Emirates:7The Eight Ps of Service Marketing:8Defining Services at
Emirates:10The Service Flower:12Service Distribution at
Emirates:13Costs and Prices at Emirates:15Evaluation of the
Services Provided by Emirates:15References:18Appendix:19
Emirates Ambitions Worry European RivalsIntroduction to
Case:Emirates started in 1980s as a small corporation but with big
dream. In the start they reduced their services to Dubai. Emirates
is a government own company and started off with the capital of $10
million; they started off with two planes both of them were leased
from Pakistan international Airlines. It was established after Gulf
Air, a regional airline then owned by Bahrain, Qatar, Oman and the
United Arab Emirates.Tim Clark, the president of emirates, says
that his airline represents the future of mass air travel. In the
time economic downfall when all companies were struggling to
sustain themselves, even at that time Emirates was well enough to
attract customer, raised fares and consistently turned a profits.
Emirates earned $925 million his last six months, which was raised
up from $205 million in the previous year.To attract and sustain
their customer they have put glamour in their planes. On the
double-decker Airbus A380s, full bars are standard in business, and
in first class cabin they includes showers, and free food and
drinks in all flights of Emirates. Emirates offer mix of quality
services, operating efficiency and low cost. Emirates government
owned company has now become worlds largest airline by passenger
flown. Success of Emirates was result of its geography because
around 4 billion people live with-in eight hours of flight. In last
two decades air travel in Middle East has grown by 7%, out pacing
other regions of world. One of the greatest steps was to building
routes to developing countries and providing them an alternative to
the local airlines, and instead of connecting through European hubs
they started their new routes through Dubai. Emirates, Currently
offers 184 flights a week from Dubai to India, to cities like
Ahmadabad, 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. It runs two daily flights to Bangkok and nine to
Australia. Emirates is growing very fast as compare to his
competitors, Emirates already got 15 A380s, the worlds largest
passenger airline, and has ordered 75 more for delivery by 2018. On
the other hand its competitors like Air France, Lufthansa, and
British Airways have order total of 39 A380s and have only 8
flying.Critics say that the growth of the emirates was result of
tight relation of Emirates with and airport authorities and
regulators, which give airline an unfair advantage.They say that
Emirates receives government subsidies, in form of low tax rates
and different facilities like terminal 3.where they also give space
to the growing number of fleets of A380s.Whereas Emirates disputes
this characterization and publish audited financial reports, and
its executives says that Emirates did not get any help from
government subsidies. The main advantage of Emirates over its
competitor is low labor cost and they hires inexpensive for
carriage and other facilities like catering mostly from the
developing countries like Pakistan, India, etc. while they pay
their pilots international wages. According to consulting company
Emirates overall cost, including those for labor, are 30 percent
lower than those of its rivals. And it is very difficult for the
other competitors to close that gap, as Emirates are more
profitable with lowest prices in the markets.Other advantage they
have is highly trained employees, like flight attendants they were
given eight weeks training and taught how to serve and give first
aid. Emirates have emerged as a formidable player on the
international travel scene. Its innovations, including private
suites in first class and individual entertainment screens in the
coach cabin, have been copied by many other airlines; its emphasis
on quality has forced traditional legacy carriers to pay more
attention to their own products. 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. Emirates one of the leading airline of the
world having 15 A380s alone and expecting to add 75 more is the
most successful airline. Emirates, which is fully owned by the
government, has grown into the worlds largest airline by passenger
miles flown. The reasons for its success are the competitive
advantage of low cost and high quality enabled Emirates to become
the leader. According to the competitors the success of Emirates is
because of the support of the rulers of Dubai but this claim is not
accepted by Emirates and they believe Emirates is a separate
business unit.Case Analysis:History of Emirates:In 1974, three
years after independence, the rulers of the UAE decided to
establish a joint flag carrier: Gulf Air. However, a tense
relationship between the airline and the Dubai government existed
ever since its inception, as the latter refused to give in to Gulf
Airs demands to abandon its open skies policy. In reaction, Gulf
Air reduced frequencies and capacities to and from Dubai by more
than two thirds between 1984 and 1985 without advance notice. Since
foreign carriers proved unable or unwilling to fill the gap, Dubais
then ruler, Sheik Mohammed bin Rashid Al-Maktoum, convened a team
of experts headed by Maurice Flanagan and later joined by Tim Clark
and the rulers then 26 year old son, Sheik Ahmed bin Saeed
Al-Maktoum to devise an emergency plan. The groups recommendation
to set up a home carrier for Dubai was quickly accepted by the
ruler, but he imposed two conditions: The new airline should meet
the highest quality standards and there would be no additional
capital injections from the government other than the agreed USD 10
million start-up capital. On October 25th, 1985, Emirates first
flight departed to Karachi, using an A300, wet-leased from Pakistan
International Airlines. The rest is history: in 1987, Emirates
began to serve it first two European destinations London Gatwick
and Frankfurt, from 1995, it has operated an all wide body fleet,
and in 2001, 2003 and 2005 Emirates placed some of the largest
aircraft orders ever. As of October 2007, Emirates route network
extends to 91 destinations on all continents.In its last business
year, ending March 31st, 2007, the airline transported 17.5 million
passengers and 1.2 million tons of cargo on 102 aircraft.
Currently, 118 aircraft are on firm order (of which 20 will be all
freighters), including 55 A380 and 43 B777The Business Model and
Strategy of Emirates: An Overview:Emirates Airline (or rather the
Emirates Group as a whole) is a crucial element of Dubais growth
and development strategy. Currently based on the Dubai Strategic
Plan 2015 (Dubai Government 2006), its objective is to prepare the
emirate for the post-oil eraby firmly establishing it as a leading
tourist destination (including trade fairs and conferences), as a
center for financial, IT and professional services, as a location
for corporate headquarters and light manufacturing, and, last but
not least, as a regional transportation, logistics and distribution
hub. The silent features of Emirates strategy are as follows: A
well-balanced mix of O&D and transfer traffic in its passenger
business. A very strong focus on cargo traffic, which generates 20%
of Emirates revenues, one of the highest percentages in the airline
industry. Strong presence in those secondary markets that are
underserved by Emirates competitors such as BA, LH, and AF which
focus on their own hubs for long distance flights. Strong presence
in markets that have been largely unconnected to the global air
transport network, and especially to the Middle East, to India,
Southeast Asia and Africa, for lack of a local flag carrier. High
frequencies: The mid-term objective is to serve most destinations
at least twice daily. Currently Emirates operates three waves at
DXB; a fourth is being gradually phased in. High quality service in
all classes onboard and on the ground including up to 600
entertainment channels in all classes and limousine service
(pick-up and drop-off) for first and business class passengers.
High labor productivity: According to a recent study by UBS, a
Swiss bank, Emirates unit costs are around 30 percent lower than
KLMs, a cost advantage that is likely to even increase after the
introduction of its A380 fleet No alliance membership: In the words
of Tim Clark: If we take the long-term view, then alliances offer a
sure fire way of achieving mediocrity and reduced profitability.
However, select code sharing agreements are in place.Customer
Service at Emirates:Emirates focus on providing high quality
airline service at a low cost. It tries to serve its customers/
Passengers in the best possible way. To win over customers, its
executives want to bring a bit of glamour 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, of course, on any Emirates flight. Serving its
customers Emirates us a mix of quality services, operating
efficiency and low costs. Emirates, offers 184 flights a week from
Dubai to India, to cities like Ahmedabad, etc. It flies to 17
cities in Africa and, in China, to Beijing, Shanghai, Hong Kong and
Guangzhou. It runs two daily flights to Bangkok and nine to
Australia. In this way Emirates is giving ease to its customers to
take any flight at any time. Moreover for the Passengers the Dubai
Airport Terminal 3 of Emirates provide a variety of Services like
good physical environment, duty free shops for shopping etc and
moreover it has created a Market for the Passengers at the Terminal
3.Value Creation at Emirates:The intangible elements usually add
value to services. As airline service is totally an intangible
service so Emirates is trying to add value to its core service and
to create value for its Passengers it is offering many types of
other service and Products. The lower cost is the most essential
component that creates value for Emirates customers. Apart from
this the big airport, trained staff, baggage handling, quality food
and sophisticated environment all creates value for the Passengers.
For the Emirates employees each week, as many as 90 new trainees
file through the companys training academy. Over eight weeks of
training, the new employees most in their early 20s and speaking
some English, learn all the ropes of the job. Life-size mock-ups of
airline cabins mounted on hydraulic legs are used to simulate
safety drills. Elsewhere, the trainees are taught how to serve
meals or use the first-aid kits. Its innovations, including private
suites in first class and individual entertainment screens in the
coach cabin have also increased customer value. In this way
Emirates is creating value for its people and its Passengers.
The Eight Ps of Service Marketing:The eight Ps of Service
Marketing are as follows in the case of Emirates:1. Product
ElementsThe core Service or Product that Emirates is delivering its
customer is the Airline Service. It provides the high quality
travelling facility along with many supplementary services. And Mr.
Clark the President says: If you want to go from Africa to Asia or
from South America to China, the straight line is through the
Middle East. And Emirates is basically providing this service by
offering many flights at any time for its Passengers.2. Place and
TimeThe Service delivery at Emirates is done with the help of the
latest and most comfortable and high capacity planes. It offers its
service to all at any time as it offers more than hundred flights
to India every week. It uses Terminal 3 of the Dubai Airport which
is the largest Terminal. Moreover it Plans to be a hub in between
the connection of Asia, Europe and America.3. Price and Other User
Outlays:Emirates deliver its service at a lowest cost. The
competitive advantage of Emirates is to provide high quality
service at a lower cost. Moreover Nathan Zielke, a transportation
specialist at the consulting company Arthur D. Little, estimates
that Emirates overall costs, including those for labor, are 30
percent lower than those of its rivals. 4. Promotion and
EducationFor the promotion of Emirates; as Emirates is such a big
name that its Promotion is mostly done by the word of mouth. Apart
from this it also follows some Advertising techniques; moreover it
has also a website that allows the Passenger to obtain information
like Flight schedule, E-ticketing, feedback and many more.
5. ProcessThe service delivery process is very simple at
Emirates. It is providing high quality service at a lower cost
which takes it ahead of its competitors. The process that Emirates
follows is very simple as it offers advance seat reservations and
the facility of E-ticketing. 6. Physical EnvironmentEmirates use
the Terminal 3 of the Dubai airport. It is not merely the worlds
largest air terminal. It is the worlds 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,
Dubais fast-growing flagship airline. Emirates provide its customer
with comfortable seats, 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, of course, on any
Emirates flight. This makes up the Physical environment of
Emirates.7. PeoplePeople or Employees of Emirates are well trained
and courteous. Each week, as many as 90 new trainees file through
the companys training academy. Its growing fleet of A380s means
that the airline will need to hire an additional 11,000 flight
attendants in coming years, nearly doubling its current roster of
12,000. Over eight weeks of training, the new employees most in
their early 20s and speaking some English learn all the ropes of
the job. Life-size mock-ups of airline cabins mounted on hydraulic
legs are used to simulate safety drills. Elsewhere, the trainees
are taught how to serve meals or use the first-aid kits. 8.
Productivity and Quality:Emirates focus on high quality and always
try to increase its Productivity. Emirates focus on serving its
customers with the best available resources. It provide them with
comfortable seats, easy and simple procedures etc. Moreover
Emirates train its employees in its academy which enhances its
productivity.
Defining Services at Emirates:Services are usually defined with
reference to a particular industry, for instance health care or
transportation based on the core set of benefits and solutions
delivered to customers. However the delivery of core services is
mostly accompanied by other services that are called as
supplementary services. These supplementary services facilitate the
service delivery process and help in differentiating the product
from its competitors. In case of Emirates the core service it is
providing is Airline service which all of its competitors like
British Airways etc are already providing but what differentiate it
from its competitors are the Supplementary service that it offers.
For example British Airways and Emirates both offer Airline Service
but the thing that takes Emirates one step ahead is its low cost
and high quality service. In designing the Service Concept for
Emirates following steps are to be followed:1) Core Product:The
core service is the basic service that is offered to solve a
problem. In this case the Airline service is the core service that
is offered by Emirates to move people from one place to the other.
And this is the service that is also offered by all of its
competitors. 2) Supplementary Services:All other Services other
then the core Service that facilitate the delivery of the core
service are known as Supplementary services. In the case of
Emirates it offers a lot of Supplementary services like comfortable
seats, free food and drinks, luggage handling, comfortable
environment, personalized cabins for business class customers etc.
And all these services help Emirates in gaining a competitive
advantage. 3) Delivery Process:It is the process through which the
core and supplementary services are delivered. In case of Emirates
the focus is always on Service delivery and it is done through the
highly trained staff though Service delivery is given importance in
Emirates but the article does not specify any particular process
apart from the highly trained staff.
4) Documenting the Service sequence over time:This stage of the
service design tells the sequence of services and activities. In
case of Emirates the customer look for the search attributes, then
experience the service. The customer buys ticket and may avail the
E-ticketing service. Then the luggage handling service may be
delivered and after that the experiencing of the core and other
supplementary services may took place.
The Service Flower:The service flower consists of the following
eight elements. Four of them are facilitating services and other
four of them are enhancing services:
Through credit card for E-TicketingIn cash in Reservation
offices, also by credit or debit card.Emirates official
website.Information counters on Airports.
E-ticketing onlineReservation counters on Air-port.Especial
Reservation officesOnline ReceiptsComputerized invoice and bill
generationAirhostesses to solve customer problems.Feedback
cardsLuggage carrier cabinsSafety demoEmergency exitsSafe Luggage
handlingComfortable seats.Personalized cabins Easy ticketing
proceduresFree food and drinksGood physical environmentEnormous
Terminal etcSuggesting flight & seats No other consultation
services.
Information, order taking, billing and payment are the four
facilitating services of Emirates where as the consultation,
hospitality, safekeeping and Exceptions are the enhancing
services.
A Hierarchy of New Service Categories:1) Major Service
innovation is not followed by Emirates as it is providing the only
core service of Airlines as provided by all of its competitors.2)
Major process innovation is followed by Emirates as it introduces
the procedure of online Ticketing and flight schedule etc.3)
Product line extension is not followed by Emirates in the given
article as it is just focusing on the core Airline service.4)
Process line extension is being followed by Emirates as it finds
out new ways of service delivery and enhances its productivity.5)
Supplementary Service innovations are being followed by Emirates as
it provides a lot of new Supplementary Services like Personalized
cabins, comfortable seats, safe keeping etc.6) Service Improvements
is the concept on which Emirates focuses a lot and continuously
tries to improve the service delivery process by training its
employees in its academy. 7) Style Changes are being implemented as
the traditional way of travelling is transformed into a modern
way.Service Distribution at Emirates:The customer interaction with
the service provider occurs at 3 stages Customer goes to the
service provider Service provider goes to the customer Interaction
at arms length (via internet, fax e.t.c)In the case of Emirates
customer goes to the service provider for facilitating from the
service, where the service is available at multiple sites. As in
the case it mentions that Emirates fly from a number of locations
and to a number of different destinations across the globe,
predominantly to India, Africa and China. In case of Emirates its a
peoples processing service provider, which travels passengers from
one destination to another which offers live experiences in form
high-quality service in all classes onboard and on the ground
including up to 600 entertainment channels in all classes and
limousine service (pick-up and drop-off) for first and business
class passengers.For emirates service delivery starts from
cyberspace where e-commerce in form of an interactive website is
used to provide information to the customers about the flight,
service dimensions and price along with that Emirate airline
provide its customer with the lowest possible fares and schedule
for travelling along with other supplementary services in form of
information of shopping facilities at the airport terminal, travel
guides, hotel services and food facilities online. It uses
technology to deliver its service where Emirates not only use the
best plane fleets of Boeing747s, 777s and Airbus double Decker
A380, where its fleet of luxury long distance planes is way ahead
in numbers than any other airline. It is one of the largest
customers of Boeing. Moreover they innovated private suites in
first class and individual entertainment screens in the coach cabin
which have been copied by many other airlines later. For delivering
its service Emirates use the best and the largest facility in
world, with a capacity to handle 160 million people a year and
currently handling 90 million passengers in a year The Dubai
International Airport. It was jointly built by Emirates and Dubai
government making Dubai the hub of international travel. At the
airport Terminal 3 which is used by Emirates has facilities like
180 check-in counters, 157 elevators, 97 escalators e.t.c clearly
one of the best facility at the airport for Emirates service
delivery.International Status:Internationally Emirates has acquired
the status of one of the fastest growing passenger airline of world
as it followed the strategy of long haul international trips where
it started its operations to developing and underdeveloped
countries which were neglected by other airlines previously. This
allowed Emirates to differentiate from rest of competitors and
attract new customers. Moreover Emirates had this advantage of
immense support from Dubai Government which allows the airline to
overcome several international barriers as in case of Canada when
Canadian government did not allowed Emirates Landing right, Dubai
government scrapped the logistic support provided to Canadian
forces which made forces them to allow Emirates Landing facilities.
As stated by Ram C. Menen who runs the companys global cargo
operations We are a business unit of Dubai Inc. And its a happy
relationship. With its strong Hub of Dubai, Emirates has been able
to gain cost benefits, economies of scales, geographic presence and
competitive advantage over several of its competitors.Costs and
Prices at Emirates:Emirates airline is considered as one of the
luxurious airlines of world. With this perception of the brand it
can easily by associated with high fares and expensive airline. The
case for Emirates is an entirely different scenario. The airline
has been able to actually get benefit from its low costs. Its
frequency of flights, large customer base, fuel efficient and
economical fleet of planes, cheap labor mainly extracted from the
Indian sub-continent, large facility and wide operations allow them
to implement value-based pricing and reducing their costs. It adds
value to its customers by providing premium services in lowest
possible costs. Emirates holds a position of cost leadership in the
industry where its costs are around 30% lower than its competitors
like KLM, Lufthansa, British Air and Continental e.t.c.As stated by
Tim Clark, the president of Emirates, The airline represents the
future of mass travel. In the 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 September, 30, up from
$205 million in the year earlier period.Evaluation of the Services
Provided by Emirates:As services are dominating economy in most
nations so the Middle East Airline company Emirates need to provide
quality service to its customers. The rising competition force
Emirates to increase its supplementary services and to add more
tangible elements in it. Tough people give importance to the
intangible components but the tangible elements add more value to a
service. There is need for Emirates to market its services.
Marketing being a very important component behind the success of
any business is somewhat missing in the case of Emirates. Though it
follows some advertising campaigns as we see the command 'Fly
Emirates' adorning some of the world's most hotly contested
sporting teams Arsenal football team, the jockeys of the Godolphin
racing stable and the field umpires in most of cricket games, but
still there is a need for some comprehensive Marketing Techniques
as currently being followed extensively by Qatar airways and Silk
Air extensively. Some things that might enhance the Service
efficiency of Emirates can be customer involvement in co
production, make people part of service experience and among the 8
Ps Process innovations should be focused and a frame work should be
developed for effective service marketing Strategies. As Emirates
is a leader in industry they have very efficient and up to date
information system, that helps company to keep track of its
customers and perform its activities very effectively and
efficiently that helps company to lower its cost. In the repurchase
stage they help their customer by guiding them with all the
necessary information they needed. They provide their customers
with the true value to their money; they provide they core service
at the lowest prices as compare to the other competitors, mix with
the other supplementary services. Everyone has its proper role and
duty and perform it efficiently attendant are highly trained. In
the case of Emirates the Service design is a comprehensive process
and it follows the complete service flower. It should be more
focusing on the consultation services. Other information, billing,
order taking, payment, safekeeping, hospitality and exceptions are
very well implemented at Emirates. Emirates should offer branding
services, it should also offer a branded experiences; it is
currently following many strategies but should also follow the
product innovation and the product line extension in the hierarchy
of services. Emirates should also research in designing new
services and should also reengineer the services to achieve and
maintain its growth and success. Emirates differentiates itself
further from competitors by attempting to provide a high level of
service, especially in its first class section where it pioneered
the concept of private mini suites complete with dining tables. It
was one of the first airlines to introduce in flight entertainment
systems in all three classes. With its facility and quality of
service and low cost it provides customers the experience they look
for. The strategy behind Emirates profitability is a combination of
new, more luxurious aircraft, competent staff and keeping costs
fairly low. The base in Dubai is also seen as a vital part of the
growth strategy as we find its location between East and West to be
increasingly convenient for its consumers. However, still Emirates'
is not the only brand that is keen to put Dubai on the map. There
are other carriers such as Etihad and Qatar that are attempting to
emulate it although they are starting from a position much further
behind. Sooner or later Emirates will get some additional direct
competition.
References:
MOUAWAD, Jad. (2011, February 12). Emirates ambitions worry
European Rivals. The New York Times, p. BU1.Knorr, Andreas, &
Eisenkopf, Alexander. How sustainable is emirates. Airlines, e-zine
Edition, (38),
Appendix:
Emirates Ambitions Worry European RivalsEmirates growing reach,
from its Dubai hub, is unnerving rivals like Lufthansa and Air
France. By JAD MOUAWADPublished: February 12, 2011BEYOND the
artificial archipelagoes shaped like palm trees, not far from the
tallest skyscraper in the world, stands another monument to this
city-states stubborn ambition. Even in this oasis of extravagance,
Terminal 3 at the Dubai International Airport startles. It is not
merely the worlds largest air terminal. It is the worlds 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, Dubais fast-growing flagship airline. Emirates is
pressing ahead with an ambitious expansion, despite the citys
financial near-collapse in 2009. Its executives, with the help of
Dubais 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. This is, after all, Dubai, where exuberant
developers planned not one but three palm-shaped island chains and
erected the glass-clad Burj Khalifa more than twice the height of
the Empire State Building alongside an indoor ski resort. What is
more, the recent political upheaval in Egypt provides a potent
reminder that Dubai, for all its air-conditioned ease and
stability, lives in a dangerous neighborhood. But here inside
Terminal 3, the rise of Emirates hardly seems a mirage. Since its
founding in 1985, Emirates, which is fully owned by the government,
has grown into the worlds largest airline by passenger miles flown.
By 6:30 a.m., Terminal 3 is teeming with travelers. Russians bound
for Durban, Chinese headed for Khartoum and Indians traveling to
San Francisco weave through the restaurants and duty-free shops.
Families snooze on the white marble floors. It feels like a giant
bazaar, devoted to a new era of air travel: crowded, animated,
cosmopolitan. 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 glamour
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, of course, 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 Dubais 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. COMPETITORS are fighting back. SkyTeam, the
global alliance that includes Delta Air Lines and Air France/KLM,
said recently that it would add two airlines Middle East Airlines,
from Lebanon, and Saudi Airlines to counter Emirates dominance in
the region. There is a reason that airlines around the world are
afraid of the success of Emirates, says John Leahy, chief operating
officer of Airbus, the European plane maker, referring to Emirates
mix of quality service, operating efficiency and low costs. That
should strike fear in the hearts of airlines around the world.
Emirates is one of Airbuss top customers. Over the next two
decades, air travel in the Middle East is expected to grow by more
than 7 percent a year, outpacing every other region, according to a
forecast from Boeing in 2010. Much of that growth will be spurred
by Emirates and two other fast-expanding airlines based in the
Persian Gulf area: Etihad Airlines, based in Abu Dhabi, and Qatar
Airways. Emirates is by far the most ambitious of the three. Its
greatest strides have come from building routes to developing
countries long neglected by traditional carriers and providing an
alternative to local airlines. Instead of connecting through
European hubs like London or Frankfurt, all of these new routes run
through Dubai. The legacy carriers still see us as the monster of
the Middle East, the bte noir of civil aviation in the 21st
century, says Mr. Clark, 61. But they wont accept that the business
we are carrying wasnt 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. It runs two daily flights to Bangkok and nine to
Australia. The strategy has prompted a strong reaction from
airlines like Air France and Lufthansa of Germany. These carriers
hope to persuade their governments to limit Emirates access to
French and German airports. Emirates strategy is aggressive, says
Pierre-Henri Gourgeon, the chief executive of Air France, who
complains that Emirates is siphoning off passengers from Europes
traditional hubs. Europe is at the center of the global aviation
world. Its the result of aviation history. Wolfgang Mayrhuber, the
C.E.O. of Lufthansa, notes that it took 40 years for Lufthansa to
build up its fleet of 30 Boeing 747s in Germany, one of the worlds
largest economies. Emirates already flies 15 A380s, the worlds
largest passenger airliners, and has ordered 75 more for delivery
by 2018. (Air France, Lufthansa and British Airways have ordered a
total of 39 A380s and, among them, have only eight flying.) In
Canada, discussions to expand Emirates landing rights took a
particularly bitter turn. After the Canadian government turned down
Emirates request to fly to Calgary and Vancouver and to increase
the frequency of flights to Toronto, the United Arab Emirates
scrapped a military agreement that allowed Canadian forces to use a
logistical base near Dubai. 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. Theres nothing better than a highly motivated
cowboy airline in a small country, he says. LIKE so much in Dubai,
Emirates started out small but dreamed big. It was established
after Gulf Air, a regional airline then owned by Bahrain, Qatar,
Oman and the United Arab Emirates, reduced its service to Dubai in
the early 1980s. Feeling shunned, Dubais rulers created their own
carrier. The government provided $10 million in capital. Emirates
began flying with two planes, a Boeing 737 and an Airbus A300, both
leased from Pakistan International Airlines. The new carrier was
run by a band of British aviation executives, including Mr. Clark,
who had been at Gulf Air, and Maurice Flanagan, a former top
executive at British Airways. Much of Emirates early traffic
connected Dubai with cities throughout the Indian subcontinent and
a few European destinations, including London. By the 1990s,
however, new airplanes with longer reach, like Boeing 777s, enabled
Emirates to establish Dubai as a world hub. Sheikh Ahmed, the
companys chairman, boldly proclaimed that Dubai would be at the
center of the new Silk Road between East and West. Rivals express
grudging admiration for Emirates. Emirates recognized the value of
a global hub, says British Airways chairman, Willie Walsh. And Mr.
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. But
geography is only one element in the Emirates formula. Government
support has also been essential. From the start, Emirates was seen
as integral to the governments ambitions of building Dubai into a
commercial, financial and tourism center in the Persian Gulf. Sheik
Ahmed plays a role in almost every aspect of air travel into and
out of Dubai. Indeed, he is known as Mr. Aviation. He is the
chairman of FlyDubai, the city-states budget airline, and of Dnata,
the airports ground handling company. He is also the president of
the Dubai Civil Aviation Authority, which oversees the industry.
And he happens to be the uncle of Dubais current ruler, Sheik
Mohammed bin Rashid al-Maktoum. Critics say this tight relationship
among Emirates, airport authorities and regulators gives the
airline an unfair advantage. Emirates, these 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 companys global cargo
operations. Were a business unit of Dubai Inc. And its a happy
relationship. The airline, however, does have undeniable advantages
over competitors, including lower labor costs. While Emirates pays
its pilots international wages, it hires inexpensive workers,
usually from the Indian subcontinent, for tasks like handling
baggage or working in catering services. Nathan Zielke, a
transportation specialist at the consulting company Arthur D.
Little, estimates that Emirates overall costs, including those for
labor, are 30 percent lower than those of its rivalsIts extremely
difficult for other airlines to close that gap, Mr. Zielke says.
Because their costs are so much lower, Middle East carriers will be
the most profitable carriers with the lowest prices in the market.
ON the road to Abu Dhabi, about an hours drive from downtown Dubai,
city planners want to build the worlds biggest airport. It would
have five parallel runways and be able to accommodate 160 million
passengers a year. (Hartsfield-Jackson Atlanta International
Airport now handles 90 million passengers a year, more than any
other airport in the world.) The estimated cost of this giant is
more than $34 billion. Although Dubai has shaken off the worst of
its financial crisis, the shock has nonetheless stalled this grand
plan for now. Yet 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. Each week, as
many as 90 new trainees file through the companys training academy,
a modern building near the Tennis Club, a popular Dubai spot among
the expatriate community, close to the historical center of the
city. Its growing fleet of A380s means that the airline will need
to hire an additional 11,000 flight attendants in coming years,
nearly doubling its current roster of 12,000. Over eight weeks of
training, the new employees most in their early 20s and speaking
some English learn all the ropes of the job. Life-size mock-ups of
airline cabins mounted on hydraulic legs are used to simulate
safety drills. Elsewhere, the trainees are taught how to serve
meals or use the first-aid kits. Emirates executives say they
recognize the challenges ahead. We dont forget who we are, and what
we do, says Mr. Clark, the president. Were a bus company. We have
seats, we have people, and we recognize what it is that makes life
more comfortable. If we hit the spot, passengers come back.
Emirates has emerged as a formidable player on the international
travel scene. Its innovations, including private suites in first
class and individual entertainment screens in the coach cabin, have
been copied by many other airlines; its emphasis on quality has
forced traditional legacy carriers to pay more attention to their
own products. 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
Indias vast expatriate population, long one of Emirates growth
engines. The recent tensions in Egypt, Yemen and Jordan have also
hurt Emirates. Mr. Clark said last week that traffic to many of
these destinations had a pretty resounding drop as tourists
postponed holiday plans. 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 business model: its reliance
on the Dubai hub. One survey that is consistent is that people
simply do not like to change planes, says Richard L. Aboulafia, an
aviation consultant at the Teal Group, a consulting firm in
Fairfax, Va. 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.