Emirates president Tim Clark says the carrier’s success is due to its completely different business model
Some airlines have gone bankrupt. Others are licking their wounds from a depressed global economy and a recovery that is taking longer than expected. But not Emirates. The Dubai-based carrier has faced its challenges — be they environmental, energy-related, or stiffer competition — head on. In many ways it has been a visionary in the way it has ploughed ahead in a $600bn aviation industry that has seen profits plunge in the past two years.
“We have a plan, which is driven by a business model which was cast in concrete in July 2000, nearly thirteen years ago. We’re tracking that and that did see major expansion into the US, Africa, Asia into Europe and we’re following that,” Clark says. “We will continue to do that and there will be others who will follow and try to emulate what we are trying to do but they need to do it profitably as we do.”
Not many airlines can boast about profitability at the moment. The airline industry, which has been in a downward spiral since its peak in 2010, is forecast to earn $4.1bn in profits this year, according to the International Air Transport Association (IATA). That’s slightly up from the organisation’s original estimate of $3bn in net profit, yet still 78.6 percent lower than the high of $19.2bn earned by air carriers two years ago.
With that backdrop one can’t but be impressed at the performance of Emirates, which, in spite of unstable global economic and regional geopolitical conditions, more than doubled its profits in the first half of its fiscal year ending in September, posting a net profit of $464m. The airline also recorded an average passenger seat factor of 80 percent in the same period.
The key to the success of Emirates, and what sets it apart from the competition, rests on a matrix of elements starting with the breadth of the carrier’s network.
“We have a completely different business model which relies on now a varied 126 destination network spanning the globe to feed our business across our hub from all sorts of places that people in the past thought we were nuts to go to,” Clark says.
But now of course they’re paying dividends because the global economy is in a pacing mode; having the European economies in a deep dive at the moment, the American economy has been in limbo for some time and it looks that it might be revitalising, the Asian economies despite being down on GDP still remain very robust. We have spread into all those countries, into Africa, Australia, New Zealand, South America and therefore where there have been less effect of global economic depression, recession, we have been able to get the benefits of that.”
By next March Emirates will have initiated flights to 23 new destinations in two years. Emirates’ continued growth, while other carriers took on cut backs, coupled with a diversified expansion strategy is at the crux of the company’s success, Clark says.
“We are able to keep our head above water, keep on growing our business, relying on a revenue stream that come from fairly geographic distant and somewhat regarded as remote to the airline world,” Clark says.
“We do not put all our eggs in the same basket with regards to the north Atlantic or south Atlantic. We try and balance the production so that we can take any knocks in the system that come from anywhere.”
That strategy has actually worked very well. It has seen the airline through Gulf wars, SARS, the Arab Spring, the tsunami in Japan, floods in Queensland and years of ups and downs in the aviation industry.
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