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Tue 20 Nov 2007 11:41 AM

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Airline CEO

The region's leading carrier chiefs on their respective progress and ongoing development strategies.

Sheikh Ahmed bin Saeed Al-Maktoum, chairman and CEO of Emirates Group, on the airline's progress during the past 12 months.

What were your objectives at the beginning of 2007?

We wanted to continue pushing our ambitious expansion plans in a way that maintained stability for the Emirates Group while keeping us ahead of the competition. On average, we receive a new plane every four weeks. These aircraft are helping us support new destinations launched in 2007, such as Venice, Newcastle, Sao Paulo, Ahmedabad, Toronto and Houston.

If you keep your costs below revenues and give customers reason to keep filling your planes, the bottom line takes care of itself.

On the infrastructure side, we wanted to work towards developing Terminal 3, the new Emirates-dedicated facility at Dubai International Airport. We also wanted to establish the new Emirates Flight Catering Centre, the Emirates Cabin Crew Training Centre and replacement Emirates Group Headquarters. We are aware of the need to provide the best possible service to customers while attracting new ones. At the same time, we acknowledge that for all the millions we may spend on new equipment, technology and infrastructure, the most prized asset is our staff.

Which objectives have you achieved so far?

On July 1, we launched flights to Venice and then Newcastle two months later. Both are doing well and we are particularly pleased with the latter. The first two flights from Newcastle International Airport were sold out in record time. Our services to Sao Paulo started on October 1, while flights to Ahmedabad launched on October 28. The following day, we launched services to Toronto and will introduce flights to Houston on December 3. Our fleet stands at 108 aircraft, with the first of 10 Boeing 777-200LRs our latest addition. The aircraft will make its debut on our Sao Paulo route.

Some 114 aircraft worth US$30 billion are on order, including 55 A380s. Another new feature of the EK fleet is the modified 777-300 ER ULR. Last month, more than 60 media representatives were shown this aircraft during a flight around Dubai. Journalists were able to experience the most advanced airline entertainment system in the industry. In August, it was announced that Emirates had won the much-coveted Skytrax 2007 Best Airline In-flight Entertainment Award for the third consecutive year.

The latest 777-300 ER ULR serves Dubai International Airport to Charles de Gaulle and will eventually cover other routes. In July, the new Emirates' Flight Catering Centre opened, representing a new chapter for airline food preparation across the industry. The $120 million unit is designed to produce up to 115,000 meals each day. In the meantime, other large infrastructural projects taking place are progressing well.

What other aims do you have for the remaining months?

Emirates' primary concern in the months ahead is to remain successful. Our long-term strategic plan is one of the main reasons why we have stayed ahead. Also, our business model relies on a relatively low-cost structure, so our unit operating costs are quite small compared with the industry average. We rely on medium and long-haul routes to a greater extent than most other airlines, and only operate wide-body jets that offer substantial belly-hold cargo revenue. It's not nuclear science. If you keep your costs below revenues and give customers reason to keep filling your planes, the bottom line takes care of itself.

What tests did you recently carry out on the A380?

In August, Emirates conducted week long tests involving more than 2000 people to assess compatibility with Dubai International Airport. It represented one of the longest customer trials for Airbus, with tests covering taxiways, runway and ground support equipment, as well as docking trials at the terminal gate and state-of-the-art Emirates Engineering Centre. Emirates worked with Airbus to conduct four test flights covering the airline's key units, such as airport services, in-flight catering and cabin crew. Other areas that were also tested include flight operations, cargo, in-flight systems, engineering and maintenance, group security, and Dnata airport operations. More specifically, we looked at cabin crew familiarisation trials, ground power compatibility tests, refuelling, catering trials using upper deck accessible hi-loader vehicles and pushback tractor tests and towing. We also checked galley insert operational tests, main and nose wheel change, brake change, engine cowls and software loading demonstration.

Why were these tests carried out?

The tests were vital to ensure that the world's largest passenger aircraft could be fully supported both on the ground in Dubai and when airborne. It was also extremely important to make sure the incorporation of the A380 into Emirates' fleet goes through as smoothly and quickly as possible.

How useful was the testing exercise?

It was extremely useful because from the time the test campaign was conceived, Emirates was clear; tests must be as real as possible and conducted under typical airline conditions. Two of the test flights were operated in the morning when Dubai International Airport was at its busiest, followed by two flights later in the afternoon. The flights, each two hours in duration and flown over the UAE, were operated at almost 80% load factor - the average seat factor experienced by the Dubai-based airline. Even with 40% more passengers on average per flight, the A380's turnaround time between each of the two test flights on August 17 and the following day was fixed at 90 minutes. Passenger boarding, comprising mostly airline staff, was conducted via double-decker aerobridges, as well as off-stand through buses on tarmac.

When do you expect delivery of your first A380 and which routes will they operate on?

August 2008. The A380 will be deployed on high density routes where limited capacity and landing slots create the greatest operational pressures.

What impact have Airbus' production delays had on your schedule for launching A380 flights?

The A380 delays have had a major impact on our operation by constraining growth. By the time the first A380 is delivered next year, we should have already had 18. Besides the A380, it's no secret that we are looking to order 50 to 100 new aircraft in the near future. Some of those will replace the older aircraft in the fleet.

How successful have the new route launches been and why introduce flights to these destinations?

We are pleased with the progress of the routes that have already been launched this year and continue to push sales through a range of marketing, PR and advertising channels. There are several factors that dictate which new routes are targeted and opened - and central to this consideration is, of course, profitability. The average load factor across the network is around 70% and we would always look to meet and preferably exceed that figure.

With six new routes this year do you plan to continue introducing new destinations in 2008?

We are expecting to make further announcements about new routes soon, so watch this space. Remember too, we are constantly increasing the frequency for our destinations around the world. For example, at the end of October we will fly three times a day to Johannesburg. Also, to strengthen our India operations, Emirates introduced a third-daily service to Mumbai and double-daily operation to Chennai on October 28.

Will you be making any announcements during this month's Dubai Airshow?

There is always a good chance that a high profile event like the Dubai Air Show will be viewed as an opportunity for an announcement. As President of the Department of Civil Aviation, I have an integral role with the Dubai AirShow. Putting that to one side, the event is a wonderful opportunity to join the industry, visitors and enthusiasts in celebrating air travel. It is also a fantastic opportunity for Emirates to showcase its products, speak with trade representatives and spread the Emirates word. Since it started in 1989, the Airshow has grown exponentially which means Emirates has to find more ways to promote its products, although we look forward to the challenge.

What are your main objectives and plans for 2008?

I want to make sure that Emirates retains and strengthens its position as a highly recognised and respected brand. It's about displaying the highest levels of service and generating increased customer loyalty as we head towards possibly becoming the world's largest airline by 2015.
Some 12 months after joining Etihad Airways, CEO James Hogan discusses the airline's development and future plans.

What were your objectives at the beginning of 2007?

After arriving [Hogan joined as CEO in October 2006] the plan was to build on the foundations laid by the chairman and management team. We looked at where the airline was to ensure we could continue the path that management had determined. The past 12 months have been about setting up new routes to a number of cities. At one stage we felt like it was one a week, with flights to Milan, Sydney, Brisbane, Singapore, Dublin Cochin and Kathmandu among others. There has also been activity improving the bilaterals with a range of governments, including Australia and Saudi Arabia.

For the past 20 years every aircraft that has come out has had teething problems.

We would like more to Canada but we are not there yet. We have been improving the frequencies, so to Brussels and Geneva we will go from three to four weekly services, Sydney in March increases to four times a week and Dublin goes from six to seven. We are also working with Abu Dhabi airport on getting the connectivity right. There will be a new terminal opening, T3, which will primarily be for Etihad. It will help us with the congestion and teething problems that airlines come across when they grow so fast. As each six months goes by, we continue to mature and improve the process, with more aircraft, pilots and cabin crew coming in. By the end of this year, we will have nearly 3500 employees from 100 different countries. As a new airline, we are bringing in talent and getting people up to speed.

What teething problems have you recently encountered?

Just getting the right people at the right time has been the biggest issue. It's making sure we are able to feed communication various segments of any market we target, whether it be Sydney, London, Dublin or New York. That's ongoing because we are moving so fast. As we go into 2008, it's all about consolidating. Next year, you will not see so many new destinations but there will be improved frequency and connectivity.

So next year is all about consolidating the business?

You have to be flexible to take advantage of opportunity. By the end of the year, we will have three A320s and six by next year's first quarter. They enable us to improve the frequency within the GCC and Middle East. It enables us to deploy those aircraft onto long-haul frequencies. There will be greater access to India next year and we'd like greater access to Saudi Arabia, so the A320s are the perfect fit to take advantage of those opportunities. China is important to us and I expect we will be operating there hopefully by the end of next year's first quarter. We are just at the final proofing stage for operating there. Beyond China and greater access to India, next year is about keeping things in place, getting the product, consistency and service right, and working on the hub in Abu Dhabi.

What have you achieved compared with 2006?

It's about the end game - we want to be the best airline in the world in terms of the airport, lounge, cabin, baggage handling... We are still developing as a business. To me, it's evolution and you never get there. You have to continue to raise standards, deal with competition and understand the customer profile, which varies. You have the business customer who takes advantages of the Sydney, Abu Dhabi, London routes. Then there are tourist passengers and religious traffic, so segmentation is probably broader for Gulf carriers than any other aviation industry in Europe, Asia, Australia or the US. We are continually developing the segmentation.

Why strike sponsorship deals with Chelsea FC and Harlequins?

We are not just doing it for the sake of doing it. When we looked at these deals we were bombarded with sponsorship packages. Spyker (F1 racing team) was a good deal with a new brand. We felt as a new business there was a nice association. Mubadala owns 5% of Spyker's engine company, Volkswagen, so there was an Abu Dhabi fit. If you look at the media rating for how many times you see Etihad [on TV] it's been successful. Harlequins (rugby) and Chelsea (football) were slightly different. It goes back to segmentation. We fly to London three times with premium traffic, as well as cabin and commercial cabin passengers. We thought with Harlequins being a London team it would help raise the profile within that premium sector that follows the team, so bankers and people who follow rugby. Chelsea is a different proposition; Harlequins has Etihad on the shirt but Chelsea has Samsung and we are the airline partner. At home matches you get the signage and score board. At some stage both Harlequins and Chelsea will come out here, so it's about brand awareness and a huge supporter base.

On which services do you plan to introduce more flights?

We will do four additional flights to Sydney from March or April next year. It will be double daily. Geneva is increasing from three to four weekly flights and in December we go to six in Dublin. There are a range of announcements for next year. We have three-class aircraft going to Europe, the Middle East, Americas and Australia while the two-class are predominantly on southeast Asia, with huge economy and religious traffic. Nevertheless, there are still strong premium markets to those countries too. You look at the Philippines which has a population of 70 million and most of that traffic goes over the ocean hubs to Europe, so we very keen to attract that traffic over Abu Dhabi.

When do you expect the Airbus A380s to arrive?

We will present a study to the board next year. At some stage the A380 and 747-8 will be required and in operation. It's too much too soon now, but we haven't cancelled our orders. We deferred it from 2009 to 2013, so we have four on order.

What impact do aircraft delays have on your operation?

There's a lot of press on the A380 and 787. For the past 20 years every aircraft that has come out has had teething problems and delays. What's unique this time around is the size of the A380. When the 747 came out there were issues but that's new technology and all of us have to be flexible. Who would have said in the last few years we would have had wars, Tsunamis, SARS - you just have to be flexible and it's the same when aircraft orders are delayed. You have to find ways to get round it.

How strong is the competition across the Middle East?

We looking at all the carriers from Europe, Asia and the Gulf. The opportunity for carriers in this region is that travellers see the Gulf as an alternative to the Asian and European airlines. More traffic is moving over the Gulf between Europe, America, the Middle East and Southeast Asia, and that's the opportunity. The customer knows there is a faster way to get from A to B. As a gateway to Abu Dhabi, we can access Dubai and all the emirates.
Samer Majali, president and CEO of Royal Jordanian Airlines, tells Aviation Business about the carrier's privatisation, fleet expansion and modernisation programme.

This year has been fairly busy. We should have moved into the second phase of privatisation (the first occurred in 2001) but the events in the region - 9/11 followed by the conflict in Iraq - forced the government to freeze the privatisation until conditions improved.

Royal Jordanian has the largest international Middle Eastern network of all the Arab carriers. We have the largest number of points that we serve internationally in the Middle East.

We embarked on a major turnaround for the airline to prepare for privatisation, both internally and in terms of the relationship with our customers. We embarked on a network reorganisation strategy, which involved setting up a strong regional plan. That means we have started to operate in most major destinations across the Arab world, as well as several secondary destinations. We provide non-stop services to Amman and connect the regional network with the international routes.

That was 2002 to 2003 and it is a continuous process as ‘open skies' approaches. Open skies is slowly evolving as the region becomes more accessible. Countries are initially opening up their secondary destinations for tourism purposes and investment. They are then doing the same with the primary destinations such as capital cities, leading to unrestricted airplane movement in terms of frequencies and capacity. That was one of the main elements of the strategy, which involves developing a strong regional network and connecting it with Royal Jordanian Airlines' international network.

Royal Jordanian has the largest international Middle Eastern network of all of the Arab carriers. We have the largest number of points that we serve internationally in the Middle East. We have more than 30 flights a week into Iraq, non-stop from Amman. We fly to four points in Iraq - Baghdad, Basra, Irbil and Sulaymaniyah. We also fly to two points in Syria, Aleppo and Damascus, as well as four points in Egypt. We look at destinations across the world with potential, evaluate them and consider starting operations. Primarily, we have looked at Hong Kong because it is the hub for Cathay Pacific, which like us, is a oneworld partner.

The airline flies to Budapest for the same reason, with Malev Hungarian Airlines another member of the carrier alliance. The second element of the strategy is to renew the fleet and we have started this with medium-sized airplanes with 100-200 seats such as the A320 fleet. We will complete the renewal by quarter one next year, with brand new A320s, A321s and A319s.

We have already introduced the Embrarer regional jet (the 195) which started last year. It's a 100 seater regional jet that operates one to two hour flights from Amman. We also decided to replace the wide-bodies airplanes, such as the A340s and A310s, with the Boeing 787 flying in 2010. We are acquiring eight to 12 through operating leases and four directly purchased from Boeing. There are more than 600 airplanes ordered so far and the plane hasn't flown yet. It's the right aircraft for out mission requirements with 250 seats to replace our long range A340s and A310s.

The third element was to improve our IT services. We made a major investment in IT and the result was winning an airline business magazine award. The fourth is staff, with improvements in benefits and working conditions. We went through several re-engineering processes throughout the past five years, removing excess staff and introducing new people. We also worked on customer skills to provide improved services to the public.

These are the four elements that are the corner stones to our strategy. After making these changes, we made reasonable net profits between 2004 and 2006. All of these changes have led to two things.

Firstly, we were invited to join oneworld in November 2005 and were on board by April 1, 2007 along with Japan Airlines and Malev. We are the first carrier from the region to join any of these alliances, which is a big achievement for us. The second was the government's decision to reactivate privatisation of the airline.

Citigroup was appointed to lead the privatisation effort as the lead consultant here. They filed their report recently and the government decided to proceed with plans to sell off 74% of the airline to the private sector. The government will keep 26% and 74% will be available for private sector ownership in Jordan, the region and possibly internationally.

We are just at the start of the second phase. The first was doing the study and putting the programme in place. Now we are implementing the programme and will hopefully complete the transaction by the end of the year. If we are successful, Royal Jordanian Airlines will be the first privatised flag carrier in the region.

We had to develop a new IT strategy, which was driven by two things. Firstly, we needed to do it for a variety of reasons such as e-ticketing, but it was also part of oneworld's requirements to upgrade and connect with their systems. In an alliance you need a seamless travel experience for the passenger, and that involves connecting all the IT systems with the nine other members of oneworld. That was a major effort. Now we are more than 50% e-ticketing compliant globally and will work to reach 90% by the end of the year.

The strategy for Queen Alia International Airport is going hand in hand with Royal Jordanian's plan for modernisation. It's also a regional network plan, so the government decided to privatise the airport under a build, operate and transfer arrangement. The contract was awarded to a consortium led by Airport de Paris, to operate the current facility and build a new terminal facility, hopefully by 2010.

Airport de Paris has the contract to run the airport under the BOT agreement for 25 years. Hopefully, the company will hit the ground by the end of this year and start running the current facility more efficiently. Management can then concentrate on building the new terminal.

The plan is to ensure the airport is not only a good destination hub, but also an ideal airport for the Levant region. It is part of HM King Abdullah's strategy to make Jordan the gateway to this part of the world - the upper Middle East and old Levant area - much like Dubai is the hub for the Gulf.

So far, all the moves have been successful in terms of making Jordan an Oasis of stability - politically and from a trading and commercial point of view - and investment.

We are now the main hub serving Iraq, Syria, Lebanon and the immediate region surrounding us.

Nobody else operates into Iraq, despite the fact it's a country with 25-30 million people. There is still a rudimentary service into Iraq because of the security situation.

We are closely linked to Iraq and the flying time from Amman to Baghdad is one hour 20 minutes. The road journey is long, arduous and insecure, so commercially and politically it makes a lot of sense.

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