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Mon 9 Nov 2009 04:00 AM

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Full throttle

As Emirates begins its 25th year, chairman Sheikh Ahmed Bin Saeed Al Maktoum talks about what the future holds.

Full throttle
Full throttle
In 2009, Emirates was the seventh-largest airline in the world in terms of international passengers carried and fourth-largest in terms of international passenger-kilometers flown.
Full throttle
Full throttle

As Emirates Airline begins its 25th year of operations chairman, HH Sheikh Ahmed Bin Saeed Al Maktoum, talks to Anil Bhoyrul about the challenges of the past year — and what the future holds.

The chairman of Emirates Airline is in a good mood. He keeps clicking the mouse, bringing up the very latest load factors on the UAE carrier. “Look,” he says, “things have stabilised. The numbers are okay. I think the worst is over.”

Not just thousands of Emirates staff, but millions in the global aviation industry will be hoping that His Highness Sheikh Ahmed bin Saeed Al Maktoum is right. Last year he began his annual report by saying he agreed with forecasts that the global industry would report a $4.7bn loss and face total debts of $170bn. Things were bad and getting worse.

For Emirates, the challenges couldn’t have been greater. It had ordered 58 of the new A380s, had known nothing other than record growth for 24 years, and had built up an incredible 91 destinations in 55 countries and six continents. The doom mongers have been quick to suggest that as the airline begins its 25th year of operations this month, the only way is down. In May this year the Emirates Group, which includes Dnata, an airport operations company as well as several other businesses, reported a 72 percent slump in profits to $406m.

But Sheikh Ahmed has never looked like a man under pressure before, and he isn’t about to start doing so now. “We had to hold our nerve. In most businesses you can says something has happened today so I can stop things happening tomorrow. In airlines, it’s not the way; you have aircraft on order and you are committed,” he says, adding: “We looked at ways to identify how long this will last. ‘09, ‘10, ‘11? It is within those three years and everyone sees now it has stabilised. That gave us confidence. You will see with Emirates we didn’t fire anyone. We allowed people voluntarily to go on leave. So we limited it.”

But surely there were some sleepless nights? “We did not get to the stage where you say I need to panic. We always try not to panic. Be calm, take it easy and do things where we can identify costs that we can do without. We are a service company, we don’t want to do anything that will affect our service standard,” he says.

It’s worth noting that despite the slump, the results were the 21st consecutive year of profit for the group. Emirates Airline itself booked a $268m profit for the year to the end of March 2009. There has still been serious investment, through funding new aircraft orders, new construction projects to build a twin tower hotel and staff accommodation, dividends paid to the company’s owners, and massive product and service investments including the hundreds of millions of dollars invested to develop dedicated Emirates Lounges across the network. At the end of all this, the group still had a cash balance of $2.4bn.

But Sheikh Ahmed is the first to admit that the world has now changed – even if not everyone has come to terms with the new financial order. “For a lot of people it was a bit of a shock, it happened overnight. You could have seen it coming some time ago but I don’t think people believed it. Because the way things were going in the years before, it was really exceptional. So you think that if things drop, they will not drop to a large extent. And then suddenly it happened, and everyone panicked. People who had money thought ‘let me do things differently’. For some they think ‘we can keep our money and in a year or two we will buy things cheaper’. I think many companies will end up being very rich.”

But he agrees there may have been too much greed in the past, saying: “When you are in business, whenever you do your budgets, your boss will always ask you to do better than last year. Isn’t that the case? So your benchmark is always this year here, next year there. I have to go higher and higher. But how far can you push it? And if you do, whatever project you are selling becomes too expensive.”

Nevertheless, Sheikh Ahmed is keen to stress the past is the past. And it has been some past: since the first flight to India on October 25, 1985 (which he was on board), Emirates Airline has continued to grow.

The airline ranks amongst the top 10 carriers worldwide in terms of revenue and passenger kilometres, and has become the largest airline in the Middle East in terms of revenue, fleet size, and passengers carried as of 2007. In 2009, Emirates was the seventh-largest airline in the world in terms of international passengers carried and fourth-largest in the world in terms of scheduled international passenger-kilometres flown.Whichever way you look at the figures, they all point in the direction of success. Though not all his rivals see it that way. For many years, there has — both publicly and privately — been mutterings that the airline’s success is entirely down to huge government subsidies. It is something that Emirates has always denied, and all these years later, it is still a subject that clearly riles Sheikh Ahmed.

“This is something that we always hear. They believe themselves that Emirates did very well because the government is behind them giving them that money. And that’s how they do it. It’s an argument but we can always prove it’s not the case.

“We lease aircraft and everyone knows exactly what we are doing and where the money is coming from. How our account works. People who lease us aircraft, the financial institutions, they know this. But those guys now say ‘oh yeah this is how they succeed.’” He adds: “When it comes to me paying my people bonus, why would I pay them a bonus if they are not doing well? You think I take money from somebody else to give them a bonus? It is for something they achieved. I couldn’t if it was a subsidised business.”

Sheikh Ahmed says that ultimately, the sniping is borne out of both jealousy and surprise at the airline’s spectacular growth. “When we are talking about the airlines who make a fuss about it, they didn’t think that this small airline that started from a small place would become a giant airline and one day would really put them in a serious competition. That would make them really compete really hard to gain their traffic. So this is how it started and they don’t want competition. They will never accept it,” he says.

“I think deep inside they know we are big and capable and one of the top 10 airlines in the world. They have to accept it, whether they like it or not, it’s up to them, sometimes they don’t want to admit it. It’s up to them. But we are a sizeable airline. We have nearly 150 aircraft.”

Apart from rivals sniping, more routes, more planes and more profit have led to continued rumours. Sheikh Ahmed is used to hearing about an imminent alliance with Abu Dhabi-based Etihad Airways. Can he once and for all categorically quash the rumour mill? “Yes. There is nothing like that [alliance]. There is always a lot of rumour, people will try and put things together. People have the right to say what they think but the problem is sometimes they believe it themselves. They come up with something and they believe it that it is happening. There is no such plan,” he says.

While we are on the subject of rumours, Sheikh Ahmed tackles the remaining ones with clarity. Suggestions of pilot fatigue following the Melbourne incident? “We don’t have an issue with that. Sometimes airlines or the press, they try and shift a story in the direction they want it to do.”

A British Airways style business class only product in the future? “We’re not looking into it.”

And can he rule out floating the company? “Ruled out? It was never ruled in. It’s an idea people made up. A lot of reporters usually push that story.” So never? “Anything is possible. If you want to do an IPO you have to find the right time and price but it is not something on my desk,” he says.

What is on his desk are the plans for the year ahead, in particular the celebration of 25 years in the business. Sheikh Ahmed has been here since day one, working in a makeshift office with a handful of other staff. “His Highness Sheikh Mohammed said we have nine months to prepare — naming the airline, the livery. The uniform, the routes we would choose. I was then involved in leasing aircraft and bilateral negotiations. It was a big job. I learnt a lot from day one.”

He clearly learnt well, and is widely respected in the global industry as one of the most astute airline bosses in the business. But looking back, he says even he is surprised by how much has been achieved. “If you asked me in 1985 did I think Emirates would be this big? The answer would be no.”

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Jacob 10 years ago

HH Sheikh Ahmed Bin Saeed Al Maktoum is truly an inspiration to the young leaders in the making, his calmness is one thing many executives have to learn and hope emirates reaches all across the world to lead and show the essence of travel and economics go hand in hand.