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Sun 15 May 2011 10:32 AM

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How Emirates can silence its jealous rivals

Opening up its books to the city with an IPO is a surefire way to curb critics, writes Anil Bhoyrul

How Emirates can silence its jealous rivals

One of the joys on writing a big feature on Emirates Airline is that it’s actually quite easy to do, as my colleague Shane McGinley, who interviewed the company’s president Tim Clark this week, found out.

There are certain buzz words that you use, and just fill in the gaps between them; record profits; record capacity; record routes; record growth; record orders.

Every time I look at the numbers, which I have done for nearly seven years now, I never cease to be amazed. This is the 23rd straight year of profit. Profits are the highest ever, at $1.5bn. They have risen by their largest ever amount, 52 percent in one year. Emirates recorded a 14.5 percent rise in passenger numbers to 31.4 million and its seat capacity rose to its highest level ever of 80 percent.

All this (if  you include the Q1 of 2011) against a background of  volcanic ash clouds, winter snow chaos in Europe, earthquakes and tsunamis in Japan and regional unrest in the Middle East and North Africa. Nor should we forget rising fuel prices that now make up 43 percent of the airline’s cost base (compared to twelve percent a decade ago). As I get older, I am often being accused of being too soft on the people and companies we write about. But come on now; is there a single thing - just one thing - you can fault about the figures?  And more importantly, why is it that Tim Clark and his boss HH Sheikh Ahmed are not held in the same regard as the likes of Sir Richard Branson, Steve Jobs and Bill Gates?

I’ll tell you why in one word: jealousy. There is an easy weapon to always fire at Emirates, which is the completely unproven and totally rejected argument that the company receives some kind of subsidy from the Dubai government to help it boost profits. This has been going on for 23 years, yet nobody - not even the world’s finest forensic accountants - have ever found one shred of evidence of this. As Clark tells us this week: “Don’t even talk to me about subsidies or asking people for help. We do it ourselves.”

What is all the more ludicrous about the subsidies argument is that even if it were true, how does that explain 31.4 million people deciding to fly Emirates in the last year - nearly fifteen percent more than the year before? The ticket prices are similar to its competitors. I rather doubt a single one of these 31.4 million passengers thought “Ah, yes, Emirates gets government subsidies, I should fly with them…”

The reason is a combination of a great product and even greater marketing. Deals such as the sponsorship of the Emirates Stadium in London, and being the carrier with the biggest fleet of A380s, have made Emirates Airline a household name from Dubai to Dakar. It is probably the most trusted Arab brand anywhere on earth. And, while I am sure everyone can find a story about a flight they would rather forget, for the most part its service from start to finish is second to none. It is time the rivals just gave up on the subsidies sniping and accept the fact Emirates Airline gets no help, never has and never will.

During the results presentation last week, HH Sheikh Ahmed was asked whether the company would consider an IPO, something that has been on the back burner for a good five years. He didn’t rule it out, though suggested it is still some time away.

He is right about that, as at the present time the company doesn’t need the funds.

But I hope that Emirates does one day take a trip to the stock market. Not only so the rest of us can benefit from its success, but because opening up its books to the city is probably the only way the critics will ever be silenced.

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Lamie 9 years ago

YEP I absolutely agree with the jealousy factor tending to descredit Emirates as a truly recognizable Global Brand.In fact ,I was just stunned earlier to see that Emirates trailing only 7th in last year's ranking of gobal top Ten Airlines and 5th I think on Skytrack 2010 ranking as well.No doubt there are terrific global industry participants out there and we can always expect to have Singapore Airlines, Qatar Airways, Cathay and now Etihad in the peloton but I am getting annoyed at the lack of respect and jabs thrown at Emirates. every so often.This is a Company with an economy class that matches many Western carriers business class, with better food,quality and smiles.. you will never get turned down if you need extra meal,in addition to great entertainment, tons a stuff for your kids!I mean Sir Branson is an achiever dont get me wrong but hey neither Virgin nor many dont get to the ankle of Emirates ..period.

Abed 9 years ago

Well they said the same set of things about the credibility of the Dubai boom when it was in its middle stages.... It is said 31.4 million passengers travelled on emirates. The number of passengers travelling in 2010 was 47million odd... Now are you trying to tell me that out of all the planes that come to Dubai 2/3rds of the passenger traffic travelled via emirates....WOW!!
Now i do not have access to the books of the airline but that is quite a claim.

Also the claim that there are no subsidies is like stating that etisalat is a private entity and the 10Billion they contributed to the federal budget was tax.

All the so called taxes they claim to pay are just facades for what the airline pays as its share to the dubai budget. Also who really knows what is going on with the carrier as the people running the airlines are also the people behind its Audit.

We will just wait and see...

Charles 9 years ago

I couldn`t disagree more. The service at Emirates has been declining steadily for a while and their prices are always more expensive than other carriers, so their position at 7th place is more than warranted. When I took my 5 year old son back home last year the kid`s meal was shocking, teh plane was delayed and the service was very poor. The only good think is the entertainment system and is that worth paying an extra 25% for? I dont think so.

Jon 9 years ago

That's because you believe the hype such as the written article. The bottom line is Emirates is an adequate airline who's standards have dropped consistently year on year with their rapid expansion.

asif ahmed 9 years ago

No doubt EMIRATES is a success story from day one (1985)..everyday the growth graph is on the climb, but at the same time EK needs to take active control on the overall service which is being compromised or overlooked...

Moreover a comment on another subject: Emirates' approach seeking traffic rights for Canada was not appropriate...Traffic Rights are sovereign rights solicited / concluded through bilateral discussion, dialogue, interaction but not through force or other indirect pressures....Nevertheless I am of the firm opinion that success can be made through bilateral discussions only between the two aeronautical authorities. The airline (Emirates) should refrain from making unnecessary statements in the print media.

Mags H 9 years ago

I agree 100% with the above regarding a decline in service and would like to add an observation after having flown Emirates to various destinations over the last decade or so it seems to be that flights originating in Dubai have worse service, worse food et al than flights not originating locally. Additionally flights originating in Dubai are often as much as double the cost of flights coming into Dubai, when this is the Emirates base and fuel here is so much cheaper. Why is that one wanders? Part of the "Reel-the-tourist-in" plan perhaps? The mind boggles, but it could certainly explain the continued increase in profit.

Hont 9 years ago

A question worth asking is why flights from Dubai cost as much as twice the price as a flight into Dubai.
Durban in South Africa to Dubai return costs about AED3000 but costs AED 5300 from here.
same thing with flights to the UK
And while the service is adequate as mentioned it is by no means exemplary. Having flown Emirates for the last ten years I can confirm that the service and quality has declined significantly.

Richard Bell 9 years ago

I have been a frequent flyer with emirates for 15 years and I have found the service, the entertainment, the new A380 all to excellent. The number of routes available is also very impressive.
I am also inclined to be loyal to the Dubai carrier.
However, I have now defected to Virgin. Simply because of the disparity of cost. Business class flights are half the price of Emirates. Whichever way you look at it, Emirates is not twice as good as Virgin.

BJ 9 years ago

I've started flying Qatar airways from Dubai, and one connection aside, I'm saving about 50% on plane tickets rather than flying on Emirates...come on people, lets start getting a little creative...this is the way to do it...safe travels :-)

Jag 9 years ago

Guys...let us not forget the generous legroom in the cattle class (economy) that forces us to sit with our knees in our mouths.....

I'd rather stretch a bit than watch mindless t.v and be served by cabin crew that "speaks 14 different languages" ;-)

Will prefer flying other airlines any day.