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Emirates: A lesson in stability and success

The record profits announced by Dubai’s national carrier are rooted in careful planning

Emirates business class onboard a Boeing 777-300. A new seating configuration in 2024 means all premium passengers will have aisle access Emirates
Emirates business class onboard a Boeing 777-300. A new seating configuration in 2024 means all premium passengers will have aisle access

Ahead of the Dubai Air Show, Emirates Group reported its best ever six-month trading as the pandemic recovery reaches maximum momentum. 

While the Group comprises much more than its flagship airline, it is the state’s glitzy national carrier that commands the most attention. After all, A380s are much more interesting than ground handling, new catering facilities or travel agencies, even though they are profitable in their own right. 

Perhaps the most remarkable part of the results is not the reported profit of $2.7 billion but the fact that this represents a doubling on the previous year’s record-breaking result. These staggering figures confirm the wider fragility of the industry. 

Once past the cost recovery point, airline profits can flow very quickly. When a 20 percent increase in Group operating revenues flows through to a doubling of profit, then the business is in a sweet spot. 

However, as is always the case in the airline industry, clear skies and favourable winds can occasionally be a sign of turbulence. So, how do the next few years really look for both the airline and the Group?

An airline focused on stability

One thing about the Emirates Group is that it always seems to make sensible decisions, and that remains the case.

Emirates is implementing a subtle programme of reducing capacity in the premium cabins with the announcement of a new configuration in business class for their B777 fleet with the “E-Seat” hurdle being removed in 2024 and direct aisle access possible for all premium passengers. 

At the same time, for those unable to pay for a business class fare but wanting more than a classic economy seat, the continued expansion of the Emirates Premium Economy product provides a balance of increased space and slightly better service. And across the runway in Dubai, FlyDubai’s business class product continues to be popular.

This week’s announcement of a new order for B777s for Emirates and B787s for FlyDubai, or at least the swap of an Emirates order to their sister company, is the next step in that continued journey of growth and places a marker down against regional competitors. 

FlyDubai’s venture into wide-bodied operations will see a smattering of new destinations and upgraded services to selected markets. The airline will have a list of existing destinations where load factors are consistently turning traffic away and some extra capacity would be welcomed. 

The B787 order will also allow for some of the released B737 capacity to be used on developmental new routes, perhaps to points in Africa and Saudi Arabia where more capacity to secondary cities in the Kingdom will dilute connecting flows through Riyadh, for example.

Emirates A380 business classEmirates
Emirates A380 business class
A Group embedded in aviation’s ecosystem

The success of Emirates and FlyDubai flows through to the rest of the Group’s businesses. For every passenger boarded by the airlines there is a likely revenue benefit elsewhere in the Group. 

DNATA, the ground handling operator, generated $1.1 billion over the six months, handling more aircraft than ever but also suffering from the global downturn in cargo activity where tonnage fell by 5 percent. 

Emirates’ catering division served up more meals than ever before, dishing up over 66 million meals to a combination of Emirates and other airlines across the globe as it expanded its stretch around the globe. 

Overlay these revenue streams with the revenues from the DNATA travel division and it’s very likely that anyone leaving the UAE by plane has contributed in some way to the Group’s success in the last six months. 

The Dubai Air Show is Emirates’ showcase

It may be positioned as the Dubai Air Show but, make no mistake, this event is where the UAE and specifically Emirates showcase their future. The day one, first-mover advantage of the aircraft orders highlights that this is their show and their market. 

However, other announcements will be lined up both for later this week and perhaps over the coming months as deals are finalised and the ink dries. 

Riyadh Air is also attending the Dubai Air Show and it’s a perfect opportunity for the airline to put a statement of intent down in the nicest of political ways. 

Additional aircraft orders can be expected from other Saudi-based carriers, and it wouldn’t be a surprise to see some orders placed from carriers based in the Indian sub-continent. 

Emirates will continue to soar in the medium-term

Record profits and a really positive outlook for the next six months suggest that the current results for the Group are well placed to cope with some potential increases in competition. 

Regionally, there will be more competition in the next few years with other airlines and destinations competing for those connecting flows through the hub airport.

The second half results for Emirates may be slightly softer than the first half but they will undoubtedly be good and probably record-breaking. With revenues running so far ahead of costs, it’s just a matter of margins for the Group and this will probably be the case for many years to come. 

John Grant is partner at UK consultancy Midas Aviation

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