The Hindu Business Line : ‘India is one of our key markets’

We will operate 163 flights per week to Indian cities by February 2009, when India will become the largest station within the Emirates Airline network in terms of daily operations. This by itself is a sizeable investment and can be seen as a sign of India’s importance.

TIM CLARK, PRESIDENT, EMIRATES AIRLINE

Preeti Mehra

While airlines across the world are feeling the heat of the global meltdown, Emirates Airline has been able to substantially buck the trend. In fact, at a time like this, it is in expansion mode and in search of new routes, more seats and wider markets. Mr Tim Clark, the President of this Dubai-based company, gave Business Line a run-down on the airline’s strategy for riding the downturn and its India plans.

Excerpts from the interview:

With the current economic downturn, major airlines seem to be on the defensive in terms of new expansions, while Emirates appears to be bullish. How come?

Our business fundamentals are solid and, provided there is no further fall-out from the current global financial situation, we anticipate a robust second half of the financial year for the entire group.

The past few months have been a roller-coaster ride for Emirates Airline in Dubai and its network. However, we are continuing to expand in size, scale and scope and are recruiting staff worldwide to sustain our operations.

While the international outlook of the Middle-East remains upbeat, there are challenges ahead.

Emirates Airline produced a net profit of Dhs284 million ($77 million) for the first six months of the current financial year ending 30 September 2008.

This is down 88 per cent compared to the same period in 2007. Overall, our fuel cost has exceeded the budget by Dhs1.7 billion ($469 million).

In spite of the current financial crisis, how has Emirates Airline managed to find financing for all of its aircraft purchases until March of 2010?

Our policy of giving long lead times (up to a year in advance) for mandating the financing for new aircraft has stood us in good stead, and cushioned us from the worst of the recent market changes. We are watching the situation closely, but have no plans to stop or slow down our fleet growth.

How important is the Indian market for Emirates Airline?

India is one of our key markets. We operate over 150 weekly flights to 10 Indian cities.

This will increase to 163 flights per week by February 2009. By doing so, India will become the largest station within the Emirates Airline network in terms of daily operations. This by itself is a sizeable investment and can be seen as a sign India’s importance.

What is the Indian sub-continent’s contribution to the airline’s profits?

West Asia and Indian Ocean contributed 8.9 per cent of Emirates total revenue in 2007-08 financial year.

What are the expansion plans for India?

Emirates Airline will add 31 weekly flights to India between now and February 2009.

From February 2009, Emirates will serve Mumbai with a fifth daily operation, while in New Delhi it will launch seven additional frequencies with immediate effect, bringing the total to 25 flights per week.

The Dubai-Bangalore operation will be strengthened with the start of five additional flights bringing it to 20 weekly flights.

From Chennai we will introduce four additional flights per week and in the next phase of expansion in February 2009 one more flight will be added, bringing the total weekly count to 19 flights.

In Kochi, Emirates will introduce a double-daily operation by launching four additional flights per week by February 2009, while in Hyderabad triple-daily services have been introduced.

Hence, the total seats per direction per week on February 1, 2009 will stand at 48,753 compared to 44,393 in end October 2008. On the Dubai-India sectors we operate at over 75 per cent load factors.

Any plans to fly to any other destinations in India and abroad?

We are always open to considering new destinations in India. The Indian market has always assumed significance for Emirates’ international operations and we are always on the lookout for opportunities to strengthen our relations with India.

However, any further growth in the Indian market will be determined by government approvals.

When will Emirates commence A380 operations to India?

We are studying the possibility of operating the A380 aircraft on some Indian routes.

Any decision to operate would depend on the ability of specific Indian airports to safely handle the aircraft from an airport compatibility standpoint.

Is Emirates Airline exploring the possibility of a tie-up with an airline from India, other than the recent agreements with Jet Airways and Kingfisher Airlines?

We have always been open to operational and marketing alliances.

What is your view on the transaction fee model?

We are currently exploring the possibility of introducing the transaction fee model in India. In markets such as the UAE, where we have implemented the transaction fee model we have conducted seminars and workshops to help agents through the transitional period and to explain the logistics required to transform their business into a robust revenue-earning model.

How tough is 2009 going to be for the Indian aviation industry?

While aviation in India has battled the surge in crude oil and a slump in tourist arrival figures, especially in the latter half of 2008, we are hopeful of a recovery by mid-2009. The optimism stems from an unexpected fall in crude oil prices.

Crude is currently hovering below $45/barrel; a decline of nearly 70 per cent from its peak level of $ 145/barrel it reached in July. The sharp decline in oil prices will provide airlines an opportunity to rationalise their pricing structure.

If the prices of ATF remain in the range of $45-55 per barrel, then most airlines will trim their fares so as to pull in travellers.

Your fuel costs have risen to $2.5billion between April and October, leading to an 88 per cent drop in profits. What’s the prediction for full-year profits?

Emirates has worked hard to manage the impact of high fuel prices on its unit costs, while continuing to grow the business.

Emirates has made massive investments in its eco-efficient aircraft fleet; in a newly-opened dedicated airport terminal; and in strengthening the global route network.

Emirates’ recent inaugural non-stop flight from Dubai to San Francisco over its new North Pole route was dubbed to be the ‘world’s longest green’ flight. Why do you call it ‘green’ and what are your promotional plans for it?

The flight routing was made shorter by 250 nautical miles, saving 13,000 pounds of aviation fuel. This translates into a saving of 45 minutes flying time.

As far as promotions go, our latest includes that all passengers flying first class to San Francisco are eligible for two nights complimentary stay at Taj Group’s The Campton Place hotel, while business class passengers are eligible for one night.