Emirates – The largest airline in the Middle East

Student comments on Emirates – The largest airline in the Middle East

1. December 8, 2015 E says:

   Thank you for this great post Vimit! What is Emirates’ magic recipe to remain profitable while investing in superior customer service and experience during times when most other airlines suffer from very thin margins?
   1. December 9, 2015 Vimit says:

      Ellian thanks for the comment. Emirates magic recipe to remain profitable is its location in Dubai. It is so centrally located between Eastern and Western world and Emirates is taking advantage of that. Due to this Emirates can play on volumes and hence its invests only in wide-body aircrafts Airbus 380s and Boeing 777s. Also Emirates does not have union problems to handle which plays big role in operations. Also, employee costs are lower at Emirates. For example, employee costs in Emirates is approximately 13% of revenue while at American Airlines is approximately 19%.
2. December 13, 2015 Disho says:

   Vimit, as an airplane aficionado, I had a blast reading your post. My questions below:

   1. With oil prices plummeting and margins improving across the industry, how would competitors take advantage of this to sway away Emirates’ clientele?
   2. Do you see Emirates becoming part of any of the larger alliances to protect market share?
   3. Will lower oil revenues affect Emirates’ owners/backers?
   4. Are there any other good examples of state owned enterprises in the airline industry? (ignore Singapore Airlines or any of the Gulf carriers)

   Thanks!
   1. December 14, 2015 Vimit says:

      These are really great questions Andres. Kindly find my responses below:
      Competitors (middle-east airlines) will not be able to match capacity deployed by the Emirates. There was an article last which compared total number of seats deployed by middle-east airlines. Quick quote from this article:
      “In terms of weekly seats, Emirates’ advantage over Qatar Airways is 116% and 278% over Etihad. This reflects the fact that Emirates operates an all widebody fleet, while both Qatar Airways and Etihad operate a significant number of narrowbody aircraft. Another way of looking at this is that in terms of weekly seats Emirates is 37% bigger than Qatar Airways and Etihad combined.”

      Source: http://www.hawker.com.bd/news_details.php?news_id=333387&news_category_id=4&val_lan=1

      So the best way to pull customers from Emirates is to deliver on customer service. From my experience, I have seen many customers moved to Qatar Airways just because of better inflight experience. Small example – B777 of Qatar Airways has nine seats in a row while Emirates has ten seats in a row. With one seat less, it gives more space for customer to move around and is much better during long haul flights.

      Emirates will not be a part of any larger alliances. Emirates strategy is different. They want to build their own customer base and they want to expand by themselves.

      Other good examples of state owned airlines – Qantas and Cathay Pacific.
3. December 14, 2015 Sijh says:

   Good article Vimit. I think you outlined the business model well. I think that there is a lot of value in understand Emirate’s core strategy of becoming the premier airline for connecting people. The airlines strategy is well aligned with Dubai’s strategy of making the Emirate as a prime tourist destination. Furthermore, the service and the staff are key differentiators of Emirates. The airline recruits young and attractive people from all over the world. On every Emirates flight, the lead cabin crew announces all the languages spoken by the staff. It allows people to be understood in their own language and in turn to be better catered.

   Its selection of fleet is also worth expanding on. The A380 has become a new way of flying, especially in Business or First Class. These fleets are mostly on the European, Asian, and US routes. Attached to this is its loyalty rewards points, Skywards. As a Skywards Gold member for example, you are guaranteed economy seat with at least 48 hours in advance.

   Overall, there are many more ways in which Emirates distinguishes itself and it is good to keep those in mind, especially on the service and the destinations choices. I have taken Emirates over 250 times while a Consultant living in Dubai and I would not want to switch airlines anymore. I have been converted
   1. December 15, 2015 Vimit says:

      Hi Sijh, I completely agree that overall Emirates’ strategy is well aligned to “sell” Dubai as tourist destination along with filling up planes for other destinations too. Sometimes (especially in low season of travel) Emirates do offer free day or two layover at Dubai which effectively means that passenger will “spend money in Dubai” – hotels, local transports etc.

      Yes, due to large fleet size Emirates has advantage to cover varied destinations across the world.
4. December 14, 2015 AnnaA says:

   Thanks for the post, Vimit. You probably knew this was coming – but how much do you think Emirates’ success due to the [unadmitted] state subsidies that allow them to spend so much on customer service? What do you think about European and U.S. carriers extremely negative response to Emirates coming into their markets and competing with this “unfair” advantage (as it is seen by many)? Cheers!
   1. December 14, 2015 Vimit says:

      Thanks Anna for the great question. On state subsidies, I would say its a grey area. If you are talking about oil prices, in general jet fuel in middle-east is cheaper than other parts of the world. And all the airlines landing into middle-east airports can get this cheaper jet fuel. Having said that in my opinion, no offense, even American Airlines got “subsidized” by the government when they filed chapter 11 bankruptcy.

      Emirates is making use of open sky policy while U.S. and European airlines are not making use of the same policy to that extent. Emirates buys new aircrafts continuously and has to deploy them somewhere in the world and as such Emirates is expanding its own network.