Guest Column: Emirates continues to defy downturn

Aside from the impact its branding has, Emirates Airline has continued to make profits in all but one year of its existence when it was initially set up with a Boeing 737 and an Airbus A300 donated by Pakistan International Airlines in 1985.

The growing traffic figures at Dubai International Airport show how critical the airline has been to the UAE emirate, as well as transforming itself into a big people mover.

Emirates, the biggest customer for Airbus’ A380 and Boeing’s 777 families, is safe in the knowledge that the ruling elite in Dubai will continue to offer favourable terms for its airport and infrastructure costs, while being able to concentrate during the current yield attrition days of becoming more geared towards traffic growth through volume.

The airline relies heavily on O&D traffic, its presence in the Australasia region is particularly interesting since no Australian carrier flies to the Middle East, much less connect traffic onward to Europe.

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Instead, they fly through the more competitive and expensive hubs at Hong Kong and Singapore, leaving Emirates to suck traffic from both ends of the Equator through its hub and beyond – almost with impunity.

Emirates ability to absorb new jets has allowed it to maintain a strong credit rating – financing backed through local banks and Sharia-compliant methods means they bear less risk than other open market sources for funding. That probably won’t ever change since the strategy works extremely well, as exemplified by their huge order commitments yet to be fulfilled.

Passenger revenue may indeed be pressurised, but Emirates has shown successfully that it can manage to swing that into its favour and still grow – just how much influence the Dubai Government has to support that is limited only by one’s propensity to research those connections.

What’s important is that Emirates will be a significant player in a resurgent buyers market in a few years time – even IATA acknowledges the Middle East is the only region growing so quickly.

Emirates has a mature, dominant position in the region which will only serve to remind us that they have the ability to leverage that traffic growth to support their expansion.
 

This column was written by FBE Aerospace chief analyst Saj Ahmad.

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