Emirates case report

Emirates’ Ambitions Worry European Rivals| 1

Abstract:

This Report is on based on the case study “Emirates’ Ambitions Worry European Rivals”, by Jad

Mouawad, where the case is summarized and analyzed. The report highlights on the service of

Emirates’ Airline and how its poses threats to its competitors and its strategy which leads to its

success as the world largest airline carrier. Moreover the report also applies the concepts of

services marketing to this case and explains various factors of Emirates’ with respect to those

concepts.


Table of ContentsIntroduction to Case:...................................................................................................................................3

Case Analysis:..............................................................................................................................................5

History of Emirates:.................................................................................................................................5

The Business Model and Strategy of Emirates’: An Overview:................................................................6

Customer Service at Emirates:.................................................................................................................7

Value Creation at Emirates:.................................................................................................................7

The Eight Ps of Service Marketing:......................................................................................................8

Defining Services at Emirate’s:..............................................................................................................10

The Service Flower:............................................................................................................................12

Service Distribution at Emirates’:..........................................................................................................13

Costs and Prices at Emirates’:............................................................................................................15

Evaluation of the Services Provided by Emirates:......................................................................................15

References:................................................................................................................................................18

Appendix:..................................................................................................................................................19


Emirate’s Ambitions Worry European Rivals

Introduction to Case:

Emirates started in 1980s as a small corporation but with big dream. In the start they reduced

their services to Dubai. Emirate’s is a government own company and started off with the capital

of $10 million; they started off with two planes both of them were leased from Pakistan

international Airlines. It was established after Gulf Air, a regional airline then owned by Bahrain,

Qatar, Oman and the United Arab Emirates.

Tim Clark, the president of emirates, says that his airline represents the future of mass air travel.

In the time economic downfall when all companies were struggling to sustain themselves, even

at that time Emirates was well enough to attract customer, raised fares and consistently turned a

profits. Emirates earned $925 million his last six months, which was raised up from $205 million

in the previous year.

To attract and sustain their customer they have put glamour in their planes. On the double-decker

Airbus A380s, full bars are standard in business, and in first class cabin they includes showers,

and free food and drinks in all flights of Emirates. Emirates offer mix of quality services,

operating efficiency and low cost. Emirates government owned company has now become

world’s largest airline by passenger flown. Success of Emirates was result of its geography

because around 4 billion people live with-in eight hours of flight. In last two decades air travel in

Middle East has grown by 7%, out pacing other regions of world.

One of the greatest steps was to building routes to developing countries and providing them an

alternative to the local airlines, and instead of connecting through European hubs they started

their new routes through Dubai. Emirates, Currently offers 184 flights a week from Dubai to

India, to cities like Ahmadabad, the commercial hub in the state of Gujarat. It flies to 17 cities in

Africa and, in China, to Beijing, Shanghai, Hong Kong and Guangzhou. It runs two daily flights

to Bangkok and nine to Australia.


Emirates is growing very fast as compare to his competitors, Emirates already got 15 A380s, the

world’s largest passenger airline, and has ordered 75 more for delivery by 2018. On the other

hand its competitors like Air France, Lufthansa, and British Airways have order total of 39

A380s and have only 8 flying.

Critics say that the growth of the emirates was result of tight relation of Emirates with and

airport authorities and regulators, which give airline an unfair advantage.

They say that Emirates receives government subsidies, in form of low tax rates and different

facilities like terminal 3.where they also give space to the growing number of fleets of A380s.

Whereas Emirates disputes this characterization and publish audited financial reports, and its

executives says that Emirates did not get any help from government subsidies. The main

advantage of Emirates over its competitor is low labor cost and they hires inexpensive for

carriage and other facilities like catering mostly from the developing countries like Pakistan,

India, etc. while they pay their pilots international wages. According to consulting company

Emirates’ overall cost, including those for labor, are 30 percent lower than those of its rivals.

And it is very difficult for the other competitors to close that gap, as Emirates are more profitable

with lowest prices in the markets.

Other advantage they have is highly trained employees, like flight attendants they were given

eight weeks training and taught how to serve and give first aid. Emirates have emerged as a

formidable player on the international travel scene. Its innovations, including private suites in

first class and individual entertainment screens in the coach cabin, have been copied by many

other airlines; its emphasis on quality has forced traditional legacy carriers to pay more attention

to their own products.

So far, Emirates has benefited from the weakness of some airlines in China, India and African

nations as it establishes its presence in those and other developing countries.

Emirates one of the leading airline of the world having 15 A380s alone and expecting to add 75

more is the most successful airline. Emirate’s, which is fully owned by the government, has

grown into the world’s largest airline by passenger miles flown. The reasons for its success are


the competitive advantage of low cost and high quality enabled Emirates to become the leader.

According to the competitors the success of Emirates is because of the support of the rulers of

Dubai but this claim is not accepted by Emirates and they believe Emirates is a separate business

unit.

Case Analysis:

History of Emirates:

In 1974, three years after independence, the rulers of the UAE decided to establish a joint flag

carrier: Gulf Air. However, a tense relationship between the airline and the Dubai government

existed ever since its inception, as the latter refused to give in to Gulf Air’s demands to abandon

its open skies policy. In reaction, Gulf Air reduced frequencies and capacities to and from Dubai

by more than two thirds between 1984 and 1985 without advance notice. Since foreign carriers

proved unable or unwilling to fill the gap, Dubai’s then ruler, Sheik Mohammed bin Rashid Al-

Maktoum, convened a team of experts headed by Maurice Flanagan and later joined by Tim

Clark and the ruler’s then 26 year old son, Sheik Ahmed bin Saeed Al-Maktoum to devise an

emergency plan. The group’s recommendation to set up a home carrier for Dubai was quickly

accepted by the ruler, but he imposed two conditions: The new airline should meet the highest

quality standards and there would be no additional capital injections from the government other

than the agreed USD 10 million start-up capital. On October 25th, 1985, Emirates’ first flight

departed to Karachi, using an A300, wet-leased from Pakistan International Airlines. The rest is

history: in 1987, Emirates began to serve it first two European destinations London Gatwick and

Frankfurt, from 1995, it has operated an all wide body fleet, and in 2001, 2003 and 2005

Emirates placed some of the largest aircraft orders ever. As of October 2007, Emirates’ route

network extends to 91 destinations on all continents.

In its last business year, ending March 31st, 2007, the airline transported 17.5 million passengers

and 1.2 million tons of cargo on 102 aircraft. Currently, 118 aircraft are on firm order (of which

20 will be all freighters), including 55 A380 and 43 B777


The Business Model and Strategy of Emirates’: An Overview:

Emirates Airline (or rather the Emirates Group as a whole) is a crucial element of Dubai’s

growth and development strategy. Currently based on the Dubai Strategic Plan 2015 (Dubai

Government 2006), its objective is to prepare the emirate for the post-oil era

by firmly establishing it as a leading tourist destination (including trade fairs and conferences),

as a center for financial, IT and professional services, as a location for corporate headquarters

and light manufacturing, and, last but not least, as a regional transportation, logistics and

distribution hub. The silent features of Emirates strategy are as follows:

A well-balanced mix of O&D and transfer traffic in its passenger business.

A very strong focus on cargo traffic, which generates 20% of Emirates’ revenues, one of

the highest percentages in the airline industry.

Strong presence in those secondary markets that are underserved by Emirates’

competitors such as BA, LH, and AF which focus on their own hubs for long distance

flights.

Strong presence in markets that have been largely unconnected to the global air transport

network, and especially to the Middle East, to India, Southeast Asia and Africa, for lack

of a local flag carrier.

High frequencies: The mid-term objective is to serve most destinations at least twice

daily. Currently Emirates’ operates three waves at DXB; a fourth is being gradually

phased in.

High quality service in all classes onboard and on the ground including up to 600

entertainment channels in all classes and limousine service (pick-up and drop-off) for

first and business class passengers.

High labor productivity: According to a recent study by UBS, a Swiss bank, Emirates’

unit costs are around 30 percent lower than KLM’s, a cost advantage that is likely to even

increase after the introduction of its A380 fleet

No alliance membership: In the words of Tim Clark: “If we take the long-term view, then

alliances offer a sure fire way of achieving mediocrity and reduced profitability”.

However, select code sharing agreements are in place.


Customer Service at Emirates:

Emirates focus on providing high quality airline service at a low cost. It tries to serve its

customers/ Passengers in the best possible way. To win over customers, its executives want to

bring a bit of glamour back to air travel. On the double-decker Airbus A380s, full bars are

standard in business class, and the first-class cabin includes showers. No one pays for food or

drinks, of course, on any Emirates flight. Serving its customers Emirates us a mix of quality

services, operating efficiency and low costs. Emirates, offers 184 flights a week from Dubai to

India, to cities like Ahmedabad, etc. It flies to 17 cities in Africa and, in China, to Beijing,

Shanghai, Hong Kong and Guangzhou. It runs two daily flights to Bangkok and nine to

Australia. In this way Emirates is giving ease to its customers to take any flight at any time.

Moreover for the Passengers the Dubai Airport Terminal 3 of Emirates provide a variety of

Services like good physical environment, duty free shops for shopping etc and moreover it has

created a Market for the Passengers at the Terminal 3.

Value Creation at Emirates:

The intangible elements usually add value to services. As airline service is totally an intangible

service so Emirates is trying to add value to its core service and to create value for its Passengers

it is offering many types of other service and Products. The lower cost is the most essential

component that creates value for Emirates customers. Apart from this the big airport, trained

staff, baggage handling, quality food and sophisticated environment all creates value for the

Passengers. For the Emirates employees each week, as many as 90 new trainees file through the

company’s training academy. Over eight weeks of training, the new employees most in their

early 20s and speaking some English, learn all the ropes of the job. Life-size mock-ups of airline

cabins mounted on hydraulic legs are used to simulate safety drills. Elsewhere, the trainees are

taught how to serve meals or use the first-aid kits. Its innovations, including private suites in first

class and individual entertainment screens in the coach cabin have also increased customer value.

In this way Emirates is creating value for its people and its Passengers.


The Eight Ps of Service Marketing:

The eight P’s of Service Marketing are as follows in the case of Emirates:

1. Product Elements

The core Service or Product that Emirate’s is delivering its customer is the Airline Service. It

provides the high quality travelling facility along with many supplementary services. And Mr.

Clark the President says: “If you want to go from Africa to Asia or from South America to

China, the straight line is through the Middle East.” And Emirates is basically providing this

service by offering many flights at any time for its Passengers.

2. Place and Time

The Service delivery at Emirates is done with the help of the latest and most comfortable and

high capacity planes. It offers its service to all at any time as it offers more than hundred flights

to India every week. It uses Terminal 3 of the Dubai Airport which is the largest Terminal.

Moreover it Plans to be a hub in between the connection of Asia, Europe and America.

3. Price and Other User Outlays:

Emirates deliver its service at a lowest cost. The competitive advantage of Emirates is to provide

high quality service at a lower cost. Moreover Nathan Zielke, a transportation specialist at the

consulting company Arthur D. Little, estimates that Emirates’ overall costs, including those for

labor, are 30 percent lower than those of its rivals.

4. Promotion and Education

For the promotion of Emirates; as Emirates is such a big name that it’s Promotion is mostly done

by the word of mouth. Apart from this it also follows some Advertising techniques; moreover it

has also a website that allows the Passenger to obtain information like Flight schedule, E-

ticketing, feedback and many more.


5. Process

The service delivery process is very simple at Emirates. It is providing high quality service at a

lower cost which takes it ahead of its competitors. The process that Emirates follows is very

simple as it offers advance seat reservations and the facility of E-ticketing.

6. Physical Environment

Emirates use the Terminal 3 of the Dubai airport. It is not merely the world’s largest air terminal.

It is the world’s largest building, period. And all 370 acres of it all 82 moving walkways, 97

escalators, 157 elevators, 180 check-in counters and 2,600 parking spaces were built with one

very well-connected company in mind: Emirates, Dubai’s fast-growing flagship airline. Emirates

provide its customer with comfortable seats, on the double-decker Airbus A380s, full bars are

standard in business class, and the first-class cabin includes showers. No one pays for food or

drinks, of course, on any Emirates flight. This makes up the Physical environment of Emirates.

7. People

People or Employees of Emirates are well trained and courteous. Each week, as many as 90 new

trainees file through the company’s training academy. Its growing fleet of A380s means that the

airline will need to hire an additional 11,000 flight attendants in coming years, nearly doubling

its current roster of 12,000. Over eight weeks of training, the new employees most in their early

20s and speaking some English learn all the ropes of the job. Life-size mock-ups of airline cabins

mounted on hydraulic legs are used to simulate safety drills. Elsewhere, the trainees are taught

how to serve meals or use the first-aid kits.

8. Productivity and Quality:

Emirates focus on high quality and always try to increase its Productivity. Emirates focus on

serving its customers with the best available resources. It provide them with comfortable seats,

easy and simple procedures etc. Moreover Emirates train its employees in its academy which

enhances its productivity.


Defining Services at Emirates’:

Services are usually defined with reference to a particular industry, for instance health care or

transportation based on the core set of benefits and solutions delivered to customers. However

the delivery of core services is mostly accompanied by other services that are called as

supplementary services. These supplementary services facilitate the service delivery process and

help in differentiating the product from its competitors. In case of Emirates the core service it is

providing is Airline service which all of its competitors like British Airways etc are already

providing but what differentiate it from its competitors are the Supplementary service that it

offers. For example British Airways and Emirates both offer Airline Service but the thing that

takes Emirates one step ahead is its low cost and high quality service. In designing the Service

Concept for Emirates following steps are to be followed:

1) Core Product:

The core service is the basic service that is offered to solve a problem. In this case the Airline

service is the core service that is offered by Emirates to move people from one place to the other.

And this is the service that is also offered by all of its competitors.

2) Supplementary Services:

All other Services other then the core Service that facilitate the delivery of the core service are

known as Supplementary services. In the case of Emirates it offers a lot of Supplementary

services like comfortable seats, free food and drinks, luggage handling, comfortable

environment, personalized cabins for business class customers etc. And all these services help

Emirates in gaining a competitive advantage.

3) Delivery Process:

It is the process through which the core and supplementary services are delivered. In case of

Emirates the focus is always on Service delivery and it is done through the highly trained staff


though Service delivery is given importance in Emirates but the article does not specify any

particular process apart from the highly trained staff.

4) Documenting the Service sequence over time:

This stage of the service design tells the sequence of services and activities. In case of Emirates

the customer look for the search attributes, then experience the service. The customer buys ticket

and may avail the E-ticketing service. Then the luggage handling service may be delivered and

after that the experiencing of the core and other supplementary services may took place.


The Service Flower:

The service flower consists of the following eight elements. Four of them are facilitating services

and other four of them are enhancing services:

Information, order taking, billing and payment are the four facilitating services of Emirates

where as the consultation, hospitality, safekeeping and Exceptions are the enhancing services.

Through credit card for E-TicketingIn cash in Reservation offices, also by credit or debit card.

Emirates official website.Information counters on Airports.

E-ticketing onlineReservation counters on Air-port.Especial Reservation offices

Online ReceiptsComputerized invoice and bill generation

Suggesting flight & seats No other consultation services.

Comfortable seats.Personalized cabins Easy ticketing proceduresFree food and drinksGood physical environmentEnormous Terminal etc

Airhostesses to solve customer problems.Feedback cards

Luggage carrier cabinsSafety demoEmergency exitsSafe Luggage handling


A Hierarchy of New Service Categories:

1) Major Service innovation is not followed by Emirates as it is providing the only core

service of Airlines as provided by all of its competitors.

2) Major process innovation is followed by Emirates as it introduces the procedure of

online Ticketing and flight schedule etc.

3) Product line extension is not followed by Emirates in the given article as it is just

focusing on the core Airline service.

4) Process line extension is being followed by Emirates as it finds out new ways of service

delivery and enhances its productivity.

5) Supplementary Service innovations are being followed by Emirates as it provides a lot

of new Supplementary Services like Personalized cabins, comfortable seats, safe keeping

etc.

6) Service Improvements is the concept on which Emirates focuses a lot and continuously

tries to improve the service delivery process by training its employees in its academy.

7) Style Changes are being implemented as the traditional way of travelling is transformed

into a modern way.

Service Distribution at Emirates’:

The customer interaction with the service provider occurs at 3 stages

Customer goes to the service provider

Service provider goes to the customer

Interaction at arm’s length (via internet, fax e.t.c)

In the case of Emirate’s customer goes to the service provider for facilitating from the service,

where the service is available at multiple sites. As in the case it mentions that Emirate’s fly from

a number of locations and to a number of different destinations across the globe, predominantly

to India, Africa and China. In case of Emirate’s it’s a people’s processing service provider,

which travels passengers from one destination to another which offers live experiences in form

high-quality service in all classes onboard and on the ground including up to 600 entertainment


channels in all classes and limousine service (pick-up and drop-off) for first and business class

passengers.

For emirate’s service delivery starts from cyberspace where e-commerce in form of an

interactive website is used to provide information to the customers about the flight, service

dimensions and price along with that Emirate airline provide its customer with the lowest

possible fares and schedule for travelling along with other supplementary services in form of

information of shopping facilities at the airport terminal, travel guides, hotel services and food

facilities online. It uses technology to deliver its service where Emirate’s not only use the best

plane fleets of Boeing747’s, 777’s and Airbus double Decker A380, where its fleet of luxury

long distance planes is way ahead in numbers than any other airline. It is one of the largest

customers of Boeing. Moreover they innovated private suites in first class and individual

entertainment screens in the coach cabin which have been copied by many other airlines later.

For delivering its service Emirate’s use the best and the largest facility in world, with a capacity

to handle 160 million people a year and currently handling 90 million passengers in a year “The

Dubai International Airport”. It was jointly built by Emirate’s and Dubai government making

Dubai the hub of international travel. At the airport Terminal 3 which is used by Emirate’s has

facilities like 180 check-in counters, 157 elevators, 97 escalators e.t.c clearly one of the best

facility at the airport for Emirate’s service delivery.

International Status:

Internationally Emirates has acquired the status of one of the fastest growing passenger airline of

world as it followed the strategy of long haul international trips where it started its operations to

developing and underdeveloped countries which were neglected by other airlines previously.

This allowed Emirate’s to differentiate from rest of competitors and attract new customers.

Moreover Emirate’s had this advantage of immense support from Dubai Government which

allows the airline to overcome several international barriers as in case of Canada when Canadian

government did not allowed Emirate’s Landing right, Dubai government scrapped the logistic

support provided to Canadian forces which made forces them to allow Emirate’s Landing

facilities. As stated by Ram C. Menen who runs the company’s global cargo operations “We are


a business unit of Dubai Inc. And it’s a happy relationship”. With its strong Hub of Dubai,

Emirate’s has been able to gain cost benefits, economies of scales, geographic presence and

competitive advantage over several of its competitors.

Costs and Prices at Emirates’:

Emirate’s airline is considered as one of the luxurious airlines of world. With this perception of

the brand it can easily by associated with high fares and expensive airline. The case for Emirate’s

is an entirely different scenario. The airline has been able to actually get benefit from its low

costs. Its frequency of flights, large customer base, fuel efficient and economical fleet of planes,

cheap labor mainly extracted from the Indian sub-continent, large facility and wide operations

allow them to implement value-based pricing and reducing their costs. It adds value to its

customers by providing premium services in lowest possible costs. Emirate’s holds a position of

cost leadership in the industry where its costs are around 30% lower than its competitors like

KLM, Lufthansa, British Air and Continental e.t.c.

As stated by Tim Clark, the president of Emirates, “The airline represents the future of mass

travel. In the era when many international carriers are struggling to sustain themselves, Emirates

has filled its planes, raised fares and consistently turned a profit. It earned $925 million in the six

months ended last September, 30, up from $205 million in the year earlier period”.

Evaluation of the Services Provided by Emirates’:As services are dominating economy in most nations so the Middle East Airline company

“Emirates” need to provide quality service to its customers. The rising competition force

Emirates to increase its supplementary services and to add more tangible elements in it. Tough

people give importance to the intangible components but the tangible elements add more value to

a service. There is need for Emirates to market its services. Marketing being a very important

component behind the success of any business is somewhat missing in the case of Emirates.

Though it follows some advertising campaigns as we see the command 'Fly Emirates' adorning

some of the world's most hotly contested sporting teams Arsenal football team, the jockeys of the

Godolphin racing stable and the field umpires in most of cricket games, but still there is a need

for some comprehensive Marketing Techniques as currently being followed extensively by Qatar


airways and Silk Air extensively. Some things that might enhance the Service efficiency of

Emirates can be customer involvement in co production, make people part of service experience

and among the 8 Ps Process innovations should be focused and a frame work should be

developed for effective service marketing Strategies.

As Emirates is a leader in industry they have very efficient and up to date information system,

that helps company to keep track of its customers and perform its activities very effectively and

efficiently that helps company to lower its cost. In the repurchase stage they help their customer

by guiding them with all the necessary information they needed. They provide their customers

with the true value to their money; they provide they core service at the lowest prices as compare

to the other competitors, mix with the other supplementary services. Everyone has its proper role

and duty and perform it efficiently attendant are highly trained.

In the case of Emirates the Service design is a comprehensive process and it follows the

complete service flower. It should be more focusing on the consultation services. Other

information, billing, order taking, payment, safekeeping, hospitality and exceptions are very well

implemented at Emirates. Emirates should offer branding services, it should also offer a branded

experiences; it is currently following many strategies but should also follow the product

innovation and the product line extension in the hierarchy of services. Emirates should also

research in designing new services and should also reengineer the services to achieve and

maintain its growth and success.

Emirates differentiates itself further from competitors by attempting to provide a high level of

service, especially in its first class section where it pioneered the concept of private mini suites

complete with dining tables. It was one of the first airlines to introduce in flight entertainment

systems in all three classes. With its facility and quality of service and low cost it provides

customers the experience they look for. The strategy behind Emirates’ profitability is a

combination of new, more luxurious aircraft, competent staff and keeping costs fairly low. The

base in Dubai is also seen as a vital part of the growth strategy as we find its location between

East and West to be increasingly convenient for its consumers.


However, still Emirates' is not the only brand that is keen to put Dubai on the map. There are

other carriers such as Etihad and Qatar that are attempting to emulate it although they are starting

from a position much further behind. Sooner or later Emirates’ will get some additional direct

competition.


References:

MOUAWAD, J ad . ( 2011 , Feb rua ry 12 ) . Emi ra t e s ’ amb i t i ons wor ry

Eu ropean R iva l s . The New York T imes , p . BU1 .

Knor r , Andrea s , & E i senkopf , A lexande r . How sus t a inab l e i s emi r a t e s ’ .

Ai r l i ne s , e - z i ne Ed i t i on , ( 38 ) ,


Appendix:

Emirates’ Ambitions Worry European RivalsEmirates’ growing reach, from its Dubai hub, is unnerving rivals like Lufthansa and Air France.

By JAD MOUAWAD

Published: February 12, 2011

BEYOND the artificial archipelagoes shaped like palm trees, not far from the

tallest skyscraper in the world, stands another monument to this city-state’s

stubborn ambition.

Even in this oasis of extravagance, Terminal 3 at the Dubai International

Airport startles. It is not merely the world’s largest air terminal. It is the

world’s largest building, period. And all 370 acres of it — all 82 moving

walkways, 97 escalators, 157 elevators, 180 check-in counters and 2,600

parking spaces — were built with one very well-connected company in mind:

Emirates, Dubai’s fast-growing flagship airline.

Emirates is pressing ahead with an ambitious expansion, despite the city’s

financial near-collapse in 2009. Its executives, with the help of Dubai’s rulers,

want to place this Persian Gulf city at the center of a transportation network

linking vibrant economies like India and China to Europe and the United

States.

It might sound like bravado from the bubble years, another case of overreach

in this sandy fantasyland. This is, after all, Dubai, where exuberant developers

planned not one but three palm-shaped island chains and erected the glass-clad

Burj Khalifa — more than twice the height of the Empire State Building —

alongside an indoor ski resort. What is more, the recent political upheaval in

Egypt provides a potent reminder that Dubai, for all its air-conditioned ease

and stability, lives in a dangerous neighborhood.

But here inside Terminal 3, the rise of Emirates hardly seems a mirage. Since

its founding in 1985, Emirates, which is fully owned by the government, has

grown into the world’s largest airline by passenger miles flown. By 6:30 a.m.,

http://topics.nytimes.com/top/reference/timestopics/people/m/jad_mouawad/index.html?inline=nyt-per


Terminal 3 is teeming with travelers. Russians bound for Durban, Chinese

headed for Khartoum and Indians traveling to San Francisco weave through

the restaurants and duty-free shops. Families snooze on the white marble

floors. It feels like a giant bazaar, devoted to a new era of air travel: crowded,

animated, cosmopolitan.

Tim Clark, the president of Emirates, says his airline represents the future of

mass air travel. In an era when many international carriers are struggling to

sustain themselves, Emirates has filled its planes, raised fares and consistently

turned a profit. It earned $925 million in the six months ended last Sept. 30, up

from $205 million in the year-earlier period.

To win over customers, its executives want to bring a bit of glamour back to air

travel. On the double-decker Airbus A380s, full bars are standard in business

class, and the first-class cabin includes showers. No one pays for food or

drinks, of course, on any Emirates flight.

So far, Emirates’ success is partly an accident of geography. Roughly four

billion people live within an eight-hour flight from here. But to the

consternation of rivals, Emirates also enjoys the patronage of Dubai’s rulers, in

particular, Sheik Ahmed bin Saeed al-Maktoum, who is its chairman. While

home-grown airlines in places like Singapore and Hong Kong have also turned

those cities into global hubs, Emirates stands apart for the scale of its

ambitions.

COMPETITORS are fighting back. SkyTeam, the global alliance that includes

Delta Air Lines and Air France/KLM, said recently that it would add two

airlines — Middle East Airlines, from Lebanon, and Saudi Airlines — to counter

Emirates’ dominance in the region.

“There is a reason that airlines around the world are afraid of the success of

Emirates,” says John Leahy, chief operating officer of Airbus, the European

plane maker, referring to Emirates’ mix of quality service, operating efficiency

and low costs. “That should strike fear in the hearts of airlines around the

world.” Emirates is one of Airbus’s top customers.


Over the next two decades, air travel in the Middle East is expected to grow by

more than 7 percent a year, outpacing every other region, according to a

forecast from Boeing in 2010. Much of that growth will be spurred by Emirates

and two other fast-expanding airlines based in the Persian Gulf area: Etihad

Airlines, based in Abu Dhabi, and Qatar Airways.

Emirates is by far the most ambitious of the three. Its greatest strides have

come from building routes to developing countries long neglected by

traditional carriers and providing an alternative to local airlines. Instead of

connecting through European hubs like London or Frankfurt, all of these new

routes run through Dubai.

“The legacy carriers still see us as the monster of the Middle East, the bête

noir of civil aviation in the 21st century,” says Mr. Clark, 61. “But they won’t

accept that the business we are carrying wasn’t theirs anyway. The 21st

century is very different from the 20th century.”

Emirates, for instance, offers 184 flights a week from Dubai to India, to cities

like Ahmedabad, the commercial hub in the state of Gujarat. It flies to 17 cities

in Africa and, in China, to Beijing, Shanghai, Hong Kong and Guangzhou. It

runs two daily flights to Bangkok and nine to Australia.

The strategy has prompted a strong reaction from airlines like Air France and

Lufthansa of Germany. These carriers hope to persuade their governments to

limit Emirates’ access to French and German airports.

“Emirates’ strategy is aggressive,” says Pierre-Henri Gourgeon, the chief

executive of Air France, who complains that Emirates is siphoning off

passengers from Europe’s traditional hubs. “Europe is at the center of the

global aviation world. It’s the result of aviation history.”

Wolfgang Mayrhuber, the C.E.O. of Lufthansa, notes that it took 40 years for

Lufthansa to build up its fleet of 30 Boeing 747s in Germany, one of the world’s

largest economies. Emirates already flies 15 A380s, the world’s largest

passenger airliners, and has ordered 75 more for delivery by 2018. (Air France,

Lufthansa and British Airways have ordered a total of 39 A380s and, among

them, have only eight flying.)


In Canada, discussions to expand Emirates’ landing rights took a particularly

bitter turn. After the Canadian government turned down Emirates’ request to

fly to Calgary and Vancouver and to increase the frequency of flights to

Toronto, the United Arab Emirates scrapped a military agreement that allowed

Canadian forces to use a logistical base near Dubai.

Craig Jenks, an airline consultant based in New York, says Emirates threatens

established carriers in the one market where these airlines are making money:

long-haul international trips. “There’s nothing better than a highly motivated

cowboy airline in a small country,” he says.

LIKE so much in Dubai, Emirates started out small but dreamed big. It was

established after Gulf Air, a regional airline then owned by Bahrain, Qatar,

Oman and the United Arab Emirates, reduced its service to Dubai in the early

1980s. Feeling shunned, Dubai’s rulers created their own carrier.

The government provided $10 million in capital. Emirates began flying with two

planes, a Boeing 737 and an Airbus A300, both leased from Pakistan

International Airlines. The new carrier was run by a band of British aviation

executives, including Mr. Clark, who had been at Gulf Air, and Maurice

Flanagan, a former top executive at British Airways.

Much of Emirates’ early traffic connected Dubai with cities throughout the

Indian subcontinent and a few European destinations, including London.

By the 1990s, however, new airplanes with longer reach, like Boeing 777s,

enabled Emirates to establish Dubai as a world hub. Sheikh Ahmed, the

company’s chairman, boldly proclaimed that Dubai would be “at the center of

the new Silk Road between East and West.”

Rivals express grudging admiration for Emirates. “Emirates recognized the

value of a global hub,” says British Airways’ chairman, Willie Walsh.

And Mr. Clark says: “If you want to go from Africa to Asia, or from South

America to China, the straight line is through the Middle East.”

But geography is only one element in the Emirates formula. Government

support has also been essential. From the start, Emirates was seen as integral


to the government’s ambitions of building Dubai into a commercial, financial

and tourism center in the Persian Gulf.

Sheik Ahmed plays a role in almost every aspect of air travel into and out of

Dubai. Indeed, he is known as “Mr. Aviation.” He is the chairman of FlyDubai,

the city-state’s budget airline, and of Dnata, the airport’s ground handling

company. He is also the president of the Dubai Civil Aviation Authority, which

oversees the industry. And he happens to be the uncle of Dubai’s current ruler,

Sheik Mohammed bin Rashid al-Maktoum.

Critics say this tight relationship among Emirates, airport authorities and

regulators gives the airline an unfair advantage. Emirates, these critics say,

essentially receives government subsidies, in the form of low tax rates and

shiny new facilities like Terminal 3, where another expansion is under way to

accommodate Emirates’ growing fleet of A380s.

Emirates disputes this characterization. The airline publishes audited financial

reports, and its executives say Emirates gets no government subsidies.

“Emirates works like a corporation,” says Ram C. Menen, who runs the

company’s global cargo operations. “We’re a business unit of Dubai Inc. And

it’s a happy relationship.”

The airline, however, does have undeniable advantages over competitors,

including lower labor costs. While Emirates pays its pilots international wages,

it hires inexpensive workers, usually from the Indian subcontinent, for tasks

like handling baggage or working in catering services.

Nathan Zielke, a transportation specialist at the consulting company Arthur D. Little, estimates that Emirates’ overall costs, including those for labor, are 30 percent lower than those of its rivals

“It’s extremely difficult for other airlines to close that gap,” Mr. Zielke says.

“Because their costs are so much lower, Middle East carriers will be the most

profitable carriers with the lowest prices in the market.”

ON the road to Abu Dhabi, about an hour’s drive from downtown Dubai, city

planners want to build the world’s biggest airport. It would have five parallel


runways and be able to accommodate 160 million passengers a year.

(Hartsfield-Jackson Atlanta International Airport now handles 90 million

passengers a year, more than any other airport in the world.) The estimated

cost of this giant is more than $34 billion.

Although Dubai has shaken off the worst of its financial crisis, the shock has

nonetheless stalled this grand plan for now.

Yet Emirates has proved remarkably resilient to recent financial shocks — the

economic slowdown did not hamper its growth. The question now is whether

Emirates can sustain its momentum without jeopardizing quality and service.

Each week, as many as 90 new trainees file through the company’s training

academy, a modern building near the Tennis Club, a popular Dubai spot among

the expatriate community, close to the historical center of the city.

Its growing fleet of A380s means that the airline will need to hire an additional

11,000 flight attendants in coming years, nearly doubling its current roster of

12,000. Over eight weeks of training, the new employees — most in their early

20s and speaking some English — learn all the ropes of the job. Life-size mock-

ups of airline cabins mounted on hydraulic legs are used to simulate safety

drills. Elsewhere, the trainees are taught how to serve meals or use the first-aid

kits.

Emirates executives say they recognize the challenges ahead. “We don’t forget

who we are, and what we do,” says Mr. Clark, the president. “We’re a bus

company. We have seats, we have people, and we recognize what it is that

makes life more comfortable. If we hit the spot, passengers come back.”

Emirates has emerged as a formidable player on the international travel scene.

Its innovations, including private suites in first class and individual

entertainment screens in the coach cabin, have been copied by many other

airlines; its emphasis on quality has forced traditional legacy carriers to pay

more attention to their own products.


So far, Emirates has benefited from the weakness of some airlines in China,

India and African nations as it establishes its presence in those and other

developing countries.

But that advantage may one day come to an end. In India, the advent of a new

generation of quality carriers, including Kingfisher Airlines and Jet Airways,

now offers some appealing domestic alternatives for India’s vast expatriate

population, long one of Emirates’ growth engines.

The recent tensions in Egypt, Yemen and Jordan have also hurt Emirates. Mr.

Clark said last week that traffic to many of these destinations had a “pretty

resounding” drop as tourists postponed holiday plans.

Another threat is on the horizon. As more airlines start using long-range planes

now in development, like the Boeing 787 Dreamliner and the Airbus A350, they

will be able to fly more people nonstop to most any other place in the world.

That could pose a problem for the Emirates business model: its reliance on the

Dubai hub.

“One survey that is consistent is that people simply do not like to change

planes,” says Richard L. Aboulafia, an aviation consultant at the Teal Group, a

consulting firm in Fairfax, Va. But, he added, “Underestimating the competition

is a time-honored feature of the airline business. Is it confidence or is it hubris?

It is only hubris if you lose.”

Documents

Emirates case report