The Emirates Group

views updated May 21 2018

The Emirates Group

Airline Centre
P.O. Box 686
Dubai
United Arab Emirates
Telephone: 971-4-2144444
Web site: http://www.emirates.com

State-Owned Company
Incorporated: 1985
Employees: 6,500
Sales: AED 5.59 billion ($1.52 billion) (2000)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 488119 Other Airport Operations; 488999 All Other Support Activities for Transportation; 56152 Tour Operators

The Emirates Group is composed of airport services provider DNATA (the Dubai National Air Transport Association) and Emirates Airlines. Owned by the government of Dubai and based at the busiest airport in the Middle East, Emirates has flourished under the sheikdom’s “wide open skies” policy, in spite of the restrictions placed on it by other countries. The airline, renowned for its luxurious in-flight service, was unique among long-haul airlines in that it had not joined a global alliance such as the Star Alliance or oneworld by the beginning of the new millennium.

Origins

Dubai, a fishing village at the southern end of the Arabian Gulf, has grown to become one of the leading trade centers of the Middle East, fueled at first by pearls, then petroleum. The Beni Yas tribe assumed control of the town around 1830. The Maktoum family led the tribe throughout the 19th and 20th centuries. Dubai became one of seven sheikdoms in the United Arab Emirates, which was formed in 1970.

As the British pulled out of Dubai in the late 1950s, Sheikh Saeed Al Maktoum decreed an open seas, open skies, and open trade policy, to develop the country into a regional crossroads for trade and tourism. He also required all government agencies to make a profit. The country was aiming to eliminate its dependence on its finite oil reserves within 50 years.

The Dubai National Air Transport Association (DNATA) was formed in 1959. By the mid-1980s, DNATA had grown to 2,500 employees. In addition to providing support services at Dubai Airport, the company served as sales agent for 26 airlines. Dubai had been used as a stopover on routes between Europe and the Far East since the days of Imperial Airways (precursor to British Airways), which landed its flying boats there en route to Australia. Its open skies policies kept its airport among the busiest in the region.

Gulf Air began to cut back its service to Dubai in the mid-1980s. As a result, Emirates Airlines was conceived in March 1985 with backing from Dubai’s royal family, whose Dubai Air Wing provided two of the airline’s first aircraft, used Boeing 727s. (An Airbus A300 and Boeing 737 were two others.) Because of Dubai’s unique political structure, wrote Douglas Nelms in Air Transport World, Emirates could be described as both government-owned and privately held, though most considered it state-owned. It was required to operate independent of government subsidies, however, apart from $10 million in start-up capital.

Maurice Flanagan was named managing director of the new airline. Formerly of the Royal Air Force, British Airways, and Gulf Air, Flanagan had been seconded to DNATA in 1978 on a two-year assignment as assistant general sales manager.

Chairman was Sheikh Ahmed bin Saeed Al Maktoum, nephew of the ruler of Dubai. Only 27 years old in 1985, he had graduated from the University of Colorado just four years earlier (his degree was in political science and economics). Sheik Ahmed also became chairman of Dubai Civil Aviation and DNATA itself. Although he lacked any direct experience in the airline industry, Sheikh Ahmed embraced his new role, learning to fly a variety of aircraft along the way. As Lisa Coleman duly noted in Chief Executive, he was indeed experienced in one area that would be the new airline’s defining trait: luxury. From the beginning, Emirates boasted a tradition of providing the best creature comforts available at 40,000 feet.

The first flight, Dubai-Karachi on October 25, 1985, was a Pakistani connection in more ways than one. The airline leased the aircraft, an Airbus 300, from Pakistan International Airlines. Bombay and Delhi were the other two earliest destinations. From the beginning, Emirates flights carried both passengers and cargo.

Emirates was profitable within nine months. During its first year, it carried 260,000 passengers and 10,000 tons of freight. Gulf Air, part owned by the much more wealthy neighboring emirate Abu Dhabi, had previously dominated air traffic in the region. Its profits fell more than 30 percent during the first year of its new rival’s operations, however, prompting Gulf Air to drop its privatization plans. The next year, Gulf Air posted a loss.

In its second year, Emirates also posted a loss, before setting out on decades of profitable growth. One reason for the success of Emirates was its aggressive marketing. Another was the high level of in-flight service in its new Airbus aircraft, which it outfitted with generously spaced seating.

In 1986, Colombo, Dhaka, Amman, and Cairo were added to the route network. Emirates launched daily nonstop service to London (Gatwick) on July 6, 1987 with two new Airbus A310s. This complemented the overnight flights British Caledonian was sending to and from Dubai. Other destinations added in 1987 were Frankfurt via Istanbul, and Male (Maldive Islands). Emirates lacked a regional feeder network since most of its neighboring countries were shareholders in rival Gulf Air.

This impressive early growth came as the region was experiencing a business downturn, with the Gulf War a contributing factor, and the subsequent laying off of expatriate workers—both bad news for the air travel industry. In its second year, competitors accused Emirates of starting a price war. The airline countered that its lower fares were stimulating traffic, not stealing it from its rivals. By the end of 1987, Emirates was serving 11 destinations.

“The Finest in the Sky” in the 1990s

Emirates Sky Cargo, which operated as a separate entity, carried 25,000 tons of freight in fiscal 1989. In the early 1990s, a number of Asian firms began using Dubai as a warehousing center for European deliveries. Emirates expanded its route network into the Far East in 1990, serving Bangkok, Manila, and Singapore. Hong Kong was added in 1991. Emirates added Paris, Rome, Zurich, and Jakarta in the summer of 1992.

About the same time as it was extending its reach into Asia, Emirates was courting long-haul business travelers. Calling itself “the finest in the sky,” the airline toned down its Arabic identity for a more “corporate” feel, positioning itself as a competitor to global carriers such as British Airways and Singapore Airlines.

Emirates was one of the world’s fastest growing airlines. Revenues increased by about $100 million a year, approaching $500 million in fiscal 1993. It carried 68,000 tons of cargo and 1.6 million passengers that year. The Gulf War, ironically, had benefited Emirates by keeping other airlines out of the area. Emirates was the only airline to continue flying in the last ten days of the war, although it had to cover increased insurance premiums and higher fuel costs (flying around the war zone added an extra ten hours to flights).

A partnership agreement with US Airlines entered in the fall of 1993 allowed Emirates to offer around-the-world service. It had previously inked cooperation agreements with Cyprus Airways.

By 1994, 60 international airlines were flying to Dubai. Emirates was connecting 32 destinations with its 15 aircraft. It was the sixth largest of eight Middle East carriers. Despite its small size, the airline had accumulated numerous awards by lavishing attention and money on passenger and cargo service. It was the first airline to install personal video systems in all seats, for example. Flight attendants celebrated special occasions with in-flight cakes and Polaroid cameras. Passengers flying first class were served six-course meals on Royal Doulton china.

Emirates took in $643.4 million in the fiscal year ending March 30, 1994. Income increased more than eightfold, to $24.4 million. The young airline had 4,000 employees and carried two million passengers a year between 34 destinations with a fleet of 18 Airbus aircraft.

Seven state-of-the-art Boeing 777s worth $1 billion were on order since 1992 to satisfy long-range ambitions. They began to arrive in the spring of 1996. One of the planes was used on a new service to Australia (Melbourne) via Singapore. Emirates placed a large order with Airbus later in the year. In spite of the large capital expenditures, the Dubai government had laid out only $50 million since the airline’s inception.

A total of 92 air carriers were serving Dubai in the mid-1990s. Emirates was able to flourish, however, in spite of restricted markets abroad and intense competition at home. The Dubai government had been promoting the country as an escape from European winters with great success, much to the benefit of Emirates. (Dubai’s summertime weather was grueling, with Fahrenheit temperatures and relative humidity readings in the 100s.) Abroad, its route network was expanding in the Pacific and Africa.

In 1997, Emirates was flying a dedicated freighter to Amsterdam, a point not on its network of passenger routes, in cooperation with KLM Royal Dutch Airlines. It carried about three million passengers during the year. The growing cargo business accounted for 16 percent of the airline’s revenues.

Company Perspectives:

We have prided ourselves on our ability to stand alone without needing subsidies or being a member of a major alliance, in order to tailor our services to our own customers’ needs.

Emirates opened a unique, $65 million training center in January 1997. It was built in the shape of an airplane. The airline was then able to provide advanced simulator training for its crew members—who represented 50 different nationalities—and flight and maintenance personnel from around the world. In the fall of 1997, a new air-conditioned maintenance center allowed the group (which consisted of Emirates Airlines and DNATA) to solicit third-party contracts in that capacity as well.

A record group profit of AED 371 million was achieved in 1997–98. Emirates executives planned a slowdown in the airline’s growth in the late 1990s to stabilize its expansive route network.

In May 1998, Emirates paid the Sri Lankan government $70 million for a 40 percent stake in Air Lanka. Emirates received almost full management rights as the Sri Lankan flag carrier was in debt and operating at a loss and had needed new capital to upgrade its fleet.

A new, lighthearted advertising campaign launched in January 1999 enjoined travelers to “Be good to yourself. Fly Emirates.” One ad aired in Britain featured a business class passenger calling his dog with the on-board phone.

Emirates signed on in May 2000 as the first launch customer for the Airbus A3XX, designed to be the largest civil aircraft ever built. Emirates justified purchasing the 481- to 656-passenger super jumbo to maximize its use of scarce takeoff and landing slots at crowded airports like London’s Heathrow. The airline planned to order up to a dozen of the planes, with the first to be delivered in 2006.

Toward the end of 2000, Emirates was planning to start ultra-long-haul service to the East Coast and West Coast of the United States as well as nonstop flights to Australia and Argentina. Traffic continued to grow at an impressive clip (20 percent) in 1999–2000, and Emirates executives planned to sustain that.

Principal Divisions

Emirates; Dubai National Air Transport Association (DNATA).

Principal Competitors

Gulf Air; British Airways plc.

Key Dates:

1959:: Dubai National Air Transport Association (DNATA) is formed.
1985:: Dubai forms its own airline: Emirates.
1993:: Emirates forms partnership with United Airlines.
1997:: New training and maintenance centers open.
1998:: Emirates buys a 40 percent stake in Air Lanka.

The Emirates Group

views updated May 29 2018

The Emirates Group

Airline Centre
P.O. Box 686
Dubai,
United Arab Emirates
Telephone: (+971-4) 214-4444
Fax: (+971-4) 295-2001
Web site: http://www.emirates.com

State-Owned Company
Incorporated: 1985
Employees: 7,067
Sales: AED 24.3 billion ($6.6 billion) (2006)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 488119 Other Airport Operations; 488999 All Other Support Activities for Transportation; 721110 Hotels (Except Casino Hotels) and Motels

The Emirates Group is composed of Emirates Airlines, airport services provider Dnata (the Dubai National Air Transport Association), other transportation-related activities, and a hotel group. Owned by the government of Dubai, Emirates has flourished under the sheikdom's "wide open skies" policy, which has brought more than 100 foreign airlines to Dubai's efficient airport, the busiest in the Middle East.

The airline, simply known as Emirates, is renowned for luxurious in-flight service as well as consistently profitable growth. It is unique among long-haul airlines in its resistance to joining a global alliance such as the Star Alliance or Oneworld. Emirates does, however, participate in code-sharing arrangements with several carriers and has a minority holding in Sri Lankan Airlines.

ORIGINS

Dubai, established as a fishing village at the southern end of the Arabian Gulf, has grown to become one of the leading trade centers of the Middle East, fueled at first by pearls, then petroleum. The Beni Yas tribe assumed control of the town around 1830. The Maktoum family led the tribe throughout the 19th and 20th centuries. Dubai became one of seven sheikdoms in the United Arab Emirates, which was formed in 1970.

The Dubai National Air Transport Association (Dnata) was formed in 1959. By the mid-1980s, Dnata had grown to 2,500 employees. In addition to providing support services at Dubai Airport, the company served as sales agent for 26 airlines. Dubai had been used as a stopover on routes between Europe and the Far East since the days of Imperial Airways (precursor to British Airways), which landed its flying boats there en route to Australia. Its open skies policies kept its airport among the busiest in the region.

Gulf Air began to cut back its service to Dubai in the mid-1980s. As a result, Emirates Airlines was conceived in March 1985 with backing from Dubai's royal family, whose Dubai Air Wing provided two of the airline's first aircraft, used Boeing 727s. (An Airbus A300 and Boeing 737 were two others.) Because of Dubai's unique political structure, wrote Douglas Nelms in Air Transport World, Emirates could be described as both government-owned and privately held, though most considered it state-owned. It was required to operate independent of government subsidies, however, apart from $10 million in start-up capital.

Maurice Flanagan was named managing director of the new airline. Formerly of the Royal Air Force, British Airways, and Gulf Air, Flanagan had been seconded to Dnata in 1978 on a two-year assignment as assistant general sales manager. Chairman was Sheikh Ahmed bin Saeed Al Maktoum, nephew of the ruler of Dubai. Only 27 years old in 1985, he had graduated from the University of Colorado just four years earlier (his degree was in political science and economics). Sheik Ahmed also became chairman of Dubai Civil Aviation and Dnata itself. Although he lacked any direct experience in the airline industry, Sheikh Ahmed embraced his new role, learning to fly a variety of aircraft along the way. As Lisa Coleman duly noted in Chief Executive, he was indeed experienced in one area that would be the new airline's defining trait: luxury. From the beginning, Emirates boasted a tradition of providing the best creature comforts available at 40,000 feet.

FIRST FLIGHT IN 1985

The first flight, Dubai to Karachi on October 25, 1985, was a Pakistani connection in more ways than one. Emirates had leased the aircraft, an Airbus 300, from Pakistan International Airlines. Bombay and Delhi were the other two earliest destinations. From the beginning, Emirates flights carried both passengers and cargo.

Emirates was profitable within nine months. During its first year, it carried 260,000 passengers and 10,000 tons of freight. Gulf Air, part owned by the much wealthier neighboring emirate Abu Dhabi, had previously dominated air traffic in the region. Gulf Air's profits fell more than 30 percent during the first year of its new rival's operations, however, prompting it to drop its privatization plans. The next year, Gulf Air posted a loss.

In 1986, Colombo, Dhaka, Amman, and Cairo were added to the route network. Emirates launched daily nonstop service to London (Gatwick) on July 6, 1987, with two new Airbus A310s. This complemented the overnight flights British Caledonian was sending to and from Dubai. Other destinations added in 1987 were Frankfurt via Istanbul, and Male (Maldive Islands). Emirates lacked a regional feeder network since most of its neighboring countries were shareholders in rival Gulf Air.

This impressive early growth came as the region was experiencing a business downturn, with the Gulf War a contributing factor, as well as the subsequent layoff of expatriate workers—both bad news for the air travel industry. In its second year, competitors accused Emirates of starting a price war. The airline countered that its lower fares were stimulating traffic, not stealing it from its rivals. By the end of 1987, Emirates was serving 11 destinations.

Emirates Sky Cargo, which operated as a separate entity, carried 25,000 tons of freight in 1989. In the early 1990s, a number of Asian firms began using Dubai as a warehousing center for European deliveries. Emirates expanded its route network into the Far East in 1990, serving Bangkok, Manila, and Singapore. Hong Kong was added in 1991. Emirates added Paris, Rome, Zurich, and Jakarta in the summer of 1992.

About the same time as it was extending its reach into Asia, Emirates was courting long-haul business travelers. Calling itself "the finest in the sky," the airline toned down its Arabic identity for a more "corporate" feel, positioning itself as a competitor to global carriers such as British Airways and Singapore Airlines.

COMPANY PERSPECTIVES

We have never copied other airlines, nor imitated any business model, or joined any airline alliance. We have concentrated on trying to provide a superb service for our passengers and cargo customers.

Emirates was one of the world's fastest-growing airlines. Revenues increased by about $100 million a year, approaching $500 million in 1993. It carried 68,000 tons of cargo and 1.6 million passengers that year. The Gulf War, ironically, had benefited Emirates by keeping other airlines out of the area. Emirates was the only airline to continue flying in the last ten days of the war, although it had to cover increased insurance premiums and higher fuel costs (flying around the war zone added an extra ten hours to flights).

A partnership agreement with US Airways entered in the fall of 1993 allowed Emirates to offer around-the-world service. It had previously inked cooperation agreements with Cyprus Airways.

By 1994, 60 international airlines were flying to Dubai. Emirates was connecting 32 destinations with its 15 aircraft. It was the sixth largest of eight Middle East carriers. Despite its small size, the airline had accumulated numerous awards by lavishing attention and money on passengers and cargo customers. It was the first airline to install personal video systems in all seats, for example. Flight attendants celebrated special occasions with in-flight cakes and Polaroid cameras. Passengers flying first class were served six-course meals on Royal Doulton china.

Seven state-of-the-art Boeing 777s worth $1 billion were ordered in 1992 to satisfy long-range ambitions. They began to arrive in the spring of 1996. One of the planes was used on a new service to Australia (Melbourne) via Singapore. Emirates placed a large order with Airbus later in the year. In spite of the large capital expenditures, the Dubai government had laid out only $50 million since the airline's inception.

A total of 92 air carriers were serving Dubai in themid-1990s. Emirates was able to flourish, however, in spite of restricted markets abroad and intense competition at home. The Dubai government had been promoting the country as an escape from European winters with great success, much to the benefit of Emirates. (Dubai's summertime weather was grueling, with Fahrenheit temperatures and relative humidity readings in the 100s.) Abroad, its route network was expanding in the Pacific and Africa.

TRAINING AND MAINTENANCE CENTERS OPENING IN 1997

Emirates opened a unique, $65 million training center in January 1997. It was built in the shape of an airplane. The airline was then able to provide advanced simulator training for its crew members, who represented 50 different nationalities, and flight and maintenance personnel from around the world. In the fall of 1997, a new air-conditioned maintenance center allowed the group (which consisted of Emirates Airlines and Dnata) to solicit third-party contracts in that capacity as well.

A record group profit of AED 371 million was achieved in 1997. Emirates executives planned a slowdown in the airline's growth in the late 1990s to stabilize its expansive route network.

A new, lighthearted advertising campaign launched in January 1999 enjoined travelers to "Be good to yourself. Fly Emirates." One ad aired in Britain featured a business class passenger calling his dog with the onboard phone.

Emirates signed on in May 2000 as the first launch customer for the Airbus A380, designed to be the largest passenger aircraft ever built. Emirates justified purchasing the 481- to 656-passenger super jumbo to maximize its use of scarce takeoff and landing slots at crowded airports including London's Heathrow. The airline planned to order up to a dozen of the planes, with the first to be delivered in 2006.

KEY DATES

1959:: Dubai National Air Transport Association (Dnata) is formed.
1985:: Dubai forms its own airline: Emirates.
1997:: New training and maintenance centers open.
1998:: Emirates buys a 40 percent stake in Air Lanka.
2001:: About six million people fly Emirates; fleet includes 36 aircraft.
2003:: Emirates announces $19 billion Airbus/Boeing order.
2004:: Service to the United States is launched via New York.
2005:: Emirates orders $10 Billion worth of new Boeings.

DUBAI BECOMING A GLOBAL AVIATION CENTER AFTER 2000

Nearly six million passengers flew Emirates in 2000. The airline also carried 335,000 tons of cargo. It had a fleet of about three dozen aircraft. Revenues were AED 6.9 billion. Overall, the group had more than 14,500 employees, about 8,700 of them at the airline and 5,700 at Dnata.

Because it was not yet heavily involved in North Atlantic traffic, Emirates was minimally affected by the aftermath of the September 11, 2001, terrorist attacks on the United States, an official told Air Transport World. Service to the United States debuted in June 2004 with a 14-hour nonstop flight to New York. The opening of additional routes to the United States would be delayed by high fuel costs.

Compared to its larger neighbor, Abu Dhabi, Dubai itself produced relatively little oil. Emirates emphasized that it received neither support from oil revenues nor discounts on fuel. The airline's sophisticated hedging operation was not enough to shield Emirates from runaway fuel prices in 2006. Nevertheless, the group was able to post net income of $762 million (AED 2.5 billion) on revenues of $6.6 billion (AED 24.5 billion), both records. Emirates continued to grow 20 percent or more a year, as it had done since it was founded.

Emirates announced a colossal order for 71 new Boeing and Airbus aircraft in June 2003. Valued at $19 billion, it was called the world's largest aircraft order to date. The group's ambition was displayed again in a $10 billion (AED 36 billion) order for 42 new Boeing 777s placed in 2005. In April 2006, the airline had 92 aircraft, with another 123 on order. By 2012 it expected to have grown its fleet to 150 planes. The airline was aiming to increase its 50 percent share of flights going through Dubai to 70 percent by 2010. These moves would make Emirates one of the very largest long-haul airlines in the world.

Emirates took the high road following a controversial episode involving another Dubai-owned transportation business, reported the New York Times. DP World acquired a half dozen U.S. ports but was obliged to sell them after U.S. politicians raised "security concerns." As a fellow state-owned company, the airline could have extracted royal revenge by diverting billions of dollars worth of aircraft orders from Boeing to its European rival Airbus. Instead, Emirates chose to ignore the issue in favor of increasing ties with the United States. Plans for a nonstop service to California were in the works.

The latest generation of ultra-long-range aircraft made it possible to connect most destinations in the world via a stop in Dubai. However, as an analyst told the New York Times, these planes made it possible for others to compete with nonstop service to the same points.

Dubai itself, already served by more than 100 airlines, continued to attract new competitors such as Virgin Atlantic. The country's economy was growing even faster than that of China, and Dubai was transitioning from a regional hub into a major world commercial center.

Emirates Group's ambitions were not confined to the skies. It was also preparing to develop a global hotel chain. It planned to open a lavish 70-story, $270 million hotel on the Dubai coast in 2007. Another property was being developed in the Blue Mountains of Australia.