Emirates has to adapt to slower growth while looking out for new opportunities in a changing market, long-serving president Tim Clark told fvw in an interview.
Over the past three decades the Dubai-based carrier has grown into the world’s biggest long-haul carrier with a gigantic fleet of 111 A380s and 157 B777s. But now it is now facing a hard landing. In the last few years, the airline’s turnover has risen steadily to more than €24 billion thanks to rising passenger numbers but its profits plummeted to just €215 million in the last financial year due to higher operating costs.
In response, Emirates is starting to cut back and has reduced its original order for 162 mega A380s to 123, with the last one due for delivery in 2021. Instead, the airline wants to operate more efficient long-haul jets such as A330-900ss, A350-900s and B777s.
In an interview with fvw, Tim Clark, who helped found Emirates back in 1985 and has run the carrier since 2003, discussed how the market is changing and admitted the carrier has some “growth pains” at present.
You helped to build up Emirates in 1985 and make the airline into the world's largest long-haul carrier with 268 aircraft. How much more should Emirates grow?
Tim Clark: It's more difficult today than it was in the past to look five years ahead. Wherever you look, there are problems: in trade between the USA and China, but also elsewhere in the world. In addition, the price of oil is difficult to calculate, and concerns about climate change are growing. In short, there are a number of short, medium and long-term events that affect demand. We and other industry players have to deal with them.
That sounds as if you are expecting demand to fall.
No, I am not assuming that overall demand will decline. But growth will slow down. We should probably not assume growth rates such as 4% in the next four or five years. The current challenges will slow our growth by about two or three percentage points.
After last year's slump in profits, how do you assess Emirates' current economic situation?
We are performing well, we had a good summer and therefore we are well above our original plans for the period of April to September 2019. But of course we have problems with Hong Kong and elsewhere. But overall demand is still very high, ironically especially with regard to Great Britain. The market accounts for 56% of our European business, although we only have 26% of our production there. This is our strongest and most profitable market anywhere, despite the Brexit discussions. That's why we send up to 17 Airbus A380s to Great Britain every day.
Your A380 plans have changed: instead of the 162 you originally ordered, you now only want to buy 123 planes. How many do you really need?
We currently have 110 in our fleet, three are on the ground, one machine is deactivated and serves as a spare parts store. 13 are still awaiting delivery. Do we need that many? I think the fleet will settle down at 115 aircraft in two or three years’ time, and perhaps we'll even go down to 100.
You are already flying to 157 destinations worldwide. How and where do you want to further develop your route network?
We still see many opportunities in India. In Germany, too, an increase in capacity would be desirable for us, but unfortunately we are still limited to four departure airports because there is no open sky agreement. We also want to do more in Africa.
To what extent does the low-cost airline Fly Dubai help?
It helps us a lot. It makes sense for us to offer many of the destinations, especially in Africa, with Fly Dubai via a codeshare agreement. It would be even better if Boeing could get the B737max, which Fly Dubai uses, back into the air. Many of our plans depend on the aircraft and engine manufacturers who cannot deliver. We do in fact have some growth pains.
Will we see more routes like the Dubai-Milan-New York model in the future?
On the North Atlantic, we take advantage of our opportunities wherever something opens up. Routes like Milan - New York won't turn our business model around now, but where it makes sense, we'll take a look.
You're about to turn 70, and you've been doing this job for almost 35 years now. Aren’t you starting to think about retirement?
For me it's almost like a hobby, I still enjoy it and I can still keep up intellectually. When the time is ripe, it’s ripe. But I'll keep going until then. But I can take away one concern from you: When I leave, there are enough good managers in our ranks who could replace me.