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| Emirates on shopping spree, rattles rivals |
| Bloomberg / London/ Paris Jun 24, 2010, 00:41 IST |
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Emirates, the biggest international airline, is rattling rivals in Europe and Asia with a growth splurge that may be as game-changing for long-haul carriers as the expansion of Ryanair Holdings and Southwest Airlines.
The 25-year-old company is building up a fleet of 90 Airbus SAS A380 aircraft with 45,000 seats and operating costs the manufacturer says are 12 per cent lower than Boeing’s latest 747. That poses a threat to European carriers that specialise in the same long-distance transfer traffic, British Airways Chief Executive Office Willie Walsh said in an interview.
Emirates’ latest order for 32 A380s worth $11 billion, announced this month, will give it 70 more superjumbos than any other airline, funnelling price-sensitive passengers through its Dubai base in a challenge to network carriers including Deutsche Lufthansa AG, Air France-KLM Group and Singapore Airlines. Competitors say the company is benefiting from government ownership and that they can’t compete with its purchasing power.
“It’s a miracle that Emirates already has more inter-continental seats than Air France and British Airways combined,” said Cologne, Germany-based Lufthansa CEO Wolfgang Mayrhuber. “It took us 40 years to get 30 747s in the air in one of the biggest global economies, so one must assume that this is an investment for the world,” he added.
Emirates ranked only 24th among international airlines as recently as 2000, putting it on a par with Sabena SA, the state-owned Belgian carrier that went bust a year later.
In the intervening period the Gulf carrier has achieved a sixfold increase in traffic — or passengers carried multiplied by the distance flown — overtaking Lufthansa last year to become the biggest carrier on international flights. British Airways, ranked top in 2000, has suffered a 5 per cent drop and stands fourth according to the International Air Transport Association, which counts Air France and KLM as two airlines.
“We always planned to grow, we were just never able to put our finger on how quickly,” Maurice Flanagan, the founding CEO at Emirates in 1985 and currently executive chairman, said in an interview. “Now we’re short of capacity all the time.”
Rivals should follow the Emirates example in buying more large planes to reduce expenses per head, the executive said.
“I can’t understand why other airlines have been so slow to pick up on the A380,” Flanagan said. “The economics are fantastic. It has given us a huge advantage because the seat-mile costs are much lower than on any other aircraft,” he added.
Emirates, which reported net income of $964 million for the year through March 31, has reached top spot while remaining outside the three main airline groupings, opting instead to build Dubai into a transfer hub to compete with alliance bases in London, Frankfurt, Amsterdam, Paris, Singapore and Hong Kong.
Chris Tarry, an independent analyst who has followed the airline industry for two decades, said the model is largely the result of improved jetliner range and Dubai’s location midway between Europe and Asia.
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