What do You think about Emirates Expansion Plan?
Emirates Airline of the United Arab Emirates are one of the largest international and fastest growing airlines in the world. Last year, they ordered 120 Airbus A350XWBs. They also have 55 Airbus A380 Super Jumbo aircraft on order, and Tim Clark, the CEO of Emirates, said he would double that order if Dubai Airport could handle it. Is this growth sustainable? Do you think that all of those aircraft will be delivered? The oil prices are high right now and is Emirates growing a rate that will cripple the company? I think that part of the reason that they are growing so fast is because that they have the advantage of having an oil state backing the company. I do not think that the number of passengers they believe they will carry will ever materialize. They order plane after plane, and do no seem to evaluate the cause. By ordering these large amounts of aircraft, they are being smart with Boeing, but I believe 50% of the aircraft ordered might never be delivered. Sure Emirates Airline is raking in extra profits, but compared to Singapore Airlines, which has a smaller fleet of aircraft, they make nearly the same. Why? Emirates, which has a much larger fleet should be able to earn more, right? Yeah, but not by much. Emirates is depending on tourism to rise, but as ticket prices rise, more and more people are staying home and not traveling by plane. I hope the numbers Emirates needs will materialize, but it seems very unlikely that the Middle East can generate that much tourism. What do you think? Please Comment
ken said,
May 18, 2008 at 10:34 pm
It would appear that Emirates may have put too many eggs in one basket, With Airbus experiencing so many problems and delays with not only the A380 but the A350 as well, and if history is a good indicator Emirates will be lucky to get its final A380 by 2020, and who knows what fuel will cost then.
Of course Emirates is not alone in the region and have now and in the future tremendous competition from other Gulf carriers. If the region and Dubai in particular are trying to establish themselves as tourist destinations they have a lot to do.
The biggest problem they will face is tremendous overcapacity and will find it very difficult to fill seats. In attempting to Establish the gulf region as an aviation hub, Emirates and other carriers will have invested millions if not billions in infrastructure to support their efforts and their attempts may be for nothing if aviation takes the inevitable step and goes to direct travel routes and eliminates the hub system.
When Airbus announced the A380 oil was about $30.00 a barrel U.S. and seat costs were manageable, and airlines could afford to fly with load factors under 75% but that certainly is not the case now and Emirates will have a very difficult time making a profit unless they cram the A380’s up to the load limit.
I would think that as soon as Boeing gets their first 787 in the air and into revenue service you’ll see an explosion of orders from all across the aviation landscape, airlines have to modernize and every percentage of operational savings gained through weight reduction and the resulting fuel saving will save them millions of dollars.
Already many of the major carriers have begun flying city pair routes getting passengers directly to their destinations with fuller loads and less cost.
The next five years is going to be very tough on airlines and many will fail, the strong will survive and consolidate and many routes will be allowed to die on the vine.