Runway work in Dubai forces Emirates to scale back expansion
Emirates has seen significant double-digit growth each year since it started in 1985, but this year promises to be more muted due to infrastructure work at its main hub.
The airline is being forced to pause its growth strategy and park 20 aircraft for 80 days—May 6-July 20—because of temporary capacity restrictions at. The number of movements possible will be limited by much-needed resurfacing work that will put the airport's two parallel runways out of service alternately: The southern runway will be closed May 1-20, and the northern runway May 21-July 20.
Emirates Chief Commercial Officer Thierry Antinori says the airline will ground mainlyand as well as some , but not . Its biggest aircraft are undergoing a wing-modification program needed to make permanent fixes to wing-rib feet and ribs to prevent cracking. That measure takes several aircraft out of service at any given time, too. Antinori says Emirates will continue to serve all of its destinations during the period.
The runway work will markedly curb the airline's expansion, however. While Antinori still expects around 10% growth in the 2014 financial year starting April 1, it would have grown 13% without the operational limitations. That compares to 35% growth over the past two years and the introduction of 20 new destinations.
The runway shutdown is not the only operational and commercial challenge Emirates is facing. Antinori says the latest alliance withis working well, but he points out that some of its competitors are “not always rational,” observing “big capacity increases, fares dropping and some overcapacity” among them. Although Antinori does not specify which carriers he has in mind, they are likely and , both of which have put more capacity into the Australian market. Nonetheless, Antinori says Australia still offers “some of the most profitable routes for us.” Elsewhere, Emirates is facing currency weakness in emerging markets such as India.
The carrier nevertheless plans to introduce 5-8 more cities this year. Since January, Emirates launched services to Boston; Taipei, Taiwan; and Kiev, Ukraine. Flights to Chicago; Kanu, Hawaii; and Abuja, Nigeria, will soon follow.
Emirates operates 45 A380s and has 140 of the type on order; 13 are to be phased in between now and April 2015, and the 50th aircraft is scheduled to arrive this May. “The [A380's] load factor is 2-3% higher than the rest of the fleet and the yield is better,” Antinori says. Airbus likes to attribute the yield to more passengers being prepared to fly in the A380, but in Emirates' case, it is linked to its relatively large first- and business-class cabins—seating 14 and 76 passengers, respectively—that shift the mix in favor of premium travel.
Unlike many other carriers, Emirates has no plans to give up first class, although it does operate two-class aircraft and is considering two-class A380s that would seat around 650 passengers for some medium-/long-haul and lower-yield markets. “We will stick with first. We need it,” Antinori says, noting that Emirates operates some very-long-haul flights, such as Dubai-Los Angeles (more than 15 hr.), and its first class is not only a brand promoter but also an upgrade option for frequent business travelers.
There are no plans to introduce a premium economy cabin, which many of Emirates' rivals offer. “Our economy is already premium,” Antinori quips. The decision to go to an 11-abreast configuration on the A380s is still under consideration, he says.
The airline has been operating several different business-class versions across the various fleet types, but Emirates' inflight product is not as heterogeneous “as some think,” Antinori asserts. It should become more homogeneous as A340-500s exit the fleet soon and with its last four A340-300s operating mainly to India and on short-haul services within the Persian Gulf and Middle East region. Emirates also has pulled from that market its A330s, formerly the workhorse for its European network, flying them only to Kiev, Warsaw and Larnaca, Cyprus. The remaining 21 A330s are now mainly deployed within the Persian Gulf region, Eastern Mediterranean and Africa. Emirates operated 29 A330-200s at one time but, after keeping them active much longer than originally planned because of delivery delays for other programs (mainly the A380 and), it is starting to retire them.
Nevertheless, average aircraft capacity has crept up significantly from 300 passengers only a few years ago. It is now at 400 seats, reflecting the introduction of a large A380 and 777 fleet.