Touch Points by Steve Finikiotis

Dubai-based Emirates Airlines continues to capture attention. At the recent (Nov, ’07) Dubai Air Show, the carrier ordered a stunning 245 new wide-body planes, spreading orders among both manufacturers: 120 Airbus A350 XWB jets, 11 more A380 super-jumbos and a dozen Boeing 777-300ERs. The orders, totaling $34.9 billion, bring the value of the airline’s fleet to about $60 billion USD.

The Dubai air show — one of the most prestigious commercial trade shows — is regarded as a bell weather of Gulf region carriers who are racing to expand their fleets, and convert the region into a major global hub. Emirates’ regional rivals are Doha-based Qatar Airways and Abu Dhabi-based Etihad, and three have been reporting record growth.

Emirates Airline, the largest airline in the region, is already the world’s 10th largest carrier, and it’s gaining altitude rapidly. It already serves 99 cities in 62 countries and, on average, is adding a new city every couple months.

Despite its aggressive growth strategy, the carrier says its keeping its focus on delivering a highly differentiated service product.  The company offers customers a 200-channel in-flight entertainment system and a responsive, well-trained customer-facing staff.

Emirates is entirely government owned, but its chairman, Sheik Ahmed Bin Saeed Al Maktoum, said recently that 30 percent of the company may be sold in public markets.

Operationally, Emirates is a sleek machine. Its operating costs are significantly lower than those of its European or U.S. rivals, and the carrier continually seeks business process and supply chain efficiencies.

We’re betting that Emirates, like its regional competitors, will maintain its staffing and service levels, even as competitors outside the region begin tightening their belts. At a time when many carriers are battling both record fuel prices and a declining U.S. dollar, Emirates should realize $1 billion in profit in the fiscal year ending March 31 on total revenue of $8.1 billion, an 18.5 percent increase over the last year.

The carrier is ahead on the currency front because it’s pegged between the UAE’s dirham and the U.S. dollar. (Emirates reports results in dirhams, but a big chunk of its earnings is in euros and pounds sterling, and the dollar’s slide is helping the carrier.)

Emirates is benefiting from the Gulf region’s unprecedented economic growth.  This boom, fueled by high oil prices and a nascent tourism industry, is expected to continue despite a world-wide economic slump on the horizon that is being predicted my many economists.

Dubai is well-situated to capture European customers en route to Asia and about half its traffic moves through Dubai International Airport.  Over the past 15 years Dubai International Airport has developed into one of the largest hubs in world aviation.

A new airport, Dubai World Central Al Maktoum International Airport, the world’s largest, is under construction 12 miles from the city center.  It will be ten times the size of the current airport and will entail a port, hotels, residential areas, as well as a free-trade zone.

The only major ripples in the pond are concerns about regional political instability and, as other carriers acquire longer-range aircraft, Dubai’s draw as a hub may be reduced.  But, for now, the picture looks rosy.  If the carrier makes the same prudent business choices as it has recently, the airline should be a force to reckon with for a long time to come.