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Nov 13, 2012

Emirates flies more, charges more, doubles half year profit

The Emirates half yearly financials to 30 September showed it profitably doing the exact opposite to most of the world's larger airlines. Instead of flying less, it flew more, instea

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The Emirates half yearly financials to 30 September showed it profitably doing the exact opposite to most of the world’s larger airlines.

Instead of flying less, it flew more, instead of charging less for its product, in race-to-the-bottom fare wars, it charged more, instead of laying off staff, it employed more, instead of pruning its network, it added new routes, and instead of cutting back on new airliners, it added more to its all wide-body fleet.

It sounds starkly different to its new approvals pending junior business partner, Qantas We expect you to fly Emirates unless you live in Sydney or Melbourne doesn’t it?

For the airline section of the Emirates group, net profit for the half year more than doubled compared to the previous corresponding six month period to $US 464 million. Capacity, measured as available seats times kilometres flown, was up 17.3%. Revenue collected per occupied seat times distance flown rose 17.8%, meaning customers increased more than available seats which pushed load factors up from 79% to 80%.

Air cargo, which is in decline in most of the world, grew by 16%, with all of these metrics comparing the first half of this financial year for Emirates to the same period in the previous year.  The Emirates reporting periods do not align with those of Qantas, and its latest figures include three months for which Qantas won’t report as part of its first half to the end of December until sometime next February.

Before the bleatings about geography and unions come back, again, to justify the mediocrity and implosion apparent in Australia’s largest airline, consider one of the fundamental things that Emirates does quite well, which is to value enhance its product so that it can go out in the market place and seek and get more for its fares in many cases than, say, Qantas.

The one thing that the retail industry is saying to those who want to ask and listen when it comes to air fares, is that like Singapore Airlines, Emirates knows how to market a good deal without totally ruining the yields on the higher and more frequently sold Emirates fares.

Qantas hasn’t lost market share to the extent it has entirely because of geography, but deficient business acumen and a contempt for its own employees, who have, on occasions, responded contemptibly and added to the ruin the company has visited on its shareholders.

Emirates and Singapore Airlines, who are very different from each other in how they ‘do’ full service air travel, have managed to look like price leaders while managing to sell to most of their customers for top dollars. Unlike Qantas, they aren’t standing still or tarting up aging jets, which no matter how well they may be refurbished, will never have the fuel efficiency or lower maintenance costs of newer, younger, more advanced jets.

It is abundantly true Qantas is at a disadvantage in terms of network and geographical realities and in various ways, taxation, depreciation and labour rules compared to competitors like Emirates. However it compounds those disadvantages with a second rate management team that was so conflicted in its customer relations that it needlessly stranded 70,000 of them to break an industrial impasse brought about by its own unwillingness to promptly negotiate employment agreements with its work force, and fought an ideological battle instead.

The Emirates results reported overnight grind the consequences of those deficiencies in the management of Qantas into the face of its shareholders and employees.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Ben Sandilands has reported and analysed the mechanical mobility of humanity since late 1960 - the end of the age of great scheduled ocean liners and coastal steamers and the start of the jet age. He’s worked in newspapers, radio and TV in a wide range of roles as a journalist at home and abroad for 56 years, the last 18 freelance.

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2 comments

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2 thoughts on “Emirates flies more, charges more, doubles half year profit

  1. The Pav

    Ben,

    For many years I have had to explain to business people that if you want to make more money.charge more.

    It seems Emirates understand that

    It really is that simple.

    To show what I meant I used to use a Gross Profit/Net profit table So ofetn a 10% drop in price would require say a 30% increase in sales just to stay still in nett terms.

    If you increas price 10% you don’t lose 30% sales so the difference is an increase in NP

    Once the idea that business is more than price irs amazing what ideas and actions become possible and the rewards are huge.

  2. Banjo

    Qantas management are proactive in spending share holders money on consultants of all persuasions & of course of paying themselves inflated, self defined bonuses.

    They are however extraordinarily incompetent at the commercial & operational expertise that determines success & that continues to give Borgetti a leg up in the Domestic field. God help this country if their performance is any sort of accurate look into the closed world of corporate Australia. Does incumbence gold plate incompetence & bald faced narcissism to this extent ?

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