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Feb 11, 2013

Emirates A380 hub, right jet, right place, right time

It is reasonable, looking at the new A380 hub at Dubai, to predict that in 10 years time, Emirates will be a much stronger brand in Australia than Qantas.


Fully operational today, the Emirates A380 hub at Dubai

The video casts, and the numbers, coming out of the Emirates A380 hub at Dubai today are dazzling.

As Emirates president Tim Clark, said on the occasion of the 20 berth A380 ‘concourse A’ facility now being fully opened, the giant airline will grow its revenue between 18-20% this financial year, ending 31 March.

Clark didn’t give away any profit guidance in his reported comments, that while no doubt also stellar, will reflect the impact of fuel costs, in a currency which is pegged to the USD.

Concourse A can simultaneously handle 20 of the 31 A380s currently in service with Emirates, all of them offering at least 489 seats, with the premium seats on the upper deck and the 399 or more economy seats on the lower deck all accessed directly from the lounges or general boarding gates.

The capacity and efficiency of the A380 hub should improve the passenger experience of Dubai airport, which can at times seem drastically overcrowded, and as Clark has hinted at times both recent and past, Dubai’s airport infrastructure is critical to its efficient use by Emirates, which has a further 59 A380s on firm order and is discussing additional orders, perhaps of larger capacity versions of the giant Airbus, to bring total orders for the type to 130 units.

Part of the answer to this problem is clearly the second more distant Dubai airport which is being built in stages to become the world’s largest aviation centre, not only taking flights by most of the other 125 or so airlines that use the current airport but large scale maintenance, overhaul and repair or MRO facilities for all comers.

Ultimately, the current airport will become something like a 99% Emirates airport, with cameo appearances by the jets of closely associated carriers, such as Qantas, which in its soon to be finalised business relationship with Emirates, will rotate its twice daily A380 services to London, one each bound to or from Sydney or Melbourne, through Concourse A from 1 April.

Emirates is not just the world’s largest operator and buyer of A380s, but Boeing 777s (most of the newest ones being -300ERs with some -200LRs). It has started it own big jet food chain, in that routes that begin as A330 or A40 services migrate upwards to the capacity of 777s, and when those hit the limits of slots available at airports like London, Paris and in due course Sydney, are in turn replaced by the biggest Airbuses.

It is from the perspective of Emirates an enormously successful business plan, as the A380s and 777s can fly non-stop between Dubai and anywhere on the planet with the right runway non-stop, but according to Clark, with the exception of Papeete in Tahiti.

Emirates does fly a small number of routes where it makes intermediate stops, for example between some Australian cities and ports in Asia, and to Auckland and Christchurch, because in each case, there is an opportunity to make money out of passengers or air freight on specific routes.

There is a massive geo-economic strategy at play in Dubai in that it has sought, so far with immense success, to make itself a global aviation and maritime hub, and attract investment in high value industries through tax free, or nearly tax free, financial arrangements.

Dubai is Singapore, writ even larger, with enormous geographically convenient growth centres at hand in central Asia, eastern Europe and most of Africa and the Middle East.

The premise of this strategy is that economic growth brings jobs and a quality of life and opportunity that will bring lasting stability.  Despite some relentless criticism down the years, and frequent forecasts of economic disaster, the plan, as spectacularly made apparent at Concourse A, is working.

But, but … will the Qantas-Emirates business partnership work?  It will undoubtedly work for Emirates, but it also means that Emirates, which was ferociously slandered by Qantas managements present and immediately past, has now been embraced as the replacement for Qantas flown services between Australia and Europe, and places Qantas in its anglo-centric world view, never gave much recognition to, for anyone flying to or from Brisbane, Adelaide and Perth.

The Qantas Emirates deal is open to the criticism that it is a cop-out by Qantas, and suits an apparent agenda to shrink the full service international brand to a core operation, and leave the risk and rewards of developing entirely new sources of inbound leisure and business flying to this country to Emirates.

It also seems to make the assumption that displaced Qantas customers, including to places in Asia served on the way to Dubai by Emirates, will obediently now take their business to Emirates.

This may not be the case, and if it is the assumption, it is insulting. There is no doubt that in its A380s Emirates is an outstandingly attractive competitor, but its 777s are a different matter in that the same amenity or spaciousness of product found in economy and business in the A380s is not available in the Boeings.

Perhaps it will be in the future. Emirates itself is very aware of the competitive challenges of other airlines on routes not just to Australia but Asia. The Qantas-Emirates partnership is a gold plated opportunity to already strong operators in the Australia market such as Singapore Airlines and Cathay Pacific, and the more recent entries into the Australia stakes by Etihad and Qatar Airways, to intercept the pass from Qantas to Emirates and make their own dash to the try line instead.

The biggest benefit to Australia in the strength of Emirates comes from its understanding and embrace of new sources of travel to this country from eastern Europe, from secondary even tertiary cities in western Europe, from Africa, and from central Asia.

But Emirates will have to compete furiously with other airlines for those new markets, and to be blunt, they were never markets that anyone in executive power in Qantas ever showed the faintest idea of recognising and understanding since the Australian icon was floated in 1995, and earlier.

It isn’t unreasonable to predict that within 10 years Emirates will not just be much stronger in the Australian market than it is now, but it’s flights will predominantly be full of non-Australia originating travellers, attracted to one-stop services via Dubai from Slovakia,  the rest of the UK and France and Germany beyond London, Paris and Frankfurt, and from Petersburg and Sochi not just Moscow among other cities.

Within a decade, Emirates, and perhaps Singapore Airlines, could be stronger brands in Australia than Qantas.


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