Sep 10, 2017

Emirates shelves its enthusiasm for lots of shiny new Airbuses or Boeings

Emirates gives fair warning that rapid expansion is part of a glorious past

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Emirates A380s may gain a premium economy cabin in Dubai Air Show announced revamp

It might be just over two months to the Dubai Air Show but the party poopers keep coming so far as new orders are concerned with Emirates President and CEO, Tim Clark, telling Aviation Daily (free registration required) that a long planned order for either the Boeing 787 or Airbus A350 is “off the table for now”.

This order has been up in lights for at least three years, and even talked up by the airline as recently as this June. The smaller Airbus or Boeing models concerned would have supported the heavy duty Emirates fleet of A380s and 777s.

But change is definitely coming to the Emirates business model, which on official guidance, is looking better now than it did when it experienced a reduced period of demand and profitability in its most recent full financial year to March 31.

It has started working closely with the FlyDubai regional single aisle Boeing 737 operation which has the same sovereign owners as itself, and Sir Tim has already given interviews looking favourably on the possibility that Emirates itself might invest in single aisle jets such as the Airbus A321 NEO LR, which would have sharpened pencils in Seattle no doubt.

FlyDubai is a 737-800 operation. He has also made it crystal clear to Airbus that a widely anticipated new order for an additional 20 A380s depends on certainty over the future commitment to and direction of the largest Airbus, of which it has 97 in service and a further 45 at last count awaiting delivery.

Emirates has made a huge success of the A380, and will unveil, it is understood, every aspect of a partly revealed refurbishment and new cabin product program for the big Airbus and the current 777 fleet at the Dubai Air Show which runs from November 12-16.

(This follows Singapore Airlines showing off its new look A380 products in full on November 2. The Emirates and SingaporeAir revamps are more ambitious it seems than the new Qantas A380 product changes recently announced and with a start date later in 2019.)

What Emirates does will obviously have consequences that go well beyond its operations. Given the unravelling of the different business model pursued by smaller and neighbouring Abu Dhabi based Etihad, speculation about a twin hub merger between the two UAE airlines seems to have gained additional momentum.

The ME3 might turn into the ME2. Or even the ME1, if the diplomatic campaign by the UAE and others against the small but very rich state of Qatar manages to totally undermine Qatar Airways. (According to statements made by that airline, it’s doing just fine.)

Emirates is the cornerstone investor in the Boeing 777-X family, due in service from late 2020, with a total order for 150 of the jet. It could probably take this entire order over the next decade for existing 777 replacements plus modest growth given that it has 129 77330ERs and three -300s in service, with nine of the Boeing family in storage.

The airline has in the recent past said it could take 100 or more additional A380s for both replacement and growth in the next decade, but put pressure on Airbus to upgrade what is the world’s largest passenger jet with new technology engines and airframe refinements similar to those being applied to the 777-X series.

However the latest messaging from Emirates makes it more than apparent that the powerful growth enjoyed by the ME3 is being replaced by more modest outlooks.

With Airbus and Boeing managements showing a reluctance to invest in technology sought by only one or two large carriers for their special needs, and a concurrent collapse in used jet values, reinvention of product, for better or worse, may take precedence over bold new designs.

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33 thoughts on “Emirates shelves its enthusiasm for lots of shiny new Airbuses or Boeings

  1. Jacob HSR

    Very good animation on how Qatar is going around the blockade:

    Mr Akbar Al Baker still wants to own an airline in India:

    Another way to boost the Qatari Sovereign Wealth Fund I suppose – own an airline in a nation that will allow you to. Do very few nations outside EU allow foreign ownership of airlines?

    1. Tom the first and best

      A domestic airline might help feed Qatar Airways` international flights as well as tap into a growing domestic market. If it also has an international arm, then costs at shared international terminals could be reduced by sharing facilities.

      1. Jacob HSR

        Well, SQ owns 49% of an airline in India called Vistara. And Vistara is determined to fly international – starting with Japan. Hopefully Australia too.

        The Qatar one in India will most likely fly international too – it would be a waste of Qatari talent otherwise. If you look at a mature market like Australia, VA flies MEL to LAX, MEL to HKG, etc.

  2. George Glass

    And now the unravelling.The Middle Eastern scammers were always going to come unstuck eventually.A government funded nation building exercise foolishly encouraged by a complacent West.Good riddance.

    1. Dan Dair

      George Glass,
      You’ve made it very clear that you despise the ME3, seemingly for being able to do things which Qantas management were incapable or to terrified of doing. (or maybe QF’s CEO was more interested in ‘union-busting’ & ‘2-for-1’ing’ than actually developing their international business.?)

      When Emirates in particular are telling us that they’re doing well & expanding, you tell us it’s all because of government subsidy & it’ll never last.
      Then, when Emirates tell us that they’re now running into a period of consolidation, you tell us they ‘were always going to come unstuck’.

      I’m confused;
      Are they unconditionally supported by their wealthy government owners, who’ll subsidise them for the benefit of the nation,
      or are they not.?

      If they are subsidised,
      Why do they need to consolidate at all,?
      If they’re not,
      doesn’t a period of consolidation after a period of huge expansion just prove that they really are a genuine business, which has reached a natural-end of market share expansion.?

      What will be interesting is what happens next.
      They’re looking at developing a short-haul business & presumably a medium-range business to operate the single-aisle fleet they’re considering.
      That to me says that they perceive no further significant expansions in their long-haul business* & that they’re looking at other types of routes, to generate further business-growth.?
      (*I don’t imagine that they’ll stop expanding long-haul, just that it will be at a very much slower rate in the future.?)

    2. Jacob HSR

      QF is chipping away at the ME3 with the PER to LHR direct flight – there might be enough Poms in Perth to make that flight profitable.

      Aucklanders fly to Doha to get to Europe. That means a 17.5 hour leg! Someone in Asia ought to come along and offer an alternative to Doha.

      And as I said above, SQ owns 49% of an airline in India and is keen to fly international. SYD – India – CDG perhaps? That would also take some business away from the ME3.

      One advantage the ME3 have is they fly into smaller cities like Manchester and Birmingham. If Hyperloop works out, or high speed rail gets faster – you could simply land at CDG airport and get to Manchester by Hyperloop/HSR.

      1. Dan Dair

        Emirates fly to the two main London airports,
        but then also fly at least daily (3-a-day to Manchester) to 5 other UK & Eire destinations.

        Irrespective of whether they’re government funded or not,
        they wouldn’t be putting on all these flights, if they weren’t getting a considerable number of bums-on-seats.
        Perhaps the Hyperloop from Paris is unwarranted.?

        1. Tom the first and best

          Direct Australia-Europe flights are the biggest advantage Qantas (and any other Australian airline able to do so) has against intermediate hub carriers (the ME3, Singapore, Cathay Pacific, etc).

          A potential strategy for Qantas (or other Australian airline) against such carriers would be have Port Headland (or other similar northern WA airport) as the major hub for international flights to Europe and most of Africa and Asia and fly to as many destinations as profitable from there, with the maximum possible domestic connections as well. Although with more and more direct flights from capital cities, this is potentially a less efficient strategy that it used to be.

          1. JW (aka James Wilson)

            What commercial advantage would hubbing through Port Hedland or any other northern WA airport provide? It would still be a one-stop service to Europe for the vast majority of passengers. That’s no better than the one-stop services offered by the airlines you mentioned and arguably a lot worse! Further, who would pay the ENORMOUS cost of upgrading the infrastructure at any northern WA airport?

          2. Tom the first and best

            A Northern WA airport hub would get as much out of an Australian hub as could be achieved to compete with the Middle Eastern and other Asian hubs in the way intermediate travel.

            Firstly, it would be between almost all Australian cities and all European, most African and almost all Asian destinations, allowing Australian passengers for those destinations to be reached without back-tracking, like the other intermediate hubs. This would allow Australian and also many New Zealand passengers for these destinations to be grouped by overseas destination allowing both smaller volume routes (Rome or other Italian destinations, Athens, Istanbul, Beirut, Tel Aviv, Cairo, more Indian cities, more African cities) and bigger and/or more frequent planes on existing routes. Passengers from some smaller Australian cities (Hobart, Newcastle, etc) would also potentially get single stop flights to the onward destinations.

            Secondly, it would be within single hop range of not just London and mainland Europe but also other parts of the UK and also Ireland, like the other intermediate hubs.

            Thirdly, foreign airlines would likely run routes to the hub leading to passengers for one leg for the Australian airline(s), just like the other hubs.

            Fourthly, unlike other hubs, there would be restriction on foreign competition on the legs between the major Australian cities and the hub.

            It would be a long term strategy, potentially one that should have been pursued decades ago.

            A combination of funding would be needed but there seems to be no shortage of money for upgrading major Australian airports.

          3. Tom the first and best

            A North-West WA airport would also have the advantage of not being in a much more socially conservative and authoritarian jurisdiction than Australia, New Zealand or the European destinations. This as a potential advantage for travellers who authoritarian and socially conservative regimes are disinclined towards.

          4. JW (aka James Wilson)

            Hmmmm – I wonder if you’ve ever been to Port Hedland (without an ‘a’)………….

          5. Tom the first and best

            I have not. Sorry for misspelling it. My proposal would see it, or another similar NW WA airport, as a mostly a transit airport.

        2. Tom the first and best

          The real obstruction to CDG being the HSR linked hub for onward destinations in the UK and Ireland by HSR is that the UK is not in the Schengen Area and thus HSR to destinations in the UK, other than the London-Chunnel corridor, would require new immigration control points to be built.

          1. Jacob HSR

            Tom, I think Ireland is not connected to Britain via a bridge – nor is it connected via a tunnel.

            I read that Amsterdam station is being upgraded and getting immigration counters for the London to Amsterdam single-seat train service. Currently people have to change trains at Brussels.

            Letting low-wage nations into the EU has been an absolute disaster.

          2. Tom the first and best

            The lack of a Dublin-Holyhead tunnel is also an impediment to HSR linking CDG or Heathrow to Ireland.

            There would be a significantly higher number of cross-Channel routes if the UK was in Schengen.

            The problem is not allowing low wage nations to become member-states of the EU, it is not having the mechanisms to gradually raise their wages to higher Western and Northern Europe levels.

          3. Dan Dair

            An Irish Sea tunnel would probably help to alleviate the laughable situation which is developing over Irish freight to the EC, now that the UK is leaving the EC.
            Previously, Irish lorries came off the boat into another EC country (ie. the UK), before transiting the UK to arrive at the European mainland.
            It’s anyone’s guess how they’ll deal with customs & stuff, when the UK ‘land-bridge’ to the EC is no longer part of the community.???
            If they had a tunnel, they could get on the train in Dublin & stay on it to Calais…..
            but they can’t.!

          4. ghostwhowalksnz

            Danair there are plenty of ferries direct between Ireland with
            4 routes to France .

          5. Dan Dair

            “there are plenty of ferries direct between Ireland & France”
            There are routes directly to mainland Europe, but because they’re ships, they take a couple of days & AFAIK, they don’t go to the same ports.
            Truckers can take their statutory break on the trip to the UK & then be able to drive for 8-10 hours the next day. Generally plenty of time to get them to the southern UK ports or Channel tunnel railhead, for the short cross-Channel trip.?

      2. Arcanum

        “Someone in Asia ought to come along and offer an alternative to Doha.”
        You mean like Air China, Cathay Pacific, China Airlines, China Eastern, China Southern, Hainan, Korean, Malaysia, Philippines, Singapore, and Thai, all of which currently connect Auckland to Europe?

        1. Jacob HSR

          Arcanum, Only TG and PR seem to be cheaper than QR.

          MH? Why fly that after MH370, MH17, QZ8501?

          CZ? The cabin crew do not know English. Not when I flew with them anyway. And the sound quality from their IFE is horrific. A $50 Sony Walkman from the 1990s has fantastic sound quality by comparison!

          TG does offer more balanced legs than QR – 12 hours and 12 hours.

  3. Tango

    If Emirates was really interested in the local and mid range market, then they would buy the 787-10.

    Some of us hate distorted economic when a government gets its finger in the pie.

    Emirate has all the hallmarks of just that.

    So yes some of us cheer when the inevitable come down and they get nailed.

    Distortions eventually work themselves out, though they tend to last a lot longer than we think they should.

    1. Ben Sandilands

      Until it lost interest in either type Emirates was publicly critical of the 787 engines as unsuited in its assessment (and heck, what would it know about hot and gritty airports) for meeting the needs of very high field temperature operations. Clearly, Qatar and Etihad disagreed, since they bought, but maybe the story is more complex than so far made out to be. Then there is the problem of fitting people into the 787 seats in economy. I think the Emirates story has some distance to go in terms of changing its business model and I wouldn’t be risking any money on any bets just yet.

  4. Mark Skinner

    All very well, but where is the evidence that anyone is getting “nailed”?

    I live in Adelaide and use Emirates/Qatar. I must admit it’s only once or twice a year, so a limited sample, but they seem to get some pretty good loads in B777/A350, and the service is good, they report that they are making money, and deny they are being subsidised. You’d also think that the major US airlines would have expensive law and accounting firms trying to prove dumping. Yet they haven’t. All they can come up with is “Everybody knows”.

    Personally, I think the ME3 have come up with a decent product, a decent strategy to put it in place, and a lot of capital to fund it. Well, that’s exactly what US Corporations did for years round the world. Boeing, in particular, with a good product range, strategy and capital, is a prime example. Good for them, it’s how capitalism works. It also works if someone else does it.

  5. George Glass

    No,Dan. QF,or Virgin for that matter,are not terrified. They simply have to operate commercially.Make a return on invested capital.Old fashioned ideas like that.Australia is the most open aviation market in the world,bar none.To the point of stupidity.Emirates A380s from Melbourne to Auckland.Really? Are we that naive?. The reckoning is coming for the ME3 because they defy common sense and rely on the simple-minded complicity of markets like Australia.Most of Europe has recognized the obvious and limited access by the ME3.Only Australia is thick-as-a-brick stupid.But the worm is turning.Reality cant be ignored forever.Good riddance.

    1. Dan Dair

      George Glass,
      It’s obviously your prerogative to think what you like & I respect that.

      I understand your point-of-view that says Australia has given too much away regarding slot-rights & transit-rights,
      but equally, as part of the move away from subsidised flag-carriers, or unsubsidised ‘legacy’ airlines with enormous fares,
      the world Qantas used to inhabit when it was previously profitable, about a 12-15 years ago,
      simply doesn’t exist anymore.!

      If Emirates & others weren’t flying out of Australia directly,
      there are many airports in Southern Asia which would be offering services to & from Australia, which would in-turn allow Australians & visitors to Australia, the opportunity to get on a flight to Europe, Africa, the Americas & the rest of Asia at a price considerably lower than that which QF was offering a dozen years ago.

      Times have changed & a heartfelt longing for the nice, sensible way things were back in the ‘old-days’ won’t make that happen.!
      (a prime example of such longing being the UK’s ‘divorce’ from the EU.
      Do they really think they’re going to get the kind of deals now, on grain & produce from the Commonwealth countries, that they used to get in the 1960’s.? The ones that voted for it probably do.?
      I think they’re in for a rude awakening.
      Why would Australian (&NZ) producers sell to the UK at a discount, when they can sell into China for a big mark-up.?)

      Do you really not believe that lowering fares, not just by the ME3, but by any number of low-cost airlines has not promoted travel to & from Australia, as well as within it.?
      Improving the competitiveness of seat-pricing has helped to considerably increase the number of visitors. Some tourists, some business-people.
      That’s good for the country’s economy.

      IMO the loss of aspects of Qantas infrastructure are not so good for the country (or the airline), but those decisions were made by QF management. They weren’t forced upon them by anyone (except perhaps Mr Economic Reality.?) & Qantas chose to go down that road, rather than support their experienced domestic staff.?

      Emirates is not in financial trouble.
      It probably is in a period of consolidation.
      It is also looking at where it can expand it’s market share in other sectors
      AND how it can integrate any new business into it’s existing network, to make it’s operations more cost-effective.?
      (in almost exactly the same way that QF & JQ haven’t.!)

    2. Mark Skinner

      George Glass,
      This ME3 stuff is a bit of a furphy. First of all, Dubai doesn’t have much oil revenue, so if it is running a business such as an airline, it needs to make money.
      Next, the ME3 are hardly the only ones coming into Australia and taking business from Australian carriers: Cathay, Fiji Air, Air New Zealand, Singapore, Malaysia all fly internationally to Adelaide quite apart from the ME3. That’s FIVE international carriers aparr from the ME3. Furthermore Australian super funds have a couple of trillions of dollars looking to invest. Much more than the ME3 could dream of.

      So, with potentially far more capital available, 5 non-ME airlines operating out of Adelaide showing what can be done, but Qantas can’t do it apparently.

      Maybe, just maybe it’s Mr Clark has a better business model than Mr Joyce.

      The evidence seems to support that, rather than some fluffy “everyone knows the ME3 are subsidised” theory.

      BTE, the ME3 are flying into plenty of European destinations. I’m not sure what restrictions you mean. Can you clarify?

      1. Dan Dair

        Mark Skinner,
        Good point…
        Emirates fly to;
        7 airports (6 cities) in the UK & Eire,
        4 cities in Italy and Germany,
        2 in France and Spain,
        as well as flying to pretty-much every major capitol city in Europe & the Mediterranean nations.
        There doesn’t appear to be much in the way of restrictions, other than perhaps slot-constraints.?

        As I said before, Manchester, a big provincial city in the North of England now has 3 daily flights to Dubai, from originally one flight.
        All of them started as B777 flights & all were upgraded to A380’s.
        My limited business acumen & imagination leads me to suspect that Emirates are getting a hell of a lot of bums on their reasonably spacious A380 seats.?
        I might suspect that the same was true for the rest of their European destinations.?

        1. patrick kilby

          Dan there is a lot more than two EK destinations in France and Spain I can think of Paris, Lyon, Nice, Madrid, and Barcelona. By the way I suspect EK will persuade Airbus to keep building A380s for their hot weather performance and a business model that works. Five a day into Heathrow and four a day into Sydney for example.

          1. Tom the first and best

            I believe that Dan Dair meant 2 cities each in France and Spain and 4 cities each in Germany and Italy. That is only one French city off the actual numbers.

          2. Dan Dair

            TtF&B, You’re correct, that was what I was trying to say.
            I looked at the Emirates website but didn’t notice Lyon as a destination.!!
            Perhaps I would have made more sense if I’d said;
            ‘4 cities in both Italy and Germany,
            2 each in France and Spain’

          3. Dan Dair

            I think the issue for Airbus is whether they think the A380 will eventually start to really sell in the numbers they originally envisaged.?
            If not, sooner or later Airbus will pull-the-plug.
            I’m pretty sure that they don’t want to throw any more development money into the hole they threw all the original development money into.?
            That said, if Airbus think the market will come come to them, they will want to keep the production line ticking-over, even at just one a month (or maybe even one every two months), until things take a turn for the better.

            But I can’t see them making any big development investments until that point arrives.?

    3. Arcanum

      George, I have to disagree. Someone clearly thought things through when deciding on access to Australia’s aviation market.
      The geographical reality is that there are literally dozens of potential connecting points between Australia and Europe. Even if each of them is restricted to one flight per day, that’s dozens of flights. Given that most of these countries have much lower labour costs, Australian carriers simply cannot be competitive. Why not open the floodgates and bring down prices for consumers?
      The trans-Pacific market, on the other hand, is completely different. The Australian and North American carriers essentially have an oligopoly on these routes, and their governments have been very careful to protect them from competitors like Singapore who have long wanted to operate fifth-freedom routes. The result – high fares and fat profits.
      It seems to me the Australian authorities looked at the situation, decided which battles they could win, and made their decisions accordingly.

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