EK Strategy
 

When considering Emirate's various attributes ( hard and soft products, lounges......) , acquisitions of new aircraft etc IMHO, EK's strategy is

1. World domination of an airline network.
2. Domination by way of volume of pax.
3. World leadership in all facets of pax comfort and safety.
4. Best lounges, terminals, ground services.

I have so far flown only once, want to fly more (no Alliance , another signal of independence ?).

My opinions here are a result of what EK is doing and what the pax are saying.

What say you ?

EK is a company chasing profits and ever increasing margins. Much like any other company. They are able to do things differently due to the nature of the country/city where they operate, they are not bound by certain labor laws as most legacy carriers are, and are able to operate on lower costs at their hub as well... they have been able to grow significantly due to an ever expanding pool of travelers coming from the sub continent (and Africa), despite if the management might want to elaborate other segments. Their focus on premium passengers comes from the general ethos of the emirate/city to focus on luxury (which is not necessarily a bad thing). Other aspects that have come to play over the years are a general movement of economies in Asia and Africa.

Dubai was always a city of trade and transfer before it became famous for being famous(or infamous!), it naturally became the point of transit for accessing the region. EK was, is, and will continue to be the face of Dubai and its most profitable component. Dubai/UAE has also helped the growth of EK by making it increasingly easier by people from all countries access into the country - especially when it is the only option for a 'western/developed' nation experience for people living within a 5-6 hour flight radius...

Other hubs of business and transit in Asia: Singapore and Hong Kong aren't going away, and are certainly not shrinking violets with their eponymous carriers.

Are they profitable? I guess we don't really know.

I agree with both posts; what Emirates has done is extremely impressive. They have managed to create a superlative brand (the breadth and consistency of their lounges is a good example) and are my favorite airline, even with some of the inevitable devaluation (of frequent-flier benefits) that has occurred lately.

Agree with you and Anxiousone.
Ek is out to eat lunches of the likes of AA and BA. BA has services to many parts of the world where EK is encroaching.....although die hard AA BA fans will differ.

There will be arguments about State funds subsidizing their ops. Legacy carriers have many faults and anchors attached to them that will slow down their acceleration.

My feeling is that of late, they are tinkering with fares, skywards, upgrade availability much more than they need to, and somewhere along the line, its going to bite them.

I have a trip to JFK coming up in a week and just noticed that neither 201/203 nor 202/204 seem to be full...That's pretty unusual for this sector and at this time of the year.

EK Strategy
 

Not sure I understand the point about profitability. Accounts are pretty transparent no subsidiary if that is what you are hinting at. Also I think with expo2020 and the Doha World Cup it's fair to assume that Dubai will be pretty busy for the next 7 years or so and with it EK.

When I travel on business class, LIS-BKK, the seat availability a week before my flight often looks empty, however once I check-in online both planes are always full. Emirates now have a model that is attracting customers like magnets, just like Apple everyone seems to want to try them. They very much remind me of Steve Jobs business model where his vision was trying to be the yardstick of quality in a world where the majority of people aren't used to an environment where excellence is expected.

What I understand here is EK has a long term vision ....something that is absent in most Western Corporations whose CEOs are focused on short term profits to boost their bonuses.

The geographic position of Dubai, and its gulf neighbours, is such that 6~9 hours flying time (~500mph) encompasses a large portion of the world population. Gives them a big advantage for a hub. So the DXB hub works, as does DOH, etc.

Great circle map with DXB at the center EK may not fly all these routes, but it does give the general idea

Isn't the airline owned 100% by the government? Dubai has perhaps a better image of transparency than some sovereign entities, but in my opinion skepticism is reasonable, ipso facto, toward the financial statements of any government-owned company in a totalitarian state.

Sure, EK's revenue growth is impressive, but it is certainly plausible that the government has been subsidizing it to achieve the domination that the OP rightly refers to. Not that there would be anything wrong with that -- in fact, it would be great for customers if the Dubai government were subsidizing our patronage -- but that doesn't mean that I would invest my own money in the airline.

EK Strategy
 

Well your odd jibe about mode of government aside, clearly you understand very little about how a tribal system in the Gulf works, I can say that the accounts are audited by a western firm so that should give you some comfort in your armchair but also the holdco regularly receives loans etc which requires a high amount of disclosure. But anyway it makes no sense for the government to subsidise the airline. It is not logical and Dubai is driven by profits and profitability not subsidy.

I am in an armchair like all of us, but I have worked with state-owned companies (and their western-branded auditors) in the Gulf for years so have plenty of experience. There are myriad ways for a government to opaquely subsidize a national champion, some of which are certainly more creative than I am. (One way that does not require great creativity is to give loans, as you note, that are implicitly backed by the state, thereby achieving a better price than the market would give.) A small example in Qatar is government preference, or mandate, to fly QR premium classes on official travel; I am not sure if Dubai does this (and it probably wouldn't have much impact given EK's scale, but in Qatar's case it's probably a non-trivial indirect subsidy).

More importantly, it might make perfect sense for the government to subsidize the airline -- build it up now, achieve domination, with a nominal strategy to return profits later. Not necessarily an irrational investment approach, except perhaps that the "tribal" governance in the Gulf doesn't have the same long-term market discipline, in general, as the West -- or do you dispute that also? Moreover, building Emirates obviously has positive ripple effects for Dubai Inc. as a whole, which the rulers might rationally calculate but from which a market actor (i.e., a private investor in the airline) may not benefit much.

If anyone is subsidizing EK it is the US tax payer! I recall some article about how the US airlines were harping about EK getting preferential loan terms from Export-Import Bank of the US...

I think if EK was being 'subsidized' to any real extent in terms of shifting losses, they wouldn't be operating 5 flights daily to KHI - which all fly nearly full, and with a full cargo load... i assume same with India and Africa... and asking for more landing slots into Canada. While charging what are the highest fares in most cases.

They are making a fortune. They might have lots of aircraft finance but profits are up, pax numbers are strong, flights are generally pretty full.

They are clearly intnet on being the number 1 air line for passenger numbers, aircraft, safety etc. Flights out of outstations like MXP, SIN, MEL etc to not DXB - when they crack that and get rid of old F and recliners in J you will have the worlds best.

Gripes are the devaluation of skywards and the lack of u/g availability.

I think people misunderstand the word "subsidy", and then go on to treat it as a dirty word later. Most people think of subsidies as direct cash injections from a government. The biggest issue with cash subsidies is that they tend to cause market distortions and are generally viewed as unsustainable.

EK benefits from in-kind subsidies (low labour costs, lax labour laws, minimal bureacracy etc etc), or what is broadly called a pro-aviation / business policy. Many international companies have benefitted from this, and no market distortions have been created.

I have been lucky to work for a company that has a commercial interest in QR and EK, and have been able to examine their books. I would say QR receives cash injections from their government, while EK does not.

The Dubai government just does not have the cash to support companies in that manner, especially since 2008 when they almost went belly-up. If anything, they are now relying on EK to pay into the government's coffers. Even as they hit record profit levels, they are not giving bonus payments to flight deck or cabin crew, so that the government can meet its obligations. Cash subsidies in QR and EY, i'll listen. Not EK.

Someone made a point about lower credit cost and the like. True in most cases, but what 2008 crisis taught the banks is that while there was always an implicit understanding that a lot of the Dubai Inc companies were backed or owned by the government, the legal status was murkier, and many of these companies are now forced to borrow at commercial rates. Won't speculate on whether this includes EK :).

Dubai is unique among Qatar, Abu Dhabi, Saudi Arabia and Bahrain because it is not an oil state. It runs an economy built around trade and logistics that benefits from the oil economies (and their associated inefficiencies) surrounding her, having used what oil wealth they once had well. This means the only waste they can afford is patronage for their people, which serves a political purpose.