DXB-IAH/DFW are long thin routes ONLY if these were EK sole routes. As explained many times over by fellow FT'ers, EK rely on a transit model. Most of EK flights I've seen go full house, both ways. Their LF seems to be normal. How can such a thing arise any suspicion about the nature of the airline?!

You're the one who seems to be in a fantasy world. More like a textbook (or lack of) close-minded DYKWIA kind of individual. Even if EK was subsidised (which isn't), what's your problem with their operations?

A lot of airlines signed up to the A380. Most of these A380s are deployed to long haul routes (just ask SQ/MH/TG/BA/LH/AF/QF). QF operate under virtually no subsidy but maintains excellent revenue from their A380 operations on ULH routes. Yet according to your warped and blind convictions, them doing Dallas non stop from Opera House should raise a lot of doubts about their shady business. Who knows, QF may be packing them white powder and whatnot in the belly of the A380 to break even on this route :p

Oh wait, US travellers -most of them O&D would either be going to Australia or New Zealand (and neighbouring micro nations), whereas these folks would naturally be going to the US. So a very small market chunk, and bet not that many strictly SYD-DFW. QF must be out of their minds for deploying an A380 on a 'long and thin' route and going almost daily with this thing. NOT.

EK have presence in virtually every market from Japan to Morocco (Central Asia/ -stan group of countries miss out a little). That's a little over 2/3rds of the world population (not the same 'world' used in World Series Baseball). They have fares to the US from most of these countries, at worst about 2 billion humans of which if just 5 percent embark on journeys to the Americas (or somewhere in between) we'll need more than the dozen or so airlines trying to serve. EK managed successfully to address this oh-i-can't-see-this-market-potential-by-fellow-analysts-like-yourself.

Just out of curiosity, what is D/O traffic?

You meant O/D?

Origin / Destination

Destination/ Origin I guess.

The OP is probably right in assuming that EK should be in loss if they had to depend on Americans travelling out of North America. Luckily EK does not have to as there are plenty of non American residents in the USA(and they actually have passports):D and quite a lot of them travel to the subcontinent frequently.

Last year some 44 million people chose to fly EK so perhaps you don't think like other travelers after all?

The middle east airline transit hub model is a more extreme version of the SQ/CX model. While SQ & CX do have O&D travellers, they too depend on transit passengers and their ability to funnel passengers to and from many destinations.

EK is this on steroids. EK has far more destinations and the middle east is more conveniently located as a transit point than eastern or southeastern asia.

SIN/HKG are convenient transit for Australia/NZ <> Europe, North America <> western or southeast Asia, Australia/NZ <> Asia.

DXB/DOH/AUH are convenient transit for Australia/NZ <> Europe, Africa <> Asia, South America <> Asia, North America <> Africa, North America <> western or southeast Asia, eastern Europe <> Africa.

With so many destinations served each IAH-DXB flight is providing access to dozens of destinations (DXB-yyy) all around the globe. The same applies for all xxx-DXB flights.

Thus each market pair (xxx-DXB-yyy) needs very few passengers for loads (on nearly all routes) to be quite high.

At the risk of beating many dead horses, a full house A380 to the USA is going to have (14*10000+76*3750+399*350 - cheapest rt fares divided by two) - c. 560k USD in pax revenue. Cargo revenue hasn't been factored in. No revenue manager who wants to keep their job is going to sell 100% cheap fares. So, more realistic pax revenue would be: (14*12000+76*6000+399*800) = 943k USD. More than enough to pay for the fuel. Sure, the profits aren't stellar, but they work. Oh. Add cargo.

Fares ex-USA to DXB range from:
Y: 1298-8099
J: 3720-18764
F: 21386-29896
So divide by two:
Y: 649-4049.50
J: 1860-9382
F: 10693-14948

Plug that into a calculator and you can find quite reasonable load factor breakevens for ex-USA routes on an ULH A380. Clearly the mean fare is going to be above the median as the availability of cheap seats is going to be much less than more full fare seats.

Let's say: (14*12000+76*6000+399*1000) = 1.023M USD. 80% load factor: 818k. Profit - enough to cover costs per pax on the connecting flight at least. Sure, not astronomical Apple sized margins - but as any airline analyst will tell you, the average net margin is 2.4%. So, if EK are making 50-100k profit per A380 flight, they are doing exceptionally well.

And now jet-A costs are relatively cheap, EK are laughing all the way to the bank.

Perhaps I should be an analyst! :D

Just stumbled across this thread. Putting the coffee on and putting my feet up and waiting...;)

This is a very educational tread, and I will be parking here to see the development.

I reckon the kettle will be boiling soon.;)

But, that is what we see ex-USA as well. All of my EK flights from the US have been packed with Indian's going to India. These EK planes aren't filled with US businessmen going to DXB (except for me), they are filled with Indian businessmen/IT/engineers going to India via DXB. So, yes, most ex-USA traffic is also transit traffic.

No question if EK was selling O/D they would be making a killing, but I would say over 75% of the flights ex-USA are not O/D. And, with the extremely cheap flights from USA-India, there is very little profit, if any, to be had. 2 years ago I flew SFO-DXB-ICN, round-trip for US$800, for sure they lost money on me. The fares to India are often sub-$1k.

I have heard before, from a reputable source, that EK doesn't make money with their economy cabins, they make their money with their premium cabins. This is quite the opposite of most other airlines. But, when running the numbers it makes sense. If they can use their economy cabins to cover, or nearly cover, their costs, then the premium cabin revenue is where their profit comes from (and perhaps cargo, too). This is likely why EK focuses on their premium-cabin customer's experience, if people are going to drop $5k - $20k on a ticket, put together a product to attract those people. I would venture a guess that Emirates has one of the highest percentage of premium cabins being filled with people paying real money for them, vs. other airlines where the premium cabins are filled with awards, upgrades, or below-market-priced corporate contracts.

Emirates Airline Net Profit Up 8%
 

Are those horses not dead yet! Let us flog them further! :D

I addressed the issue of connecting fares in a previous point - that the lowest Y fares price out at about 730USD net to EK rt (to BOM) - if we allocate that fare 3:1 between the USA and BOM sectors (rough back of the envelope calculation based on sector length) that's 547.50/2 which is 273.75 for the one way sector, which of course is a loss on that pax for that part of the journey, assuming the cost of fuel is maxed at 570USD and the fuel cost per EKs latest report is 38% of total costs - which gives us a maximum total cost per pax of 1500USD each way. Clearly EK is making a loss on super cheap fares ex-USA. However, this doesn't mean that the routes themselves are unsustainably loss making.

To elaborate: the max cost of flying an A380 to and from the USA is 735k USD each way. It is feasible for EK to get revenues of 800k-1M USD each way because:
- Not all fares are the super cheap fares
- Cargo

Additionally the cost is not going to be 1500USD per pax because:
- Cargo reduces the cost per pax - the max fuel load is based on a full cabin and and a full cargo compartment
- Jet-A fuel is no longer 3.1/3.2 USD/US gal, more like 2.8 USD/US gal - that reduces fuel costs by around 30k USD: equivalent to the fuel cost of 60 pax, or total costs of 20 pax (at the 1500USD rate) - that's 4% less load you have to find to breakeven.

If the cost per pax is 1300USD that works out at 635kUSD, 1200USD/586k, 1100USD/538k. You can see that these are difficult but achievable revenue targets. At a 2.4% industry average margin you only need 650k/600k/551k USD revenue to beat the competition. Feasible, I think.

Of course ex-USA EK needs more than super cheap Y fares to be profitable. But US statistics show that load factors range from 80-95% across all USA destinations. Anecdotal evidence shows us there is non-zero premium traffic on these routes - therefore it follows the routes can be profitable with no subsidy.

It also follows that A380s on ULH routes are most likely going to have the thinnest margins because of fuel costs. This means that the rest of the network had better not also be losing money, or EK is screwed. However, we can do similar calculations for the rest of EKs network and show that money is also made there - even if USA is only breakeven or at a slight loss, the rest of the network can support it with profits from operations. Therefore no subsidy needed.

When it comes to ULH demand let's not forget that most people are making round trips, so to fill 500 seats a day, you can pull that demand from both source and destination markets - and EK has a wide enough footprint to do that.

Your point about making money from premium pax is a good one and is also a tried and tested strategy: BA and now IAG's strategy was and is exactly that. That's why the 2007/8 financial crisis really screwed BA, but now they are in very good shape. It also explains why they have 2-4-2 TATL J seats in the majority of their fleet. I would argue that most mainline network carriers need to make their money in premium classes and the ones that are struggling now are the ones struggling to attract those yields. Y is there to make sure they can breakeven on some routes, and to position themselves in the market as being accessible (all J/F carriers seem to fail quite regularly -Maxjet, Eos Airlines anyone?) - but to find considerable Y profits you would have to look to the AirAsias, Easyjet and Ryanairs of the world.

As an aside to you whimike, I think over 75% of all of EKs traffic is transiting, not just Americas traffic. In fact I think it's probably like 90% - the only significant O&D market to DXB is by far the UK (London specifically) with 1 million inbound overnight visitors yearly. The next 4 markets are Riyadh with 450k, and Kuwait, Jeddah and Paris with 400k (according to Mastercard's research for 2014).