How does EK do it?
 

I was looking at their US website and saw their sale fares for Oz to be 1149 before taxes. I have seen regular fare for 1600-1700 for such a long flight as well as some amazing prices for JFK-LOS,NBO,JNB and many other places in Africa. How do they price it so low and gives miles for every paid fare for such long distances and then make a profit? Or why don't other airlines do so...SQ are you feeling me????

For JFK-Oz EK's price has to be very low in order to attract any business. It is much further on EK than on say QF or UA/NZ.

Yeah I realize that, that's why I asked how/why do they do it and turn a profit??

For starters EK jams in more seats in economy than other airlines, gets cheap fuel and other support from their owner.

From other threads of discussions, I think it is fair to say that Emirates benefits from load factors that are significantly above airline norms. However, above all, I think there is either a large degree of govt. subsidisation or acceptance of much lower margins, as the success of Emirates has seen as a key part of the strategy to attract people to/through Dubai, thereby helping the state's economy to develop, diversify and grow.

I believe its actually the opposite. EK's break even load factor is around 60%, and its average load factor is around 75%.

Also - there is 0 gov subsidisation, but EK does benefit from low oil costs. I think their success is partly due to their very effective pricing stragety. They always seems to be getting the most amount of money out of me that they possibly can.

Cheers

I flew EK from SIN to CMB on a 777 with 10-across seating in Economy. The seats were the narrowest I have ever seen on a commercial airfcraft and the 1709 miles seemed like an eternity. I hate to even think of what a JFK-DXB-SYD journey would be like on that aircraft.

DXB-SYD nonstop is A345, but there is 777 via BKK (so even longer in the seat).

Isn't JFK-DXB also an A345?

Yes, but EK will be doing some aircraft changing this summer. It is tbc, but from the late fall it will either be 2x 77W and 1x 345 or 1x 77W and 2x 345.

Cheers

I am sure this has been debated on this thread before but I will say it again EK does get help from the Government (Royal Family). It may not be documented but it would be foolish to believe a carrier as good and modern as EK can constantly undercut the competition and have no help from their home town.

It has been reported that Dubai is running out of oil and the Royal Family are looking at other ways to sure up the prosperous future of the UAE by creating a 1st class airline plus creating other revenue building platforms like establishing a tourist trade (Eg worlds biggest indoor ski resort, Worlds only 7 star hotel) plus the introduction of the A1. It has been reported that while they can the Royal Family will do “all they can to ensure the future of EK” and I am sure they are ;)

Wow, 3x/day, that says a lot about EK, they must be doing something right.

Dubai wants to create the "mother of all hubs" and EK is the way they are doing it. I have no doubt that the royal family is lending a hand whenever possible as there is a great rivalry between Dubai (Emirates) and Abu Dhabi (Etihad). Dubai is also building a newer and much bigger airport. This is from Wikipedia; notice the "new" name of the airport...

Dubai World Central International Airport (IATA: JXB, ICAO: Unknown) is a new airport under construction in Dubai, in the United Arab Emirates. This airport was formerly known as "Jebel Ali International Airport". The airport will cover 140 square km (54 square miles) and include facilities for cargo, finance, and other industries. It will also include a golf course. Upon completion, it will be the world's largest by physical size. Dubai intends for Dubai World Central to pass Heathrow, O'Hare, and Atlanta in passenger metrics, but it will initially service cargo airlines. The airport will complement Dubai International Airport, some 40 km (24 miles) away.

As to whether they will succeed in creating a "first class" airline, that all depends if (and when) they start working on providing consistent service and reducing unscheduled aircraft changes...

The "narrowest" seats are 1 inch less (17) than on other aircrafts (18).
I understand, that for some people one inch matters.

On the other hand they have 3 inch more legroom (34 against 31 on most other airlines), this is much more important for lot of other people!

Most passengers would be Asian and they are generally not as tall nor heavy as fellow European / North American passengers. I appreciate all the space that I can get.I know that they have an extra seat in each row but it works for them.

Yes, When I was in year 6(12 years old) i used to hire out my gameboy to people at my school for $1/game. Someone else started doing it for 80c/game, so I dropped my prices to 40c/game and sent them out of business. My success was my pricing strategy. But without Government subsidy (my parents) I would have never been able to afford the cost of fuel (batteries).

Do you have a source for this? All official sources that I have read, explicitly state that EK received no government favours. This is different from other benefits that it receives (such as low oil prices - but this is because oil is cheap in Dubai, not because EK is getting the easy way out.) I do not have connection with the top management at EK (sadly ;) ) but I do know some people that work for them, and I have been reassured many times that nothing happens that it off the books. If this did happen, other countries would probably close their doors to EK, and they would have nowhere to fly to.

Airlines are quite different, in that they use price discrimintation. In your situation that would mean charging 80/c per game to the people that were willing to pay a max of 80/c per game, and chargin 245/c a game to people that were willing to pay. I find EK to be more expensive that most of its competitors especially from European cities.

Cheers

In this world how can one trust what some business leader says especially the accountants of the company? Didn't Enron teach us enough? Its not like that their financials are audited by independent sources, so even less trust in them. To be able to offer such ridiculous prices for such long distances really really smells fishy. Why would other countries close doors on them? There are plenty of government owned airlines the world over flying to capitailistic countries.

As I said before, their prices are not ridiculously cheap. Suppose they offered a $1 JFK-DXB-PER fare. This fare would only be available on limited flights / dates etc and almost no-one would be able to use it. EK will then more than make up for it with their expensive J class fares (and just look at how many people they cram in J vs other airlines) etc

If EK is getting a free ride, countries won't want to allow EK to fly there because it will harm the airlines flying there because they won't be able to compete with EK. An example is in Austrailia. Qantas constantly accuses EK of getting help, and they also accuse EK of flooding the trans-tasman market making it impossible to compete with them.

Cheers

I haven't looked that closely, but I don't see Abu Dhabi giving Dubai's pet projects (EK) cheaper fuel than available locally. Last I heard Abu Dhabi was trying to blackmail Dubai yet again.

I am sure that I've mentioned this on FT before:

1. The UAE's ultimate power is not subsidizing Dubai's pet project that is Emirates.
2. The UAE has a lot of oil and it's running out is not happening this decade or next. It's just that Abu Dhabi has most all of it while Dubai never had a whole lot.
3. The UAE's ultimately powerful royal family (the house that is Abu Dhabi's) is not that in love with Emirates' owners (which is the house that is Dubai's). ;)

I'll have to pull up my FT post on this matter before. :D

not bad at all..
 

flew EK in Y on A330 ATH-DXB and 77W DXB-JNB and back.. food was great, seat width not a problem for my lard-..... service was impeccable.. IFE on 77W is AMAZING!! plenty of legroom.. this was at Christmas time so flights were full to the brim. It was not uncomfortable at all..

I know!! I love the 77W. I don't notice the tight seat width at all (but I am VERY VERY thin) and I love the extra legrom, and of course, the IFE is excellent. I'm not an A330 fan though :p

[QUOTE=sadiqhassan]Do you have a source for this? All official sources that I have read, explicitly state that EK received no government favours. This is different from other benefits that it receives (such as low oil prices - but this is because oil is cheap in Dubai, not because EK is getting the easy way out.) I do not have connection with the top management at EK (sadly ;) ) but I do know some people that work for them, and I have been reassured many times that nothing happens that it off the books. If this did happen, other countries would probably close their doors to EK, and they would have nowhere to fly to.



I think your post here sums it up. If they did receive government assistance and made it public they would be cut out of several destinations. I personally don’t have a major problem with EK getting assistance from the Royal Family. It is keeping fares low and offering an alternative for consumers. As long as it does not lead to a monopoly in the distant future.

As for my source I do not have anything "official" (of course :D ). But I did watch an interview with the now late Royal family member who was on the board of both A1 and EK (The interview was in Australia shortly before he passed away in Brisbane and was flown back to Dubai :D ). Saying that for him the two most important things for the future or Dubai "the jewel in the UAE crown" was EK and A1 and how the board (the royal family) will be doing all it can to grow and make EK the best airline in the world (We will help them any way we can without being to obvious about it). Yes they get cheap fuel as it in cheaper in the UAE than other parts of the world but do you think if I established an airline based in Dubai I would get all the same benefits the EK get ....I doubt it

But what do you mean by benefits? If you started an airline in the UAE, you would get the same ridiculously cheap oil prices as Emirates gets...

Cheers

I don't know sadiqhassan... I still feel that Emirates gets a few favors every now and then and a couple of "lets look the other way"... IMHO, I believe that the rivalry between the emirate of Dubai and Abu Dhabi is so "vicious" that I honestly cannot believe that the royal family of each emirate is not somehow involved... Let's see what happens when the oil runs out in a few years.

If they are so expensive, as you claim, but also have excellent load factors as you also claim, what is it that is attracting customers??? I have never flown EK but have flown SG and CX and would definatley fly them if I was in a premium cabin rather than QF business. But surely there must be something that is attracting the custom. CX and SG are excellent airlines and in all fairness I would not fly EK over those two if EK was more expensive.

Edit: I just did a search and EK was the second cheapest option SYD-LHR for July travel in Business....sounds more like they are adopting my pricing strategy :D

Abu Dhabi's oil is not running out in a few years, at least not in the next 10-20 unless they radically increase extraction/production. Dubai's oil is another matter entirely, but it never had anywhere as much as Abu Dhabi does.

The dynamics of intra-UAE politics is very interesting. Then again it's "me against my brother; my brother and I against my cousin; my brother, my cousin and I against the tribe; my brother, my cousin, my tribe and I against the other tribes; my brother, my cousin, my tribe, the other tribes and I against the outsiders." And so on.

If you do a search on the web, you will find plenty of articles which point to cheap labour in Dubai (these are general and not specifically related to Emirates), however, I would be very surprised if one of the main factors in their success was the relatively low costs of using Dubai airport.

Additionally, as Dubai is their base, and doubtless they have staff based in other cities around the world, they are going to benefit from more cost effective routes transiting their own country, just as SQ, CX and other Asian and Middle Eastern carriers will.

BA and LH probably have the edge if you are flying from the Middle East to anywhere in America (perhaps with the exception of New York, but even then BA or LH may be more competitively priced). But flying to Asia Pacific from Europe, EK is bound to be able to be so competitive, because its frequencies, and as I mentioned the relatively low costs at Dubai (I stand to be corrected as far as Dubai is concerned, but I can't believe that EK is paying a lot to use this airport).

The assistance EK receives is rather indirect. Much of it revolves around the airport. For instance, there is only one ground handling agent at DXB -- Dnata, which is owned by EK. All other airlines at DXB must use Dnata for all services (ramp, ticketing, pax handling, etc.). Dnata's fees are quite high compared to airports where services are competitive (e.g. most of Europe). The govt perserves this monopoly for EK which forces other airlines to subsidize EK. Want catering? Your only choice is Emirates flight catering. Who was contracted for all of the IT infrastructure for the new terminal at DXB? Mercator, EK's systems integration subsidiary. If the government were to allow competition for all of these services, EK would be much less "profitable"

Other airports are on the table for discussion and more, including from those in the UAE establishment that don't want to see Dubai "get it all". In other words, EK's "monopoly" won't be around forever as much of the UAE's government is not eager to let Dubai "have it all".

It must be remembered that more direct national government ownership of airlines and airport authorities/facilities exists elsewhere -- or existed elsewhere -- and that's been no guarantee of success. If anything, that's normally been a formula for lousy travel (with notable exceptions).

Indeed... I meant to say wonder what would happen to EK once the oil runs out? Wonder if they will add on a hefty fuel surcharge to their tickets...

LOL :D ... Oh so true... Very interesting dynamics indeed...

Bingo!! Cheap labor is where EK maintains a huge advantage over most other carriers. In most businesses (and I would imagine in airlines as well) labor costs are the biggest expense out there. I would be that their flight and cabin crews wages are competitive with the rest of the world, but where EK has the advantage is their ground staff, who are being paid peanuts in comparison to their counterparts in Europe, the US, etc. They can pass these savings on to the customer in the way of lower airfares, keeping their flights full. If you do a search on itasoftware.com from KWI for example, pick any 10 markets which EK serves and they will be in the top three for lowest price on all 10 destinations. Check routes to Europe and the Euro carriers are sometimes almost double the price.

I'm sure there are other advantages that EK has at their Dubai hub, although I think the fuel price disparity is not as great as some would like to believe.

Stopping an airline flying trans-tasman if it wants to is very difficult if not impossible. NZ & Australia have an open air trans-tasman agreement which means that any airline flying to one country can fly to the other, include freedoms between the two countries.

NZ & QF have often used EK as an example for why they should be allowed to merge/engage in anti-competitive practices.

Well the airlines I fly most often have 34 or similar pitch and at least 18 inches (if not more) width. EK's seat is noticeably smaller in economy (and in business for that matter).

This i agree. All airlines that are majority owned by governments would have some sort of "help." For SQ, the increased insurance costs after the tragic crash in Taipei was picked by up the singapore government. Im sure Emirates would have some sort of financial assistance as well.

For airlines such as Qantas or US based airlines that do not have any government state, do not have this financial support to depend on.

But if you talk to these airline officials, im sure they will tell you to the tone of " its strictly business." a bit similar to the concept of the american TV show, "the Apprentice" by Donald Trump.

I'm jealous :p The airlines I usually fly normally have seat pitches around 31"-32", so EK's 777s are a welcome treat. I've heard great things about NZ's Y class seating, though.

Cheers

QF doesnt have "help"??? Have you checked out SYD-LAX prices recently? And the government has prevented SQ from flying that route....QF derives 15% of its profit on that single route....thats protection....
US based airlines....check out the assistance they got after 9/11
Airlines are the most protected business in the world IMHO...partly because of the dependance of air travel now, and more importantly because for a lot of countries they represent a certain level of national pride....and also lets not forget the $$$$

Last time I flew NZ's Y class long-haul, there was no personal IFE. :(

Didn't QF also get help from the Aussie govt indirectly? I heard that the govt has shown partiality to them over other Aussie competitors itself most notable Ansett?

I think you miss the point, which is that the airline is likely subsidized by other group companies (e.g. Dnata and Mercator) who are the beneficiaries of government spending (in what are likely not competitive bids) or forced subsidization by other airlines.

Complicated -- or not so complicated -- such types of arrangements are not something I'm unaware of. Furthermore, those kind of arrangements are not unique to EK.

I don't see what the complaint about EK is, one way or the other. Even if there was unprecedented subsidization, why should I care? If a foreign government want to subsidize global travel and such doesn't generate long-term anti-competitive outcomes, why should I not welcome the financial assistance? It's not like such an arrangement is perpetually sustainable. The Soviets tried it, and it failed. ;)