Bloomberg News

Emirates Widens Gap as Record Order Builds Dominance

November 14, 2013

An Emirates A380 Aircraft

Emirates is buying more than a third of all the superjumbos Airbus has sold, and the airline is urging the planemaker to build an even larger model that would seat 750 people in three classes and as many as 1,000 on specific operations such the Muslim Hajj pilgrimage. Photographer: Paul Thomas/Bloomberg

Emirates is preparing to draw a line in the sand of this year’s Dubai Air Show.

The carrier is set to place the biggest order yet in aviation history in coming days, in a commitment the company has called “enormous,” for as many as 150 upgraded Boeing Co (BA:US). 777X planes. Already the largest long-haul airline, such a purchase would set Emirates further apart from rivals and secure its position as the dominant carrier for the next generation.

Based in Dubai at the crossroads of global flight paths, Emirates has morphed from desert upstart into the biggest international carrier that’s a third larger than its next rival. Such dominance puts pressure on Airbus SAS and Boeing, whose wide-body aircraft form Emirates’ fleet, with design and success of the planes increasingly decided by the Middle East carrier.

More from the Dubai Air Show 2013:

  • Slideshow: The 2013 Dubai Air Show
  • Airbus Looks at A380 Operating Boost With Winglets, Seats
  • Boeing Beats Airbus in Dubai Airplane Battle
  • Qatar-Emirates 777 Order Pact Squeezed Best Deal

“Emirates wants it all - hot weather performance, ultimate range going halfway around the world, and the highest payloads,” said Robert Mann, an aviation consultant at R.W. Mann & Co. “For anyone else who buys a plane who isn’t going to need all those performance characteristics, it’s like buying a Ferrari to drive it to the supermarket.”

New Airport

Emirates’ planned order will be the highlight of the Dubai Air Show, the biennial aviation expo that starts Nov. 17. The carrier has used past events to place major orders, buying 50 current-generation Boeing 777s in 2011 and six years ago 70 Airbus A350s and 11 A380 superjumbos.

Among other carriers set to announce purchases at the show are Qatar Airways Ltd and Etihad Airways PJSC.

This year’s event takes place at the new Al Maktoum airport for the first time, which Dubai is erecting to eventually take over from the Dubai International site. That airfield handled almost 58 million passengers last year, narrowing the gap to London Heathrow, the busiest international hub.

Emirates will lean on the new twin-aisle Boeing jet, with a range of 9,395 nautical miles, to expand its reach as it links its Dubai hub with almost any destination in the world. The deal aims to secure its dominance through at least 2030 and underpins its role as the make-or-break client for planemakers.

Largest Order

The carrier’s ability to flex its muscle is forcing Airbus and Boeing into a balancing act of satisfying one of the most active yet demanding jet buyers without alienating relationships with other carriers. Deutsche Lufthansa AG CEO Christoph Franz has bemoaned the design of wide-bodies being designed with ranges that U.S. and European carriers don’t necessarily need.

The Middle East “is an extremely important market for us” with significant growth prospects, said Harald Wilhelm, chief financial officer at Airbus parent European Aeronautic, Defence & Space Co.

Jeff Johnson, Boeing’s president for the region, said today that while it’s positive to have a customer with Emirates’s capabilities to help develop a plane, the 777X has numerous potential clients that have all influenced its design.

“They’re a heavy influence on what we do but we have to build these planes for the whole market,” he said in an interview in Dubai. “I don’t see it from any one carrier in particular.”

Expansion plans at Emirates, Qatar and Etihad highlight how the center of gravity for global air travel is has shifted to the Middle East from Europe and North America. The three have a combined 347 wide-bodies on order, according to Doug Harned, a New York-based analyst at Sanford Bernstein.

Gulf Growth

“They’re a significant long-haul hub carrier today and arguably they’ll be more significant in a decade’s time if these growth plans come to fruition, ” Penny Butcher, an aviation analyst at Morgan Stanley in London, said of Emirates. “An order of that scale would continue their growth plan well into the next decade.”

Persian Gulf and Middle East carriers will propel increased flying in the next 20 years with growth of 7 percent, eclipsing of other markets, Boeing and Airbus predict. Emirates, whose international traffic is almost 30 percent bigger than No. 2 United Continental Holdings Inc., already operates 44 more wide-bodies than the next biggest long-range jet operator, Delta Air Lines Inc (DAL:US).

Growth ambitions go beyond its home hub. Emirates this year began operating flights between Milan, and New York as the network grows beyond connecting cities as diverse as Manchester in northern England and Thiruvananthapuram in India via Dubai.

Fuel Burn

Even as Middle Eastern carriers become a growing force, Airbus and Boeing can’t ignore their more traditional customer base. Singapore Airlines Ltd. was the first buyer of Boeing’s 787-10, the largest Dreamliner on offer since June, and Lufthansa led Emirates in committing to take the new 777X.

Boeing is rejuvenating the 777 with a new wing and engine to cut fuel burn. The first variant, the 777-9X, will be able to fly as far as 8,000 nautical miles with more than 400 passengers, consuming 20 percent less fuel than the existing version. A second type, carrying 350, will push past 9,400 nautical miles, enough to go nonstop from New York to Singapore.

“Equipment makers can’t have Emirates dictating to everyone else out there,” said Robert Stallard, London-based analyst at RBC Capital. “You’ve got Japanese, European and American carriers who have lots of 777s, and if you add all those old 777s up, there’s quite a few around and the replacement needs of all those carriers combined are greater than those of a single carrier.”

Boeing shares rose 0.6 percent to $133.17 in New York trading yesterday.

Emirates may test its market influence with the A380 double-decker. Emirates is buying more than a third of all the superjumbos Airbus has sold, and the airline is urging the planemaker to build an even larger model that would seat 750 people in three classes and as many as 1,000 on specific operations such the Muslim Hajj pilgrimage.

“We’ve told them right from the start we wanted the bigger -900, not the -800, when we took the first aircraft in July 2008,” Emirates President Tim Clark said. “We’ll work on them.”

To contact the reporters on this story: Robert Wall in London at rwall6@bloomberg.net; Julie Johnsson in Chicago at jjohnsson@bloomberg.net; Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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