Global Economics

An Airline With A Deafening Roar


Habib Fekih was traveling in the Mideast as a salesman for European planemaker Airbus in 1985, the year Dubai's ruling family set up a dinky airline called Emirates to shuttle Pakistani workers between Dubai and Karachi aboard two leased planes. ``Nobody believed Emirates could be a successful airline,'' recalls Fekih, who now heads Airbus' Mideast subsidiary. ``It was the joke of the day.''

Nobody's laughing now. Emirates today is the world's 10th-largest airline, winning praise for top-notch service as it expands everywhere from New York to New Delhi. And it's buying airplanes at an astounding rate, with $37 billion on order and billions more expected soon. No other carrier's order book comes close. That gives Emirates unparalleled clout with Airbus and Boeing Co., (BA) the more so because Emirates buys only widebodies, the aircraft makers' most profitable models. Indeed, Emirates is already forcing Airbus and Boeing to design new widebody planes to its specifications and to undertake costly revamps of existing models.

Following the Dubai Ports World controversy, could Emirates use that power to hurt U.S. exports by steering multibillion-dollar orders to Airbus instead of Boeing? Aviation industry experts say Dubai's rulers are unlikely to let politics sway their purchasing decisions.

But Emirates and its blunt, British-born president, Tim Clark, sure know how to make suppliers sweat. He recalls that when Boeing was considering launching its new long-range 777-300ER, its program chief, Lars Andersen, ``came to me and asked, 'What do I need to do to get you to buy this plane?''' In exchange for carte blanche on design specs, including size and flying range, Emirates ordered 46 of the new planes, more than any other carrier. ``Clark knows what he wants, and we listen,'' says Scott Carson, Boeing's executive vice-president for sales.

In hopes of snaring orders for 40 to 60 planes from Emirates, Airbus has reworked plans for its new A350 with a new wing design and other modifications that have added more than $1 billion to development costs. Boeing, with its 787 Dreamliner competing for the same order, could buckle to pressure from Clark to develop a stretch model with up to 310 seats. Clark is warning Airbus that if it doesn't spend millions to improve the fuel efficiency of its A340-600 jet, Emirates could cancel or delay its $4 billion order. ``Oh yes, we are working them over,'' he says. While most airline executives keep mum about their talks with the planemakers, Clark steps up the pressure by speaking openly about his demands.

DOUBLE-DECKERS

This upstart has buying muscle, all right. And with a fleet set to grow from 80 to more than 150 planes by 2012, including 45 of Airbus' new A380 double-decker megaplanes, Emirates can keep expanding from its Dubai hub. But could that projected growth prove to be a mirage? Dubai's population is only 1 million, and Emirates is still a fraction the size of the top U.S. and European carriers. If growth stalls, billions in Boeing and Airbus orders could evaporate.

Not likely. Clark and Emirates Chairman Sheikh Ahmed bin Saeed al-Maktoum have shrewdly developed Dubai as a hub linking Europe and the U.S. with booming Asian markets. Clark, who has run Emirates since its founding, is a veteran airline executive who has lived in the Mideast for 30 years. The carrier posted $637 million in profits last year on $4.9 billion in sales. Its flights are 70% full, on average, a healthy ratio. Travelers rave about extras such as a 200-channel in-flight entertainment system. ``It's like the difference between a motel and a really nice hotel,'' says Fred Watts, a businessman waiting in Emirates' sumptuous lounge at John F. Kennedy International Airport in New York.

There are some clouds on the horizon. Mideast political instability is a constant worry, and as other carriers acquire longer-range aircraft, Dubai's attraction as a hub could diminish. But for now, Emirates looks set to stay on course -- and to keep buying those planes.


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus