Emirates, leading long-haul low-cost airline? The economist

[Vinnie-Winnie]

Dear all,

I would like to share this interesting article found in the economist about emirates! Since it is subscription only let me summarize it in a few sentences:

Common wisdom in aviation said that the no-frills could only be applied on relatively small journeys. Passengers want frills on these flights and anyway long distance flights and fuel eat away the savings made by a quick turn-around at airports. A few airlines tried but failed.

Today though Emirates seems to be the leading one thanks to its low cost structure. Goldman Sachs has calculated that Emirates profit-per-seat matches Ryanair's one, twice de level of Lufthansa and 2/5 more than BA.
It's main advantages: A home base where there are no corporate and income taxes, and the backing of the ruling family in Dubai. But the best savings are made on cheap labour, round the clock operations, low airport fees.

With the A380 the paper even guesses that u could go to Australia for €400 return!

But with Etihad and Gulf airways entering the fray, over-capacity might lead to a price-war, with even cheaper flights

ps: Ok I hope I haven't done a copyright infringement here. If one of you has any doubts tell me and i'll mail the Economist for their approval! In the meantime I hope U will like these hard facts!

[chornedsnorkack]

With the A380 the paper even guesses that u could go to Australia for €400 return!

Tried the great circles from Dubai.

The structural payload limit range of Airbus 380-800 passenger version is about 12 000 km, a bit over 90 tons payload. And with 555 seats, a bit over 50 tons payload, they seem to get 14 800 km. So that is the 8000 nm which is the quoted range.

Drawing 12 000 km radius great circle from DXB, Sydney is just inside the range. On the opposite side, so is JFK. London is closer and more comfortable. This range includes all required reserves, but no wind.

So, can anyone comment on the winds on DXB-SYD? What is the actual still-air range needed to operate both ways?

555 seats would probably have no problems. 857 seats might be a different matter.

[Vinnie-Winnie]

On the website-related forum, quit a few people complained about the quality of some posts recently.

In my opinion, this was a good topic! Can anyone tell me why no-one hardly replied?

Childish and quit a fftopic: post but yeah I'm very puzzled!

C ya


Vincent

[Avro]

Dear Vincent,

In my opinion, this was a good topic! Can anyone tell me why no-one hardly replied?

Too be honest I overlooked this topic a few days ago when it was new. With all the new messages per day on this site it's becoming impossible to read al he topics, let alone 75% ....

Anyway let me respond to this very interesting topic:

Common wisdom in aviation said that the no-frills could only be applied on relatively small journeys. Passengers want frills on these flights and anyway long distance flights and fuel eat away the savings made by a quick turn-around at airports. A few airlines tried but failed.

Well it's quite logical that the most no frills airlines will operate short haul flights. They are namely obliged to serve something to eat during very long flights I suppose. But this doesn't mean that there are no long haul LCC. If I'm correct Zoom is a low cost airline doing flights between several cities in Canada and the UK. They are already around for some time now and don't seem to have too much trouble to survive.

Anyway, as the article sais it's more difficult to be a LLC carrier on long haul flights since the margin where you can cut costs will probably be smaller compared to the overall costs of the flight.

Today though Emirates seems to be the leading one thanks to its low cost structure.

Since when does Emirates have a low cost structure ??? Do they mean a company structure where they squeeze every penny and make a high profit margin per pax like explained after in the text ? Or do they mean that Emirates has a pricing structure like a low cost airline? I wouldn't say the latter one, but they indeed seem to do very well the last couple of years.

The arrival of the A380 in their fleet will indeed be a big milestone, but however i'm still skeptic if they'll be able to keep 45 of those flying around to so many destinations..

Voilà some food for thoughts

Cheers
Chris

[sn26567]

In my opinion, this was a good topic! Can anyone tell me why no-one hardly replied?

This is indeed a good topic. I am sure many people overlooked it because the Civil Aviation forum (the right one for this topic) is less popular than the latest news forum or the spotting forums.

Please keep posting such articles. They honour our Luchtzak website.

You have also pinpointed the tax advantage of operating in the Arab peninsula. I remember that former member "themole" was angry when SN... Fons mentioned this, and he insisted it was clever management that made the success of airlines like Emirates and the like. I rather think that it is a combination of both factors (Ireland is also known for its low corporate taxes!).

[Vinnie-Winnie]

Hello All,

Well 144 page views is not worth the "hassle" if you ask me! As Both of you pointed it out the general aviation forum is less popular. I find this very sad because at least in this forum you can actually expand your ideas. What can I say to such news as for example Etihad coming to BRU? great excellent but what else?

Anyway I suppose most people prefer the latest new section so be it can't do anything about it!


Back to the topic though:

Dubai definitely can't rely on oil for example: As I found on Wikipedia, "Oil reserves in Dubai are less than one-twentieth that of the emirate of Abu Dhabi, and hence oil income is a minor contributing factor to the city's prosperity."

So Dubai has had to diversify it's sources of wealth: it's a major trade-route between Europe and Asia, is in the process of opening a new stock-exchange, and finally is selling itself as a major touristy destinations.

Emirates in that sense is a potential huge source of business. Although it doesn't appear to receive direct subsidies I can understand why it gets indirect financial facilities. This obviously violates it's free-trade credentials but anyway it's a tremendous good way for them to establish themselves as the leading middle-eastern country!

Well cheap landing charges and cheap labour from neighbouring countries insures that it can save a lot of money in the first place. Being in the most oil fertile part of the world must also definitely ensure lower oil prices that's for sure

But yeah will it not over-extend itself as some others did in the past?

[phoenix28]

http://www.economist.com/business/displ ... id=5135765

Article on the aviation market, and yea has a thing or two about Emirates. Good topic Vinnie.

[Advisor]

I'd put my money on Etihad, though Emirates is aggressive, but in the long run, i think Etihad would score, much more.

[Vinnie-Winnie]

I'd put my money on Etihad, though Emirates is aggressive, but in the long run, i think Etihad would score, much more.

Why?

[Advisor]

Focussed group

[regi]

A bit more positive please: it is already AND Emirates, and Gulf Air, and Etihad ,and Qatar, and ... There is not even a consolidation happening. It is on the brink of expansion in different directions. First of all: the big expansion through the use of new modern and larger airplanes. Secondly by the start up of local LCC airlines.
We ain't seen nothing yet.

[KiwiKid]

Emirates uses air freight to subsidise overheads aswell. It's business and first class also offset the very low fares it can offer on large aircraft to those at the back rows (cattle class)

[Advisor]

I'd put my money on Etihad, though Emirates is aggressive, but in the long run, i think Etihad would score, much more.

Why?

On second thought, I think Vinnie-Winnie has aptly suggested that THE BRAVE MIGHT SURVIVE.

With the recent updates and sourced information, Emirates is more bullish and keen on a more global outreach and plan to stay more vibrant in the aviation market than most of its competetiors.

I think, i have made a mistake in suggesting that i would put my money on Etihad. I rather suggest that i would put it on Emirates because of their policies and yes their plans.

Thanks for the paradigm shift, Vinnie. I owe you one

[chunk]

Having a low cost base is no doubt helping Emirates, but also note that they don;t have cut throat low fares in order to get passengers on board either. The same cannot be said for Etihad who frequently cut fares in half in order to get bums on seats. The market for these airlines is not local - it is global as you can see by their route networks. Add the fact they are so centrally located and they are in almost an ideal position. Personally I would go nuts being on a plane any longer than the KUL - AMS flight i did three times last year and I know a lot of others are the same.

That said - all will survive (though maybe Gulf Air will struggle) but Qatar and Etihad will survive as government props them up - Emirates has already proved that isn;t necessary in their case. Just go to Glasgow every day and see the loads on the 77W they have on the route now - packed to the rafters.....