Aviation, tourism and energy writer for the Business Herald

Big Read: How Emirates took on the world

An Emirates Airbus A380 superjumbo
An Emirates Airbus A380 superjumbo

The big western airlines were already decades old in 1985 when Tim Clark joined a tiny Middle Eastern start-up with two aircraft leased from Pakistan.

Clark's job was with Emirates, an airline set up with a US$10 million loan from Dubai's royal family. Its first flight took off from a dusty runway bound for Karachi.

Brought in as head of airline planning, the economics graduate had a vision that would go on to see Dubai at the heart of an aviation boom like no other. With two-thirds of the world's population within eight hours of the emirate, Clark aimed to have his new airline carrying millions of them.

By various measures, that vision has come to fruition; the airline's growth has been staggering.

While other established airlines have folded, merged or gone backwards, Emirates has known only one trajectory - up.

Thanks to its international reach and billions of dollars spent on promotion, marketing and sponsorship, it's the biggest brand in aviation, has the largest available flight kilometres of any international carrier and in absolute size, is in the top three behind American and United Airlines.

"I wouldn't have dreamt that in 1985 when we set the thing up," says Clark - now Sir Tim, and one of aviation's most powerful executives.

Asked about Clark's place in the airline industry, a leading aviation analyst this week described him as being "slightly south of God".

Clark extends a half-hour interview with the Herald to nearly an hour at Sydney's Shangri-La hotel. There are fine views out to the Opera House, but much of his focus is on the meeting room, where there are two scale models of the Airbus A380 superjumbo, Emirates' signature aircraft.

The airline now has more than 80 of the double decker planes and close to 150 other widebody aircraft flying to more than 150 destinations. Almost the same number of aircraft are on order and it carries more than 50 million passengers a year.

"By the mid 1990s we had 40 aircraft and probably thought we would cap out at about 120. We thought we could be at the scale of Singapore Airlines (which today has 103 aircraft) and everyone said we were barking mad."

Watch: Emirates boss explains A380 interior design:

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The NZ connection

Emirates has been flying to Auckland since 2003, adding a Christchurch service the following year. It scaled up massively in 2009 with three A380 services to Auckland and from the end of this month capacity will surge again with the number of superjumbo services increasing to five, including replacing 777s on the Christchurch route and the direct Dubai-Auckland service. This will add 2500 more seats a week each way.

Growth elsewhere is strong. So far this month the airline has announced new services to all parts of the globe: Guangzhou, Moscow and Florida.

What about fares?

Rival Middle Eastern carrier Qatar will start Doha-Auckland services from next February and Clark says there is ``theoretically'' room for both carriers.

''Both carriers are growth animals they thrive on growth and looking for new markets and being innovative and experimental in what they do.''

The extra competition meant times couldn't be better for New Zealand travellers.

"The fares are already down. In this part of the world we're seeing arfares that were around eight to 10 years ago - that's supply and demand,'' he says.

The big Asian carriers were adding more capacity to Australasia and boosting competition but Clark says there are product differences.

''If they come in and trash the pricing then that's up to them but it is a long way to go and if you've got a moderate or mediocre product.''

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When will Emirates' growth end?

"When we increase supply and demand doesn't grow with it, we're not there yet simply because there are multiple city pairs that we want to do," Clark says.

The airline has modelled up to 60,000 places in the world that could be linked, including little-known cities in China and Latin America.

"If you get disequilibrium you will know the model has maxed out. I don't see that happening because there are so many city pairs that are untouched by long-haul carriers in the second level segments where the markets are, but people don't believe in or don't know about."

Clark says the main constraint is at its Dubai hub, which can't keep up with capacity growth in spite of a seemingly never-ending building programme.

The airport needs to push through tens of thousands of people an hour and increase the number of gates three-fold to meet Clark's growth goals.

"If you can build a hub to to do that then it opens up a huge spectrum of offerings. Will this model work? - yes with the geocentricity of Dubai." he says.

"It goes back to the business model of 1985 with access to primary markets."

Emirates business class seats. Photo / Grant Bradley
Emirates business class seats. Photo / Grant Bradley

Storm clouds about

The fall in fuel prices is double edged for Emirates, in an industry that was notorious "for racing to the bottom," he says.

"Now we've got low costs everyone's saying 'let's go and grab all the business' but unfortunately everyone has got it at the same time - consumers globally have had an absolute field day."

Analyst Peter Harbison, executive chairman of the CAPA Centre for Aviation, says there are other storm clouds about.

Emirates is facing growing competition from Middle Eastern carriers Etihad and Qatar, and also the big Chinese long-haul operators.

"It's a tough world on long-haul now," says Harbison. "We used to say the thing that kept Tim awake at night was the Chinese carriers."

And there's something else, deeper, that Clark has in the back of his mind. Outside the usual economic and demand fluctuations, popular anger that fuelled the Brexit vote and is behind support for Donald Trump could play out in aeropolitics.

The introduction of the jumbo jet in the late 1960s has been credited with making mass long-haul travel feasible, bringing about profound political and social change. Similarly, when Emirates - and then other airlines - ramped up global operations and linked cities in ways that had not been imagined, they broke down barriers too. Now Clark wonders how long that will last.

It is possible he has to understand the balance because aeropolitics drives the global demand for Boeing aircraft which is the largest single exporter in the US. If you compromise that then down they go.
Peter Harbison, CAPA's executive chairman

"You've got to be very careful about that because at this particular juncture you see the effects of globalisation and free trade."

Moves that were good for the global economy in the 1990s are now being questioned.

"All the fantastic things that were happening in general as we knitted as a community and we broke down all the barriers about faith and creed, colour sexuality and gender.

"We thought this could last forever and have deployed capacity to the most bizarre city pairs and seen traffic move - now that's all changing. Are there paradigm shifts in this?"

He says that question could be answered by the result of next month's US election next month - not that he'll be drawn on who he supports.

"I'm not going to take sides on this otherwise I will get in big trouble, but if there is a move to the strange right position, if that happens, if the kind of statements he's [Trump's] been making about trade - a degree of isolationism - will this pan through to aeropolitics?

"It is possible he has to understand the balance because aeropolitics drives the global demand for Boeing Aircraft, which is the largest single exporter in the US. If you compromise that then down they go."

Emirates A380 aircraft.
Emirates A380 aircraft.

Throwing bricks

In May the Emirates Group announced its 28th consecutive year of profit - US$2.2b, up 50 per cent from the previous year.

Opponents "threw bricks" at Emirates in the early days, says Clark, and "said we were cheating, saying we had free oil, government money, because they couldn't understand how this could happen and for us to still make money and quite good money."

The airline has spent years pushing back on those claims, and others about paying low wages, especially from opponents in the United States where the big three carriers have fought hard against Emirates entering that market.

Analyst Harbison - who offered the "south of God" line - says Clark is right about the Emirates standing on its own.

"He's a phenomenon, one of the two (along with Maurice Flanagan) who set up an airline with two aircraft, no guarantee from the government that it would have any protection whatsoever and built the most massive empire in the world," said Harbison, on the sidelines of the inaugural New Zealand Aviation and Travel Summit in Auckland.

"Tim's no softie - when you've knocked around in the airline industry as long as he has you have a few battle wounds and a few good scars to cover them up, you know how to fight."

Emirates economy class on an A380.
Emirates economy class on an A380.

"Put in the big windows"

Plane makers know the power of a Clark pushback too; in 2014 he walked away from a $16b Airbus deal.

When Clark was named Aviation Week's person of the year in 2013, Airbus president Fabrice Breglier said: "He knows everything you could possibly know about an aircraft, just give him the parameters and he'll tell you immediately if it's a go or a no-go."

Clark says it's a matter of historical record that the bigger the airline got, the more successful it became.

"We didn't buy [aircraft] in twos or threes, we bought them in 100s and 200s so it was only a matter of time before the manufacturers began to look at what we were doing, understanding we were a serious player and it was probably a good idea to adapt what they did."

"With the 777X (which Emirates will get in four years) we worked with them and said 'put the windows in like the 787' they said structurally they just couldn't do it. I said 'just put them in' so they put them in."

He is also is demanding that manufacturers produce aircraft capable of flying for 20 hours, which could link Dubai and Chile.

Circling the globe

Emirates has about 15 per cent of traffic on the transtasman route and the respect of home carrier Air New Zealand, which with Virgin Australia has just over half of the market.

"We have a huge amount of respect for what Emirates does on a global basis," says Air New Zealand chief revenue officer Cam Wallace. "They have a different business model to us and obviously our businesses do overlap and compete.

"We're very pragmatic and have to compete with anyone, we're up for it."

The diplomatic tone is a far cry from when Emirates first entered Australasia, when Qantas (now in a deep partnership Clark's airline) and Air New Zealand expressed anger and alarm at the prospect of the Middle Eastern giant using rights to fly on across the Pacific and to the Americas, creating a massive operation circling the globe.

"There was a shock reaction in New Zealand with open skies - now they're going to go across the Pacific they'll be in Los Angeles and we'll be all toast," says Clark.

Clark is now in his mid-60s and this year the Gulf News reported he had up to another decade at the airline.

So there's no hurry to join all the dots and Clark says he "doesn't deny that Emirates has aspired to a global operation in terms of circumnavigation."

- NZ Herald

Grant Bradley travelled to Sydney courtesy of Emirates.

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