No stopping Emirates from flying high

Tim Clark has lost count of the number of bricks rivals have hurled at him.

The onslaught does not shake him but "it irritates me", admits the man who heads one of the world's fastest-growing global airlines.

As president of Dubai's home carrier Emirates Airline, he stands accused of everything from benefiting unfairly from subsidised oil and airport services, to flooding the market with cheap seats to undercut rivals.

Competitors need to look only at Emirates' record of achievements to have reason to worry.

In under three decades, it has grown a fleet of 201 aircraft, with another 193 ordered. An average of two new aircraft will join the fleet every month over the next five years.

Emirates is the world's largest operator of the Airbus 380 - the biggest passenger jet - with 35 of the giants in service, and 55 on order. Singapore Airlines, to compare, has 19 A-380s and five more coming.

In a May ranking of the world's biggest international airlines by total number of seats and distance flown in a week, Emirates topped the list compiled by Sydney-based consultancy, the Centre for Asia Pacific Aviation.

The airline clocked more than five billion available-seat kilometres, a measure of total capacity derived from the number of seats offered multiplied by distance flown.

United Airlines was second with more than 3.7 billion km flown and Lufthansa third with 3.5 billion km. At No. 9, SIA topped the Asian list with 2.3 billion km, followed closely by Cathay Pacific.

Emirates' growth comes on the back of beefing up capacity in existing markets and aggressively launching new routes. Last year, it started 15 new routes, and started at least another seven so far this year.

Mr Clark, a British citizen who was 35 when he helped start Emirates in 1985, tells The Sunday Times in an interview: "Knowing how hard we had to work, and all the blood, sweat and tears that went into taking the airline to where it is now... and then to be told by others that it's too good to be true, you're cheating; it's a pity but that's where we are."

But he adds: "If you're a fighter and people start to throw bricks at you, you fight harder. The more successful we become, the more the bane and I say to the guys I work with that the moment it stops, we know we have a problem, we are not doing our jobs properly."

He declares that Emirates will defend its position stoutly, as it has many times against baseless accusations. Otherwise, governments will be persuaded by their home carriers to keep Emirates out of key markets, he says.

The Association of European Airlines - which includes carriers such as Lufthansa, Air France/KLM and British Airways, which have embarked on major cost-cutting and restructuring to drive profits - has been especially critical of not just Emirates but also Abu Dhabi's Etihad and Doha's Qatar Airways.

Dubai and Abu Dhabi are part of the United Arab Emirates, while Qatar is a separate state. European carriers allege that the Gulf airlines enjoy special perks and benefits that distort the competitive landscape, and without a level playing field, the industry must step in to curtail their expansion.

Emirates, the biggest of the three, comes under the umbrella of The Emirates Group which also owns the ground-handling unit Dnata. The aviation group and Dubai airport are wholly owned by the government of Dubai.

Although its rivals cry foul, aviation consultant Sagar Shahane of Frost & Sullivan points out that Emirates is not a public-listed firm but its accounts are audited in line with global best practices by PricewaterhouseCoopers (PwC).

Aviation expert Shukor Yusof of Standard & Poor's Equity Research agrees but adds that because the airline is not listed, there is less clarity regarding its financial health.

Mr Clark contends that the Dubai government has "never had to put money in, never had to bail us out and they don't protect us in the aero-political environment".

In the last 15 years, Emirates has raised a total of US$26 billion (S$33 billion) for financing aircraft and other requirements. This has been done through various sources, including European and United States export credit agencies as well as non-conventional sources like Islamic funding.

Mr Clark and his management team run the airline under the close watch of chairman Sheikh Ahmed Saeed Al Maktoum, a senior member of Dubai's royal family who also heads The Emirates Group, the Dubai airport and the civil aviation authority. The group's top brass is made up of eight key executives who include Mr Clark and three other foreigners.

Mr Clark recalls only one occasion when the government made its presence felt in the running of the airline. It was after the airline lost about US$2 million during the winter of 1986/87.

"They said, 'We didn't start this airline to lose money so you've got to make sure that from now on, you never lose money.' After that, we never did," he said.

In the 2012/2013 financial year, Emirates reported profits of US$622 million, a 52 per cent jump from the year before. SIA made $379 million in the last financial year, and Cathay Pacific, HK$916 million (S$149 million).

So how does one explain the airline's success and phenomenal growth at a time when many others are shrinking capacity, watching costs closely and dealing with competition from budget carriers?

Analysts point to the close links between the people who own and run the airline, its good location and low costs including relatively cheap labour mainly from the Indian subcontinent.

The Emirates Group has more than 50,000 employees from more than 150 countries. It has more than 13,000 cabin crew members who collectively speak more than 50 languages.

The dependence on foreigners reflects the reality in Dubai, where more than eight in 10 residents are expatriates.

Mr Clark, who started his airline career in 1972 with now-defunct British Caledonian and later moved to Gulf Air in Bahrain before joining Emirates, says: "It is true that I work hand in glove with my chairman, who is a senior member of the ruling family and through him, I have direct access to the leaders of power in Dubai. If I want something done, like say we have got to grow the fleet or we have to do this and that, the chain of command is so small and quick, things get done.

"And yes, we are going to turn that to our advantage. I don't have a board, I don't have to worry about non-executive directors and I don't have to wait for a quarterly board meeting to get things done. We just do it and get on with it."

But with such freedom to act comes responsibility and zero-tolerance for errors.

In an indication of how tough his boss is, Mr Clark says: "We are not allowed to make mistakes. If we screw up and lose money, you will hear about it because I probably won't be sitting in the seat I am in and talking to you."

Now 63, he was appointed Emirates president in 2003 after 18 years of helping to build an empire which owes much of its success to the route network he established as head of airline planning.

Growth has not been without risk but he says the airline was able to expand quickly because the people he works for are "bold, brave, understand the issues and are prepared to take the risk".

Much of the airline's success has also been driven by its good location in the Gulf which is under eight hours' flight time to Europe and the same to fast-growing markets like Russia and Africa.

Dubai's proximity to the Indian subcontinent also provides a huge pool of potential traffic from one of the world's fastest-growing air travel markets.

Mr Clark says: "The geocentricity of Dubai was not lost on us. We sit plum centre - eight hours to the east, eight to the west, south and north. Within this eight-hour radius of over 6,400km, we have nearly three-quarters of the population of the planet."

Emirates' expansion in recent years has been focused mainly on Europe and Africa.

Mr Sagar says: "By channelling connecting traffic through its geographically fortuitous hub at Dubai, the airline has captured an ever-increasing share of international long-haul traffic."

Last year, Dubai airport handled 57.7 million passengers, compared to Changi's 51.2 million.

Mr Clark adds: "If we have an advantage over our competitors, it's because we have more access, more easily to these markets than perhaps they do." He points out that for Singapore, the east of Changi Airport is the vast Pacific Ocean.

Mr Shukor says: "One of the things we like about Emirates is that they clearly have the vision, have stuck to it and it has worked well for them."

He adds that a broad network with 134 destinations across 77 countries - SIA and SilkAir together serve 97 cities in 36 countries - and competitive fares have attracted travellers to Emirates.

But rivals, especially European carriers, have been unrelenting in criticising Emirates for dumping capacity and undercutting with its aggressive promotions and fare deals.

The airline is now offering Singapore travellers special website deals to more than 50 destinations in Europe, the US and Asia. But there are conditions attached, such as blackout dates. All-in return fares to London, for example, start from $1,276 and to New York, from $2,207.

SIA also has an ongoing deal of $1,308 to London. Its regular fare to New York is more than $2,700.

Mr Clark prefers to describe the discounts as competitive fares and makes no apologies for offering them. He says he must fill up three-quarters of an aircraft before he starts to make money. "We believe this stimulates the market and we let our volumes take care of the margins."

Airlines that continue to fly high despite challenges are those which watch their costs and harness technology and opportunities to drive business. Not those which are stuck in the Jurassic Age, he adds.

In his view, SIA, Cathay Pacific, Lufthansa and, more recently, British Airways are the few success stories in international aviation. After 40 years in the industry, Mr Clark says he has a succession plan for Emirates but his exit has not been fixed.

"If I were to drop dead tomorrow, would the company be able to continue doing what it is doing and would, from the team, emerge a leader? The answer is yes to both," he says.

"There is life for me after Emirates. I travel the world extensively and see nothing. My airline career has been spent in and out of hotels. There's a lot to do when I finally leave the business."

When is that likely to be? He says with a chuckle: "Even my wife doesn't know."

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