Emirates – The largest airline in the Middle East

Emirates is an airline based in Dubai and its integrated business and operating models have made Emirates commercially successful.

Emirates is an airline based in Dubai and is a subsidiary of The Emirates Group owned by the government of Dubai. Emirates has highly successful integrated business and operating model in the airline industry. It operates over 3300 flights per week or over 20 flights per hour.

Business Model

The core business of Emirates is to transport passengers from one place to another place in highly efficient way while delivering excellent customer services. It serves 144 cities in 81 countries. Emirates also has cargo business but smaller in revenue. For the year ending March 2015, Emirates carried 50 million passengers (10.7% YoY growth) and 2.4 million tones of cargo (5.6% YoY growth). What Emirates really did across its network on six continents was connecting people to places and businesses with opportunities.

Commercial Performance

For the year ending March 2015, overall revenue of Emirates was AED86.7 billion (USD23.4 billion) with 7% YoY growth. Approximately 81% revenue is from passenger sales. Emirates has operating profits of AED5.9 billion (USD1.6 billion) with 38% YoY growth. Overall profit margin stood at 5.1%.

Emirates Revenue (AED billion)

Figure 1: Emirates Revenue (AED billion)

Emirates Operating Profits (AED billion)

Figure 2: Emirates Operating Profits (AED billion)

*1 AED (United Arab Emirates Dirham) = 0.27 USD

Emirates Operating Model

In order to deliver high commercial success, customer satisfaction and to transport huge number of passengers, Emirates invests a ton of money in customer service, buying new aircrafts and upgrading its own airport terminal at Dubai Airport.

Emirates fleet

Emirates fleet consists only of wide-body aircraft and maintains policy of operating young fleet (average use of an aircraft is 6.3 years). As of September 2015, total of 229 aircrafts are in service and 268 aircrafts are in order. Emirates is the largest operator of A380 with 70 A380s in operations and 70 in orders. Emirates also has one of the highest utilization of an aircraft – 13.7 hours per day.

What Emirates does the best is to transport huge demand from multiple points to different locations through its hub. For example, assume Emirates has six aircrafts, five of them flying from different points in Asia to Dubai and last one flying from Dubai to London. All five aircrafts from Asia should land at Dubai within acceptable time window (within 3-4 hours) to send those passengers on single flight to London. Scale this model to a network of 144 cities with different time zones and with use of 229 aircrafts. Designing schedule to achieve seamless and hassle free traveling for passengers and at the same time optimizing revenue is very challenging.

Designing schedule is only one aspect, one also has to manage the schedule on daily basis given different challenges that take place around the world. Emirates has huge operations control group that successfully manages the fleet of 229 aircrafts around the world (with different time zones); any delays; technical problems; weather challenges etc. This group forms core of operations along with successful ground operations team at the airport. A peek into the Emirates control room video:

Other Services

Getting passengers on board is one component to be a successful airline. An airline also needs to service passengers within the flight through different services such as great meal, connectivity through internet and in-flight entertainment system.

Emirates flight catering: This facility has over 450 chefs preparing meals for over 1500 different menus. More details in below video:

Emirates also provides Chauffeur-drive service for First and Business Class passengers in 74 cities. As Emirates strives to meet the needs of its customers who want to stay connected while they travel, onboard connectivity is a key focus. Emirates invests over US$20 million annually to install and maintain Wi-Fi services across its fleet.

Apart from this Emirates has whole terminal at Dubai Airport for itself to manage its operations. Dubai Airport is a separate operations model by itself. Success of operations at Dubai Airport is one of the reasons for the success of Emirates. National geographic has multiple documentaries on Dubai airport. Ultimate Dubai Airport is one of them. Peek into its trailer:

Branding

Emirates has never compromised on its branding. It’s the Emirates brand that has made the airline successful. Emirates is the world’s most valuable airline brand, with an estimated value of US$6.6 billion according to the 2015 Brand Finance Global 500 report. Emirates has sponsored all major sports events such as 2014 FIFA world cup, 2015 ICC cricket world cup, Arsenal football club, Real Madrid football club, Tennis – US open. Emirates works with celebrities for its branding purposes. Latest ad featuring Jennifer Anitson.

Overall to be successful commercially, Emirates has to be successful in all operational aspects of the airline business.

Operations Chart

Figure 3: Emirates Operations Chart

 

Sources:

  1. http://www.emirates.com/ae/english/
  2. https://en.wikipedia.org/wiki/Emirates_(airline)
  3. https://en.wikipedia.org/wiki/Emirates_business_model
  4. http://content.emirates.com/downloads/ek/pdfs/report/annual_report_2015.pdf
  5. https://en.wikipedia.org/wiki/Emirates_fleet
  6. https://www.youtube.com/watch?v=IP8nt7ECPmc
  7. https://www.youtube.com/watch?v=yex-WMaJTjg
  8. https://www.youtube.com/watch?v=NcF43lt4jc0
  9. https://www.youtube.com/watch?v=kwYr4LAIUjk

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8 thoughts on “Emirates – The largest airline in the Middle East

  1. Thank you for this great post Vimit! What is Emirates’ magic recipe to remain profitable while investing in superior customer service and experience during times when most other airlines suffer from very thin margins?

    1. Ellian thanks for the comment. Emirates magic recipe to remain profitable is its location in Dubai. It is so centrally located between Eastern and Western world and Emirates is taking advantage of that. Due to this Emirates can play on volumes and hence its invests only in wide-body aircrafts Airbus 380s and Boeing 777s. Also Emirates does not have union problems to handle which plays big role in operations. Also, employee costs are lower at Emirates. For example, employee costs in Emirates is approximately 13% of revenue while at American Airlines is approximately 19%.

  2. Vimit, as an airplane aficionado, I had a blast reading your post. My questions below:

    1. With oil prices plummeting and margins improving across the industry, how would competitors take advantage of this to sway away Emirates’ clientele?
    2. Do you see Emirates becoming part of any of the larger alliances to protect market share?
    3. Will lower oil revenues affect Emirates’ owners/backers?
    4. Are there any other good examples of state owned enterprises in the airline industry? (ignore Singapore Airlines or any of the Gulf carriers)

    Thanks!

    1. These are really great questions Andres. Kindly find my responses below:
      Competitors (middle-east airlines) will not be able to match capacity deployed by the Emirates. There was an article last which compared total number of seats deployed by middle-east airlines. Quick quote from this article:
      “In terms of weekly seats, Emirates’ advantage over Qatar Airways is 116% and 278% over Etihad. This reflects the fact that Emirates operates an all widebody fleet, while both Qatar Airways and Etihad operate a significant number of narrowbody aircraft. Another way of looking at this is that in terms of weekly seats Emirates is 37% bigger than Qatar Airways and Etihad combined.”

      Source: http://www.hawker.com.bd/news_details.php?news_id=333387&news_category_id=4&val_lan=1

      So the best way to pull customers from Emirates is to deliver on customer service. From my experience, I have seen many customers moved to Qatar Airways just because of better inflight experience. Small example – B777 of Qatar Airways has nine seats in a row while Emirates has ten seats in a row. With one seat less, it gives more space for customer to move around and is much better during long haul flights.

      Emirates will not be a part of any larger alliances. Emirates strategy is different. They want to build their own customer base and they want to expand by themselves.

      Other good examples of state owned airlines – Qantas and Cathay Pacific.

  3. Good article Vimit. I think you outlined the business model well. I think that there is a lot of value in understand Emirate’s core strategy of becoming the premier airline for connecting people. The airlines strategy is well aligned with Dubai’s strategy of making the Emirate as a prime tourist destination. Furthermore, the service and the staff are key differentiators of Emirates. The airline recruits young and attractive people from all over the world. On every Emirates flight, the lead cabin crew announces all the languages spoken by the staff. It allows people to be understood in their own language and in turn to be better catered.

    Its selection of fleet is also worth expanding on. The A380 has become a new way of flying, especially in Business or First Class. These fleets are mostly on the European, Asian, and US routes. Attached to this is its loyalty rewards points, Skywards. As a Skywards Gold member for example, you are guaranteed economy seat with at least 48 hours in advance.

    Overall, there are many more ways in which Emirates distinguishes itself and it is good to keep those in mind, especially on the service and the destinations choices. I have taken Emirates over 250 times while a Consultant living in Dubai and I would not want to switch airlines anymore. I have been converted

    1. Hi Sijh, I completely agree that overall Emirates’ strategy is well aligned to “sell” Dubai as tourist destination along with filling up planes for other destinations too. Sometimes (especially in low season of travel) Emirates do offer free day or two layover at Dubai which effectively means that passenger will “spend money in Dubai” – hotels, local transports etc.

      Yes, due to large fleet size Emirates has advantage to cover varied destinations across the world.

  4. Thanks for the post, Vimit. You probably knew this was coming – but how much do you think Emirates’ success due to the [unadmitted] state subsidies that allow them to spend so much on customer service? What do you think about European and U.S. carriers extremely negative response to Emirates coming into their markets and competing with this “unfair” advantage (as it is seen by many)? Cheers!

    1. Thanks Anna for the great question. On state subsidies, I would say its a grey area. If you are talking about oil prices, in general jet fuel in middle-east is cheaper than other parts of the world. And all the airlines landing into middle-east airports can get this cheaper jet fuel. Having said that in my opinion, no offense, even American Airlines got “subsidized” by the government when they filed chapter 11 bankruptcy.

      Emirates is making use of open sky policy while U.S. and European airlines are not making use of the same policy to that extent. Emirates buys new aircrafts continuously and has to deploy them somewhere in the world and as such Emirates is expanding its own network.

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