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Exclusive: Can 2018 fuel prices offset “better” year for Emirates Airlines?

Emirates has renewed its confidence in Airbus.

Speculation was rife last year that the A380 aircraft was on its last leg, and manufacturer Airbus on shaky ground unless Emirates Airlines puts in an order, which it did.

“The A380 is our customers’ favorite aircraft, and we have a long and rich history with the manufacturer,” said Sheikh Majid Al Mualla, Divisional Senior Vice President of Commercial Operations Centre for the Gulf, Middle East, Iran and West Asia at Emirates Airline.

AMEinfo sat with Al Mualla for an exclusive interview at ATM 2018, starting with a conversation on last year’s results.

Read ATM 2018: Hyperloop One announces seven-minute Dubai airport-to-airport plans

Wings lift

Al Mualla was very optimistic about the 2016/2017 results.

“We are going to release in May the Group’s performance numbers for 2016/2017 ended March 2017 and though I can’t say the results, they are much better than the year before,” said Al Mualla.

Half year results for 2016-2017 saw profits of $631 million from revenues of $13.5bn for the Group.

Full year Emirates Group results ending March 2016 showed profits of $670 million, where airline revenues stood at $23.2bn offset by losses of $572 million from unfavorable currency exchange.

At the time, 35 new aircraft were delivered and 27 older retired. It then carried 59 million passengers, to 156 destinations.

The average age of Emirates fleet is around 5 years.

Read: UAE-based carrier Emirates ends 2017 on high note

New Aircraft

In 2017, Emirates invested $15.1bn in Boeing 787-10s aircraft and $16bn in Airbus A380.

“At last year’s Dubai Airshow, we placed order for 40, 787-10 Dreamliners which will fit our expansion plan, and to replace older aircraft, which are 6-7 years old,” said Al Mualla.

“Also, the reach of the Dreamliner, set for a delivery date in 2022, goes farther than the A380, allowing us to reach new routes.”

Emirates Chief Sheikh Ahmed bin Saeed Al-Maktoum said at the air show that the Dreamliner deal raises total orders from Boeing, the global competitor of Airbus Industries, to as high as $90 billion.

Emirates is already the world’s largest client for Boeing’s 777, with 165 jets and another 164 on firm order, according to AFP.

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Routes & destinations

“We have announced two routes for Chili, Santiago and London Stansted, but we will announce more, as more aircraft and opportunities show up,” said Al Mualla.

Emirates has announced a new service from Dubai to Santiago, with a short stop in the Brazilian city of San Paulo, starting from July and come June, Emirates will offer the only way to Essex when it becomes the first Middle Eastern airline to operate out of London Stansted.

“We have 159 destinations, to all continents, with 271 aircraft,” said Al Mualla.

“We invest in 8-12 new aircraft per year, a mix of Boeing and Airbus.”

Read: Why ‘now is the ideal time to invest in Dubai’s real estate sector’

The A380

The A380 is synonymous with Emirates.

“It’s a product we believe in and we have huge positive feedback from customers on the aircraft,” said Al Mualla.

It is reported Emirates has over $60bn invested in total with over 180 A380 planes ordered so far.

Yet, Emirates’ large network necessitates a variety of planes, with different capacities that can accommodate various airports and different paying customers.

“The A380 with us enjoys high capacity and has a seat factor of 91%, and we have the A380 to accommodate 615 passengers,” said AL Mualla, adding “giving us great flexibility on supply and demand.”

In 2015, Emirates made room for 130 additional economy seats, by scrapping the spacious first-class cabin and trimming 18 flat-bed seats from business class to create this huge seating configuration.

Read: Emirates rescues Airbus A380 from extinction

 Efficient travel

Emirates’ first A380 in 2008, is different in terms of engine specifications, and body weight.

“Today’s aircraft are different in fuel consumption, up to 25% less, and whereas fuel used to be around 40% of cost, now we are looking at a range from 20-28%,” said Al Mualla.

“This is a fluctuating range because we don’t do any price hedging (Futures markets), and so we buy at market prices, and that’s one of the things we have to live with in the near future.”

Oil prices are on the rise heading towards $80 per barrel of Brent crude, as several analysts expect.

Whether Emirates transfers rising fuel prices into ticket hikes in the form of fuel surcharges is left to be seen.

Emirates has a bigger problem to solve.

Read: What is leading UAE’s $820 billion construction sector?

Sky is the limit, literally

Emirates is looking for more favorable bilateral agreements with countries such as Canada, the US, China and India and open skies policies that provides the carrier more flexibility to add more aircraft to existing routes.

“The demand is there. With some of the aircraft we reach a 100% seat factor, but certain governments won’t allow us to enter with more aircraft, because of protectionist policies,” said Al Mualla.

Open Skies refers to policies agreed upon by two or more governments allowing for unrestricted overflight and landing rights on each other’s lands, allowing for more competition between international carriers and more travel options for consumers.

India’s market is lucrative, but highly protected.

Read: What key role is Emirates playing to keep UAE-US open skies open?

Codesharing success is no secret

Codesharing for Emirates is not new, already having it with carriers like Alaska Airlines, Qantas, and Philippine Airlines.

“The difference with flydubai is that we are in the same hub, and we consolidate our operations so as to make them smoother, and the  passengers facing any issue find that solutions are quickly found,” said Al Mualla.

“We have 51 routes that we don’t fly to that flydubai does and that allows us the opportunity to bring passengers from these routes and transition them to one of ours, not to mention provide Emirates passengers access to those routes on board flydubai.”

Emirates and flydubai revealed strong passenger numbers for the first six months of their partnership announced in July 2017.

The first code-share flights began at the end of October 2017 and from November 2017 to March 2018, the codesharing agreement benefited over 400,000 passengers.

New codeshare flights are Krakow, Dubrovnik and Kinshasa, Catania from June 13, Thessaloniki from June 15 and Helsinki from October 11.

Read: flydubai settles choice for codesharing terminal with Emirates

Carrying its weight  

Cargo and freight plays a big role in air travel, and Emirates is no different.

“Cargo is 20% of the load in our normal aircraft, but operations for freighters has moved to Dubai World Central (DWC) and tracking is now conducted there,” said Al Mualla.

Emirates moved to an ultra-modern facility called Emirates SkyCentral.

Freighters represent 20% of the company’s revenues, according to Al Mualla.

The expected move of Emirates from Dubai International Airport at Terminal 3 to DWC extends to beyond 2025, when runways are built, according to Al Mualla.

Upon completion, DWC will become the world’s largest airport with an ultimate capacity of more than 160 million passengers and 12 million tons of cargo per year.