Tim Clark on Emirates’ Expansion and Dubai Airports

It seems that Tim Clark – President of Emirates – has been around forever. Therefore, when he speaks to the media, it is almost always newsworthy. At a briefing in London, Tim Clark gave several interesting tidbits about the future of Emirates and the two airports at Dubai – DXB and DWC.

For the benefit of our readers, I am summarizing them here.

Acknowledges Slowdown

Tim Clark accepted that global commercial aviation is going through a slowdown. There are several reasons for it including trade wars and political instability in some geographies. Specifically, Mr. Clark gave the example of Hong Kong where load factors have fallen more than 10% due to the ongoing situation. He also thinks that the worst is probably not behind us.

“We’re not in a good place at the moment, but we’ll deal with it. At the moment, I don’t see any green shoots, and bottoming out might take 3 to 5 years.”

There are two takeaways from this – one for Emirates and the other for Dubai airports.

Emirates Reviewing Fleet Strategy

There are a lot of numbers on Emirates’ order book. Everyone likes to talk about it given the sheer size of the airline. Instead, I would focus on what is provided in the Annual Report of Emirates Group. It is a few months dated but is the most reliable set of numbers you would find. You can download the PDF version here.

 

Emirates orderbook is as follows:

• 14 Airbus A380-800
• 40 Airbus A330Neo
• 30 Airbus A350-900
• 35 Boeing 777-8X
• 115 Boeing 777-9X (with an option of additional 50)

In February this year, Emirates had announced a reduction in A380 orders and had placed orders for its smaller cousins A350 and A330 instead. This had effectively removed the life support from the A380 program. One of the reasons for the change was that there was a limit to expansion using A380s.

In his interaction, Tim Clark acknowledged the stated change in strategy.

At the same time, he appeared bullish on Emirates’ future orders and asked Boeing and Airbus to up their game. This was in light of the recent issues with Airbus engines and Boeing 737Max. He categorically stated that Emirates would not accept any orders until the planes are truly ready. In fact, Emirates might be considering replacing part of the Boeing 777X order with the more proven Boeing 787 till the former is ready.

“We would be foolish to start adjusting or coming up with new contracts until we are absolutely sure these aircraft are going to do what they said they were going to do.”

“I think propulsion is an issue for us, and I’m a little bit irritated… I say you give us airframes and engines that work from day one. If you can’t do it, don’t produce them.”

Strong words there but I think he is justified. Aviation is highly complicated but you do not want an airline to suffer due to glitches in a new program.

He also denied using the Airbus / Boeing issues as an excuse to renege on the order commitment.

“This is not an attempt to slow things with a regard to our obligations under contract. It is just a re-establishment of the rules of the game, which I do not think are unreasonable.”

Future of Dubai Airports (DXB and DWC)

Dubai has two airports – Dubai International Airport (DXB) and Al Maktoum International Airport (DWC). DXB airport is operating at near-full capacity. DWC airport is a planned development and only a small part is operational at present.

A few days ago, Bloomberg had published an article – Dubai Halts Mega-Airport Project as Gulf Economies Stumble. I do not have a view on this except for a general comment. Most of us were not prepared for the crisis of 2008-9. Since then, many in the media have started painting doomsday scenarios. Perhaps if one of them become true, they could proudly say – we told you so.

Tim Clark had a different perspective on this. According to him, the capacity at DXB airport can be expanded from 90 million currently to 115 million passengers annually. Rather than junking DWC airport, he anticipates a future where Emirates and flydubai would operate from DXB airport. While the other airlines could be moved to DWC. This would give everybody some room for expansion in the medium-term.

If such a thing were to happen, one would expect Emirates to operate out of DXB for the next decade or so.

Source: Arabian Business, Reuters and Emirates website