We will be the most potent hub in the world by 2015, Emirates Airline President Tim Clark says
Emirates CEO Tim Clark says the airline is continuing to grow according to its plan despite the difficult times
GULF NEWS: Is Emirates’ profit going to be further down for 012-13 from last fiscal with fuel prices still volatile and the European debt crisis worsening?
TIM CLARK: No. I am hoping that we will be ahead of where we were last year. [These are] difficult times… as we have talked about the fuel, the acquisition of many aircraft coming in, opening up new routes, so we are continuing to grow according to our plan. Some years we have great [profit of] Dh5.6 billion the Emirates Group made the year before, Dh2.6bn last year. What are we going to do this year? We will see.
So are you interested in investing into Indian carriers or not, if the 49% FDI (foreign direct investment) came through?
I should think all of them [the Indian carriers] will be very happy if Gulf money came in to the tune of 49 per cent. But Emirates is not keen on it – not at the moment.
What is an investor going to look at? You’re going to look at a strong balance sheet, how the business is run, what the business model is, access to capital and so on. And then you slide Indian aviation into the frame and they say that you can have 49 per cent. Would you do it? It’s fantastic on paper. Then I go and say I want to buy 50 777-300 ERs or 30 A380s, for instance, and the main shareholders say you have to go through a process of procurement that has to go through the Parliament and so on. And 15 years later you are still trying to argue the toss on that.
If I was to say, I will come in but these are the rules of the game – 49 per cent and we have complete management control, we decide where, what and when. So, we source, we negotiate, we bring in, we have complete control to set up the operation the way we see it needs to be done with no interference from anybody. Have you seen that working in India? You have to have the management control to make it work.
Would the whole wing-crack issue with your Airbus A380s prevent Emirates from taking its A380 order up to 120 from the original 90 as you were planning for? And does it affect your future deliveries of A380?
No, I spoke about additional [A380s] orders if we could. That’s got nothing to do with this. We planned for 90 planes, but if there is a freeing of capacity at the airport and we can find a way to get more in, we will probably do it. But at the moment, there isn’t.
And Of course, it [the wing-crack issue] does [affect future deliveries]. The aircraft that should have been delivered in March and May are still there in Tolouse, France [Airbus’ headquarters]. These are all being fixed now by Airbus. That means we will take six planes in September and October, three each month. There is a compression now and they have all been delayed.
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What is the exact status at present with the fixing of A380 wing-cracks?
The wing-crack issue is being dealt with. It’s a long, complex, expensive process. Airbus have identified root cause in the fix. They have to get the regulator to approve it, which they haven’t done at this stage. If they do, we have already mapped with them how is that going to work with all of our planes which would be delivered through the first quarter of 2014. So we have about 43 aircraft which will be subject to the change-out in the structure within the wings under very carefully defined set of rules. So, will the job get done? Yes. Will it be time consuming, expensive? Yes.
We have 21 A380s in service at the moment. Of those we have two grounded today. In October the first ones come back again and have to go through the intervention process, which may or may not require more fixing.
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How much losses have you incurred so far with the grounding of A380s?
The worst thing for us is that of the 21 [A380s] that we are flying today, six were grounded for quite a long time. And that completely knocked out our A380 programme.
Our early estimates with regards to loss of profit were $30 million a month then. So for January, February, March, about $90m is where we were down and that impacted the bottomline of our financial results last year. But that wasn’t declared in our financial statement. Overall, we should have had 23 A380s flying today, but they are not. So we are dealing with that.
Where do you see Emirates in 2015 – in fleet size and the number of destinations?
Fleet size will be just about 200 aircraft… or maybe 210. And the number of destinations would probably touch 145 – [at the rate of opening] probably five to six new routes a year. We operate to 124 destinations right now. So that will be the largest, most potent hub in the world. No other hub in the world will do what we will be doing by then. Whatever they may claim, internationally, they will not have the number of operations that we do.
What’s the latest on Airbus A350 upgrades that Emirates is pushing Airbus to do?
They [Airbus] must attend to it is what I would say. And no, it does not impact our orders that we have for the 70 [A350] aircraft.
With all the volatility in oil prices, do you see airfares going up or down this year?
I don’t think airfares will go up. The value proposition remains. I think that Emirates, and the whole industry, has been remarkably resilient and fair and reasonable about what it’s doing about its pricing. If you look at the hospitality, or the retail sector, their prices have gone up and up and up and up. But as soon as you put your fare up five per cent in the airline industry, it’s like the world is going to come to an end.
We didn’t do anything for a year. We hoped that oil prices will come down. We absorbed. This is part of the reason we had that fall off in profit, because we didn’t pass it on. In the end, when you see Dh2 billion going out of your bottomline because you didn’t put the fares up… so we have to impose the surcharges as they are.
When do you plan to pass on to customers the ETS (emissions trading scheme) costs?
We haven’t yet passed it on to customers. We will just wait and see what happens to the ETS. We are providing for the payment to the EU [European Union]. We don’t have to pay until the end of the year, nobody does. There is a view that they will slip anyways, so we may not have to pay them [EU]. But if it’s a reality, we will have a look at it at that time. If we can resolve it we will, and if we don’t, we will have to pass it on – some or all.
Does Emirates need to order more planes? Will we see more orders from Emirates at the forthcoming Farnborough International airshow?
No.
Emirates CEO Tim Clark says the airline is continuing to grow according to its plan despite the difficult times
GULF NEWS: Is Emirates’ profit going to be further down for 012-13 from last fiscal with fuel prices still volatile and the European debt crisis worsening?
TIM CLARK: No. I am hoping that we will be ahead of where we were last year. [These are] difficult times… as we have talked about the fuel, the acquisition of many aircraft coming in, opening up new routes, so we are continuing to grow according to our plan. Some years we have great [profit of] Dh5.6 billion the Emirates Group made the year before, Dh2.6bn last year. What are we going to do this year? We will see.
So are you interested in investing into Indian carriers or not, if the 49% FDI (foreign direct investment) came through?
I should think all of them [the Indian carriers] will be very happy if Gulf money came in to the tune of 49 per cent. But Emirates is not keen on it – not at the moment.
What is an investor going to look at? You’re going to look at a strong balance sheet, how the business is run, what the business model is, access to capital and so on. And then you slide Indian aviation into the frame and they say that you can have 49 per cent. Would you do it? It’s fantastic on paper. Then I go and say I want to buy 50 777-300 ERs or 30 A380s, for instance, and the main shareholders say you have to go through a process of procurement that has to go through the Parliament and so on. And 15 years later you are still trying to argue the toss on that.
If I was to say, I will come in but these are the rules of the game – 49 per cent and we have complete management control, we decide where, what and when. So, we source, we negotiate, we bring in, we have complete control to set up the operation the way we see it needs to be done with no interference from anybody. Have you seen that working in India? You have to have the management control to make it work.
Would the whole wing-crack issue with your Airbus A380s prevent Emirates from taking its A380 order up to 120 from the original 90 as you were planning for? And does it affect your future deliveries of A380?
No, I spoke about additional [A380s] orders if we could. That’s got nothing to do with this. We planned for 90 planes, but if there is a freeing of capacity at the airport and we can find a way to get more in, we will probably do it. But at the moment, there isn’t.
And Of course, it [the wing-crack issue] does [affect future deliveries]. The aircraft that should have been delivered in March and May are still there in Tolouse, France [Airbus’ headquarters]. These are all being fixed now by Airbus. That means we will take six planes in September and October, three each month. There is a compression now and they have all been delayed.
*
What is the exact status at present with the fixing of A380 wing-cracks?
The wing-crack issue is being dealt with. It’s a long, complex, expensive process. Airbus have identified root cause in the fix. They have to get the regulator to approve it, which they haven’t done at this stage. If they do, we have already mapped with them how is that going to work with all of our planes which would be delivered through the first quarter of 2014. So we have about 43 aircraft which will be subject to the change-out in the structure within the wings under very carefully defined set of rules. So, will the job get done? Yes. Will it be time consuming, expensive? Yes.
We have 21 A380s in service at the moment. Of those we have two grounded today. In October the first ones come back again and have to go through the intervention process, which may or may not require more fixing.
*
How much losses have you incurred so far with the grounding of A380s?
The worst thing for us is that of the 21 [A380s] that we are flying today, six were grounded for quite a long time. And that completely knocked out our A380 programme.
Our early estimates with regards to loss of profit were $30 million a month then. So for January, February, March, about $90m is where we were down and that impacted the bottomline of our financial results last year. But that wasn’t declared in our financial statement. Overall, we should have had 23 A380s flying today, but they are not. So we are dealing with that.
Where do you see Emirates in 2015 – in fleet size and the number of destinations?
Fleet size will be just about 200 aircraft… or maybe 210. And the number of destinations would probably touch 145 – [at the rate of opening] probably five to six new routes a year. We operate to 124 destinations right now. So that will be the largest, most potent hub in the world. No other hub in the world will do what we will be doing by then. Whatever they may claim, internationally, they will not have the number of operations that we do.
What’s the latest on Airbus A350 upgrades that Emirates is pushing Airbus to do?
They [Airbus] must attend to it is what I would say. And no, it does not impact our orders that we have for the 70 [A350] aircraft.
With all the volatility in oil prices, do you see airfares going up or down this year?
I don’t think airfares will go up. The value proposition remains. I think that Emirates, and the whole industry, has been remarkably resilient and fair and reasonable about what it’s doing about its pricing. If you look at the hospitality, or the retail sector, their prices have gone up and up and up and up. But as soon as you put your fare up five per cent in the airline industry, it’s like the world is going to come to an end.
We didn’t do anything for a year. We hoped that oil prices will come down. We absorbed. This is part of the reason we had that fall off in profit, because we didn’t pass it on. In the end, when you see Dh2 billion going out of your bottomline because you didn’t put the fares up… so we have to impose the surcharges as they are.
When do you plan to pass on to customers the ETS (emissions trading scheme) costs?
We haven’t yet passed it on to customers. We will just wait and see what happens to the ETS. We are providing for the payment to the EU [European Union]. We don’t have to pay until the end of the year, nobody does. There is a view that they will slip anyways, so we may not have to pay them [EU]. But if it’s a reality, we will have a look at it at that time. If we can resolve it we will, and if we don’t, we will have to pass it on – some or all.
Does Emirates need to order more planes? Will we see more orders from Emirates at the forthcoming Farnborough International airshow?
No.
