Emirates the long haul carrier known for its luxury services, has set new standards for the way we travel. In its 2019-2020 financial year, 56 million passengers and almost 2.5 million metric tons of cargo flew on Emirates to over 80 countries. But like airlines everywhere, the carrier has been battered by the coronavirus pandemic. Covid-19 was especially devastating to airlines like Emirates. When we had to ground the airline for two months, that’s unprecedented in certainly my long career in this business, never seen anything like it. And it was a psychological blow actually just as well as what’s a physical blow. Covid brought Emirates to a standstill. In November 2010, Emirates group announced half year net losses of three point eight billion dollars. To keep passengers safe and on board, Emirates requires face covering for it’s passengers and crew, conducts on site rapid covid tests for fliers, and allows travelers in economy class to purchase the adjacent seat on their flight. And will Emirates, with its network of over 140 destinations and its fleet of wide bodied aircraft, be able to bounce back from the economic fallout pummeling the airline industry? Emirates got its start in Dubai in the mid 1980s. With a dwindling supply of oil, and the Iran-Iraq war impacting its shipping container business, in 1985, Dubai authorities launched Emirates Airline.
The carrier’s maiden journey took place on a leased Pakistan International Airlines Boeing 737 flying from Dubai to Karachi. Four years later, Emirates was traveling to over a dozen destinations. But it was cheap credit of the early 2000s, rising oil prices, and an ambitious new ruler Sheikh Mohammed bin Rashid Al Maktoum, that helped transform the airline and the city. And the goal was to transform Dubai into what it’d been seeking to be for decades a link between east and west, a place where people would stop over, but also a place that people would stay as they began to heavily invest into their tourism sector and create the monuments that we now know, like the Burj Khalifa, the Palm Jumeirah.
All of those were linked to the Emirates Airlines strategy of getting as many people onto those planes as possible in as short of a time as possible. By the early 2000s, Emirates boasted travel to more than four dozen international destinations, including London, Paris and Melbourne, Australia. And it was flying to hotspots most European and American carriers deemed too dangerous. When I lived there, terminal two was kind of the death terminal because that was a place that would fly to Mogadishu, Kabul, Baghdad, Beirut. They are willing to service places that other airlines considered too risky. And that’s part of what Emirates Airlines tries to do. It tries to go into places that others don’t.
What Emirates realized was that as the capabilities of aircraft were developing, not only were they able to carry more people and cargo, but the range was extended and Emirates realized that they could turn Dubai into a super hub. And while the airline industry was seeing growth from low cost carriers like Ryanair and EasyJet, Emirates was beefing up its cabin. In 1992, Emirates became the first airline to install a video entertainment system on all its seatbacks. In 2008, it introduced the onboard lounge for its Airbus A380 passengers. And in 2017 debuted the world’s first fully enclosed first class private suite. So since our inception, we have been focusing on impeccable services and amenities throughout the entire passenger journey. Since our start in 1985 as well we’ve continued to set the pace for innovation, luxury within the travel industry.
I would describe Emirates as what they like to call accessible luxury. They want the image of luxury. They want their airlines to look spick and span. They want everybody to be taken care of as though they’re first class while offering fares that are affordable for some of those developing world customers that they’re trying to seek. Like its regional rivals, Abu Dhabi’s Etihad Airways and Qatar Airways, Emirates benefits from having a well-funded government owner and a desirable geographic location. Dubai Airport is located just eight hours from two thirds of the world’s population. Emirates is linked to Dubai’s core identity. It’s part of one of its most successful brands. And the royal family has put its full political and economic capital into maintaining the Emirates image as an affordable luxury airliner. So we’ll see them around for a long time.
Covid-19 has had a devastating impact on airlines around the world, according to the International Air Transport Association, global passenger traffic plummeted 60 percent in 2020 to one point eight billion travelers. Worldwide airlines in 2020 lost 118 billion dollars. And it brought airlines to a complete standstill. Overall, global demand fell as much as 95 percent. It’s since rebounded, but it’s still far below where it had been. Depending on the country, it’s somewhere between 30 percent and about 45 percent of pre covid levels. In March 2020, Emirates temporarily suspended nearly all of its passenger flights to and from the UAE, except for repatriation flights to about a dozen countries. That drop in passenger traffic led to the company’s first loss in its 30 year history.
In November 2020, the Emirates group announced half year net losses of three point eight billion dollars. And according to analysts, Emirates, with its ultra long haul flights, may have a harder time moving back to profitability than many of its competitors. Everything that made Emirates to be so distinctive is basically what is working against them right now. This is the kind of travel that almost immediately stopped. People were worried about getting the disease.
People were worried about spreading the disease. People were worried about catching the disease and being in another country. And according to analysts, long haul carriers like Emirates face a number of difficulties, including a drop in international business travel and a laundry list of worldwide covid-19 travel restrictions. What company wanted to send their employees abroad to another country, send them to a country that’s 10 plus hours away?
That demand dried up pretty much overnight by covid. You also have the issue that your crew and your passengers are coming from many different countries. So trying to understand when you are basically checking somebody, if that person with that particular passport is allowed to enter in a given country is becoming a nightmare. Another issue for the airline, unlike many of its U.S. and European counterparts, Emirates doesn’t have a local domestic market to fall back on.
There’s virtually no intra emirate flights. There’s no Abu Dhabi to Ras Al Khaimah flights that Emirates can move into the way the domestic carriers say in the United States or throughout Europe were able to still move it within their own national borders, even as the the lockdown’s were kicking in. An additional problem for Emirates, according to analysts, is the makeup of its fleet. While many carriers have already transitioned to smaller, more fuel efficient planes, Emirates remains the world’s largest operator of the Airbus A380.
The Emirates Airbus A380 can seat over 600 passengers and has a range of roughly 9000 miles. Airbus announced an end to its A380 program in 2019 due to a lack of orders. Of course, the aircraft aren’t completely full and therefore we are able to socially distance people on flights, keep the crew well protected with all the PPE that they’re wearing and still doing good standard service. And that’s worked across the whole network. So if you have a hub, you have to have many feeders, many routes that go to Dubai and then they go out of Dubai. The principle is not new. Any airline has done that, but they did it at a massive level to a level that nobody basically has done it. Emirates did, however, find some relief in cargo. While the airline had a well-established distribution network in place prior to the pandemic, In April 2020 facing a surge in demand for PPE, it stuffed cargo on seats in economy class and in overhead bins.
It also removed economy class seats from passenger planes, essentially converting them into cargo planes. At the beginning of the pandemic, we were focusing more on the cargo side and cargo has proved to be our sort of surviving line, if I must say, because it has helped us to mitigate whatever risks and losses that we had earlier. According to the UN’s World Tourism Organization, global tourism suffered its worst year on record in 2020, with international arrivals dropping by 74 percent. Most experts don’t expect to see a return to pre pandemic levels happening before 2023 or perhaps later. It’s a major disruption, probably the worst we’ve ever had.
But goodness me, we have the wherewithal to try and get ourselves through it and get going again as soon as possible. And I believe that demand will return to pre covid levels sooner than everybody else is thinking that they will. In May 2020, Emirates announced 2019-2020 revenue of twenty five billion dollars, six percent less than the year earlier. Passenger revenue made up eighty three point one percent of revenue. Cargo made up twelve point three percent and non transport services made a four point one percent. Excess baggage made up the remainder. So it’s the mass tourism, the millions of people that they want to be ferrying back and forth, which that’s going to have to wait for the vaccine in a lot of places it’ll have to wait for people to feel confident enough to spend money on things like tourism, for Emirates to take advantage of that.
While it waits for those tourist numbers to ramp up. Emirates is also hoping to capitalize on the global demand for vaccines. In October 2020 Emirates, announced it was setting up the world’s largest dedicated airside hub for covid-19 vaccines at its cargo terminal. The airline also said it was working with major pharmaceutical companies, including Pfizer, to transport vaccines around the world. It is a very high yielding thing that has been attractive to airlines and they have been building up facilities over the past few years so that they can have a bigger slice of that business.
Certainly at the moment we’re working on trying to move this Pfizer vaccine in specially designed containers on our planes, in our holds, and in the cabins, and keeping them at that level through the distribution point. So we have the chillers, we have the freezers, we have the logistical control for the airline to get these vaccines into multiple parts of the world where others can do that. By February 2021, Emirates had delivered millions of vaccine doses to Egypt, South Africa, and Latin America from manufacturing hubs in India and elsewhere. And once the pandemic subsides, Emirates is hoping Dubai continues to emerge as a major tourist destination.
In March 2021, Dubai launched its vision for 2040, which includes a 400 percent increase in public beach areas and a commitment that 60 percent of Dubai’s areas will be nature reserves. The growth of Emirates and the growth of Dubai are interlinked with one another. Dubai wouldn’t be where it is without Emirates, and Emirates has really turned Dubai into a global business and leisure hub. Emirates is part of the brand and it is very much part of the core national strategy. So in that sense, nothing short of the end of Dubai. We’ll see the end of Emirates. Emirates is linked to the royal family in a very big way. That is an advantage because they are too big to fail. And more than anything, Emirates is hoping for a speedy return for international travel demand to saying it will serve all of its one hundred and 43 destinations by the summer of 2021.