On takeovers and the A380

In an exclusive interview with TTN’s JONNA SIMON, Emirates Airline president Tim Clark comes clean on the airline’s hotels venture, new routes to South America and what the A380 delay means for the fastest growing airline in the world
Clark: A380 delays

Emirates is, I understand, the third most profitable airline in the world today and is also in the top 20 category of the largest international carriers. What are the challenges facing Emirates in the next, say five years?
In terms of international revenue passenger kilometres, we are number eight in the world and last year, we were number three in profitability.

The challenges in the next five years? The most immediate problem is the A380 delay, that is a big set back! Also, the aero-political framework in which we operate with regards to restrictions by various countries, and thirdly the concern that people have about us and what that drives them to do and how we have to deal with that concern. Apart from that, worldwide challenges like wars, insurrections, tsunamis etc, we just deal with these occurrences, when they happen, as we always have done in the past.

Will the delay in the delivery of the A380 aircraft until August 2008 affect Emirates’ growth or profitability over the long term?
We have a mapped out growth curve, network expansion plan, fleet expansion plan, profitability growth, we have a mapped out cash flow amount, and what this delay does, it puts our plans back two years.
It is an irritant, a nuisance more than anything else, as we have never had curbs on our growth before. We have always been in control of our expansion and the aircraft and engine manufacturers have been there for us all the way.
We have always been in charge of our own destiny and the pace we desired and now the pace is being set by somebody else and, of course, we are not at all happy about that. There will be a financial loss in the short term due to this delivery delay. We will not lose money, but we will not be able to profit from the A380s as quickly as anticipated. By August 2008, we were supposed to have 17 or 18 of these aircraft, which would have helped our expansion and profitability greatly.
The cash flow anticipated from A380s underpins our ability to finance future expansion and it will not now be there, but then we do not have to pay for the aircraft either. These aircraft, at the price we pay for them and with their operating costs are like cash machines, so we have been deprived of two years of that cash flow.

When will Emirates Airline begin flying to South America?
The South American routes will not be affected by the delay of the superjumbo, but at present I cannot give you a firm date for the start-up of our services to South America. It is a huge market, so we are very keen to go there.

Would the new Boeing 777-200 long-range aircraft tempt you to start a round-the-world service?
If the market is there, if we can supply the aircraft and if the opportunity actually presents itself, why would we not do it?

Do you think it a good idea to start building a new airport at Jebel Ali and talk about more than 100 million visitors to Dubai? Where are all these people going to come from?
Jebel Ali Airport is going to be one of, if not the largest international airport in the world. Look at the world map and see where Dubai is located. Then calculate how many of the world’s six billion people are within an eight-hour radius from Dubai.
If you look at the West European hubs or the Asian hubs, there is a lot of water to cross. Dubai is a central location for Africa, West Asia, South Asia, North Asia, Europe, Australia and New Zealand.
Knowing that airline travel is increasing every year and connectivity is of the essence, knowing that traders in Africa, for instance, want to buy T-shirts from China, that the Ukrainians are going to the Maldives on holidays, means that any airline connecting up all these people is going to be in the forefront of civil aviation industry. Airlines keeping to the old trade routes are out of touch with the future of air travel.

Emirates Group is launching a new hotels division. Tell me a little more abut the group’s move into hospitality?
We moved into the hospitality industry with the Al Maha Desert Resort & Spa, followed by a hotel in Fujairah. At present we have a number of projects under way. We have the Wolgan Valley project in Australia, another project in the Seychelles, a 416-room hotel, then there is the Marina Serviced Apartments & Spa, opening in the spring of 2007 in Dubai and in 2009 we will open the Safa Park Towers in Dubai offering 1,400 rooms.
We entered the hospitality industry, firstly because it is highly profitable in the UAE, secondly because it adds to what our business is all about and thirdly, because we have such a powerful tour operator, Emirates Holidays and [destination management company] Arabian Adventures that the move made sense.

Will the planned Wolgan Valley Resort in Australia make money for the Emirates Group?
It won’t make huge amounts of money, but it certainly will show a decent profit. Also the resort is unique in the world and many travellers will want to visit the resort. Guests at Al Maha are already showing great interest in Wolgan Valley.

Do you think, there will soon be too many hotel rooms in Dubai?
No, I don’t think so. The number of travellers visiting Dubai either on business or on holiday or both are increasing tremendously each year. Again due to the location, the infrastructure and facilities offered by the Dubai Government.

Rumours have been rife in the last few months of Emirates perhaps buying Aer Lingus, then it was British Airways and just recently Lufthansa. Apart from Emirates’ shareholding in SriLankan, have you any intention of buying another airline?
We have never been acquisitive in Emirates, so, no, we have no plans to buy another airline.
Whether we stay with SriLankan is entirely up to the Sri Lankan government. We will still have our equity in the airline, but whether the contract for management of the carrier will be renewed or not, is not our decision. The present contract expires March 31, 2008.