Emirates’ profit plunges: Are the good days over?

Courtesy EPA

Emirates Airlines posted its weakest earnings in a decade – its profit at Dh871m (US$237m) plunged 69 per cent for the year ending March 31.

The airline’s chairman Sheikh Ahmed bin Saeed Al Maktoum attributed the lacklustre performance to higher oil prices, competition, weakening of travel demand particularly in the Gulf region, and strengthening of the US dollar.

Was 2018/19 merely an exceptionally tough year, or is it a sign that the good days are coming to an end?

Emirates has been very successful in operating inter-continental flights, hubbing at Dubai International Airport. However, with more airlines mounting direct flights, Emirates may face the challenge to fill up its fleet of A380 superjumbo. Its reliance on Asia-Pacific traffic to connect through Dubai to Europe has also been affected by the spread of terrorist attacks that are turning travellers away.

Going forward, Sheik Ahmed bin Saeed Al Maktoum said: “We expect the year ahead to remain challenging with hyper competition squeezing airline yields, and volatility in many markets impacting travel flows and demand.”

Interestingly, Emirates will be introducing a premium-economy class next year to help broaden its appeal. Known to have modelled itself after Singapore Airlines (SIA) in its early years of formation, Emirates is going through the same kind of pain that SIA experienced. And a little lately. SIA had for some time fought shy of going the premium-economy way, and is now competing aggressively to lead the pack.

The danger with success is how one thinks the good days will never come to an end so long as one continues to do what one has been doing. We forget that things are constantly changing around us.

Emirates’ profit plunge may signal something wider in the Gulf region. Last year Qatar Airways reported a loss of 252m riyals (US$67m), attributing it largely to a political dispute that resulted in a ban on the airline by Saudi Arabia, the UAE, Egypt and Bahrain. It expects to make a loss again this year.

Etihad Airways too has been incurring losses since 2016. Last year it posted a loss of US$1.28b. The Abu Dhabi-based airline has since shifted its focus on acquiring stakes in other airlines to build up its intercontinental network to focusing on operating point-to-point flights. There is rumour that it may eventually be assimilated by rival Emirates.

So true it is that one’s fortune may change depending on how and where the wind blows. You can’t ever rest on your laurels.

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Skytrax Best Airports 2019: No surprises

Generally the Skytrax list of top ten airports does not surprise. It’s very much the same again this year, with the airlines staying in the same rank or switching positions one up or down. Frankfurt Airport is the ony one to drop out of the list, replaced by Tokyo Narita.

Courtesy Changi Airport

Singapore Changi wins hands down, a record seven years. With continuing construction of new facilities and upgrading works, it is one hard to beat. Changi pampers the travellers, and respondents give it top honours for leisure amenities. But it is ranked behind Seoul Incheon and the Japanese airports of Tokyo Narita, Tokyo Haneda and Centrair Nagoya for airport staff service. It is also second to Seoul Incheon for international transit.

Worthy of note is again the absence of North American airports but the rising popularity of Japanese airports. No surprise that Tokyo Haneda and Centrair Nagoya are the two cleanest, with Tokyo Narita and Kansai also in the list. Doha Hamad International is the only Middle East airport in the top ten, and you may ask where is Dubai International as the world’s busiest airport. The list is generally dominated by Asian airports, but European airports have managed to maintain some presence in the top ranks: Munich (7th), London Heathrow (8th) and Zurich (10th).

The modern airport is today more than a mere transportation centre facilitating movement from one place to another, but a metropolis in its own right as airports compete to keep the numbers coming. Shopping for example is an important feature, for which London Heathrow wins the day. So too is dining, for which Hong Kong is a consistent winner.

The form impresses, but it is empty if not supported by substance. The basics are still important, such as baggage delivery which according to the survey is best provided by Kansai.

A new category introduced this year – best website and digital services – sees the mention of an American winner: entity: Houston Airports System. By he way, Houston George Bush is ranked fifth for dining. So there is hope, America!

Is Istanbul Airport the new Middle East hub?

Courtesy Getty Images

Turkey’s new Istanbul Airport is set to be the world’s largest airport, capable of handling up to 90 million passengers by 2021 with room for expansion to increase capacity to 200 million by 2028.

By comparison, Hartsfield-Jackson Atlanta International Airport in the United States – the current title holder – is capable of handling 104 million. Neigbouring Dubai International Airport has a capacity for 84 million, behind Beijing Capital International Airport’s 94 million but ahead of Haneda Airport’s 80 million, Heathrow Airport’s 76 million and Frankfurt Airport’s 61 million. (2016 figures provided by Airports Council International).

The airport was declared open on Oct 29 by Turkey’s President Recep Tayyip Erdogan. However, not all flights operating at the existing Ataturk Airport have been transferred to the new airport – not until the end of the year according to plans.

Mr Erdogan referred to the new airport as the “most important transit location on the north-south, east-west axes, connecting 60 countries and US$20 trillion economies”.

So, is Istanbul Airport the new Middle East hub, overtaking Dubai International?

No reason why not if you consider how geographically Istanbul is positioned not much differently from its Gulf neighbours. In fact, Istanbul, situated in a country that straddles both Asia and Europe, makes a viable alternative considering touristic interest in the region and how it is actually located on the doorstep of the wider Europe.

Already the authorities are encouraged by Istanbul’s growth of transit traffic albeit at the Ataturk Airport, and analysts are inclined to think that the new airport is likely to grow at the expense of other Middle eastern airports including Dubai, Doha and Abu Dhabi. That is, if Istanbul can ramp up the game to match what these other airports are offering in terms of cost, facilities and service. And, of course, if the volatile political climate in the region can be contained.

The competition will be fierce.

It cannot be denied the Gulf airports have been growing in tandem with that of their home airlines – Dubai/Emirates Airlines, Abu Dhabi/Etihad Airways, and Doha/Qatar Airways. Turkey’s national carrier, Turkish Airlines, is no small player. It operates scheduled services to 304 destinations in Europe, Asia, Africa and the Americas, making it the largest carrier in the world by number of passenger destinations, serving more destinations non-stop from a single airport than any other carrier in the world.

However, Turkish is ranked 18th in the 2018 Skytrax survey of the world’s top airlines, behind Emirates (4th) and Etihad (15th). But that’s still ahead of some major European carriers including KLM (19th), Air France (25th) and British Airways (31st).

Right now, Ataturk Airport is the 11th busiest airport in the world in terms of total passenger traffic and the 10th busiest in the world in terms of international passenger traffic. As of 2017, it is Europe’s 5th busiest airport after London Heathrow, Paris Charles de Gaulle, Frankfurt Airport and Amsterdam Schiphol Airport. The new airport, larger and capable of providing better facilities, should not fare any worse off.

Qantas is changing the game

Courtesy Getty Images

After the successful launch of the non-stop Perth-to-London flight in March, Qantas is now working on plans to introduce a non-stop Sydney-to-London flight, which is expected to take a little more than 20 hours. Boeing and Airbus have been invited to retrofit an aircraft that will fly the distance, and Qantas CEO Alan Joyce expected a launch by 2020.

This is set to be a game changer, continuing the momentum set by the Perth non-stop which, according to the Australian flag carrier, is performing well, and in fact, exceeding expectations. Mr Joyce himself said early signs were positive, and that the new route “is the highest rating service on our network.”

The task now is how to make the ultra-long haul comfortable enough to influence the pattern of travel and get non-believers on board. According to the Independent, a Twitter poll with over 1,200 responses showed that 40 per cent would prefer a non-stop flight, 30 per cent would want a break in the journey, and the remaining 30 per cent said it would depend on the fare.

“We’re challenging ourselves to think outside the box,” said Mr Joyce. “Would you have the space used for other activities – exercise, bar, creche, sleeping areas and berths?”

Maybe think, along the line of a cruise?

One suggestion put forth was converting the plane’s cargo hold into sleeping pods.

With more non-stop ultra-long haul flights from Australia – Perth now, Sydney next and most likely Melbourne to follow suit – to London and possibly other European destinations such as Paris and Athens (and further down the road to key destinations in Africa and the Americas as well), how will this affect the competition?

The Kangaroo Route has been a lucrative route for Qantas and rivals that include Singapore Airlines (SIA) and Middle East carriers, notably Emirates Airlines (despite its alliance with Qantas), Etihad Airways and Qatar Airways, flying via their home airports. Even Cathay Pacific may be counted as a veritable competitor.

However, these airlines are themselves also operating the ultra-long haul, so they are not unaware of how the game may be changing. Take, for example, the Middle East: Emirates, Etihad and Qatar are all operating non-stop to Los Angeles, albeit from their different home airports of Dubai, Abu Dhabi and Doha respectively, in close proximity, and this is besides Saudi Arabian Airlines (Saudia) flying from Jeddah. Both Emirates and Qatar are also flying non-stop to Auckland.

Asian rivals Cathay Pacific and Philippines airlines both fly non-stop from New York to Hong Kong and Manila respectively, and will soon be joined by SIA connecting the Big Apple with Singapore. Cathay and Philippines are also competing on the non-stop option from Toronto, while SIA and United Airlines are taking on each other flying non-stop between San Francisco and Singapore.

Perhaps to the relief of Qantas, British Airways (BA) has expressed no interest in mounting non-stop flights between Australia and the UK. In fact, over the years, BA has reduced its interest in Australia, currently operating only one service from London to Sydney via Singapore.

It seems that the ultra-long haul aims at narrowing the rivalry on key routes where point-to-point traffic is the target, and is perhaps also an attempt to claim native rights, cutting out third parties jumping on the bandwagon. The question is whether there is adequate traffic to justify the operations.

The fortunes of some airlines may shift, so too those of some airports which rely on transit traffic with no real attraction other than being a convenient stop en route. One only needs to look back at how Bahrain Airport quickly lost its status when new technologically advanced aircraft able to fly a longer distance without refuelling emerged on the horizon.

Dubai International and Singapore Changi are two popular hubs on the Kangaroo Route. How will their fortunes change?

Yes, they may lose some traffic with Qantas flying direct from Perth, Sydney and Melbourne, but all is not lost so long as there continues to be up to 70 per cent of travellers who are yet convinced the ultra-long haul is the way to fly. The airlines themselves understand the dynamics, hence the dual strategy, offering the options. Qantas may reduce some flights, but it is unlikely to completely stop flying via Dubai or Singapore. Similarly, SUA will not cease making a stop at an Asian port just because it has introduced non-stop flights to Los Angeles and San Francisco.

Again, if one sees how Dubai International does what Bahrain could not do, reviving the importance of a Middle East hub with convenient connections to Europe and Africa, no less owing to the vast network of Emirates, and how Changi has enticed transit and transfer passengers with being more than just another airport, one can be hopeful of their future. They may even flourish as important regional hubs, feeding traffic from and into the ultra-long haul flights.

And don’t forget, non-stop flights cost more. People spend their dollar in different ways.

Qantas marks new milestone with Perth-London nonstop flight

Courtesy EPA

At last, Qantas is able to shift the kangaroo route to flying nonstop from Perth to London Heathrow, marking a new historical milestone. The inaugural flight on March 25 managed the journey in just over 17 hours, flying more than 9,000 miles, making it as of now the world’s second longest after Qatar Airways’ Doha-to-Auckland flight.

The lucrative so-called kangaroo route used to be operated via other airports, from as many as six in the old days to only one recently via either Dubai or Singapore. While Qantas is not giving up its operations through these other ports, the Perth-Heathrow non-stop service now offers a viable alternative that may well reduce the traffic through them and enhance the chances of Perth becoming a hub airport.

The growing popularity of the non-stop ultra long-haul as more airlines begin mounting such services is helping to shift the demographics, noting however there may still be travellers who may prefer to break their journey to stretch their legs, and airports like Singapore Changi are not pulling the stops to continue to entice transit travellers with facilities and amenities that promise to pamper and spoil them.

Qantas is said to have done much homework to help passengers overcome possible jetlag issues and minimise the discomfort of such a long flight, working with university researchers on the response of the human body to such conditions and equipping the Boeing 787-9 Dreamliner jet with features that improve air quality and lower cabin noise.

It is understood that the inaugural flight carried more than 200 passengers for a capacity of 236 seats configured for 42 Business, 28 Premium Economy and 166 Economy. Now the challenge for Qantas to fill up the aircraft is marketing Perth as the hub for the kangaroo route, channeling traffic from other parts of Australia – until the dream of a similar non-stop from Sydney and Melbourne to London becomes a reality, then when one might ask, how long is it too long to be sitting in an aircraft?

What do Conde Nast best airports have in common?

Yet again – and again – no surprise who tops Conde Nast’s pick of the best airport, or even the top five which are located either in Asia or the Middle East What do these airports have in common?

According to Conde Nast, they stand out “with enough amenities and time-wasters that you might be a little late boarding that flight.” Such frills include indoor waterfalls and great restaurants. In other words, they have to be more than just a fucntional facility for air transportation – however efficient although one must assume efficiency is a key consideration.

Courtesy Changi Airport Group

Top in the ranks is Singapore Changi, followed by Seoul’s Incheon, Dubai International, Hong Kong International and Doha’s Hamad International.

Size matters. They are all huge airports. Changi has a handling capacity of 82 million passengers a year. Incheon is adding a second terminal which will double capacity to 100 million passengers annually, and Dubai Intl is aiming for 200 million passengers yearly. Hong Kong Intl handled more than 70 million passengers last year. Opened only in 2014, Hamad Intl is fast growing, recording a throughput of 37 million passengers last year, an increase of 20%.

They are hub airports. Dubai is now the world’s largest airport for international passenger throughput, edging out London Heathrow. Hong Kong Intl is positioning itself as a gateway to Asia in competition with Changi, with connections to some 50 destinations in China.

They are supported by strong home airlines with extensive connections: Qatar Airways (Hamad Intl), Cathay Pacific (Hong Kong Intl), Emirates Airlines (Dubai Intl), Korean Air and Asiana Airlines (Incheon) and Singapore Airlines (Changi).

They are modern with state-of-the-art infrastructure, and are constantly upgrading. Changi has recently added a fourth terminal where passengers can expect hassle-free processes from check-in to boarding without the need of any human contact.

The Asian airports offer fast rail connections to the city.

And, they are all competing to provide the most alluring “time-wasters”. Changi made news when it offered a swimming pool where passengers with time on their hand could relax and soak int he tropical sun. Now that’s also available at Hamad Intl, where you may even play a game of squash too. While Dubai is known to be one of the world’s biggest duty-free shopping centres, Hong Kong Intl is reputed for its great restaurants. Incheon is uniquely Korean with its “Cultural Street” that showcases local cuisine, dance performances, and arts and craft workshops. It also boasts an indoor skating rink and a spa. Hamad Intl too has an exhibit hall for that cultural touch.

Changi comes closest to being a destination in itself where it is said a passenger wouldn’t mind a flight delay. Besides the swimming pool, there are: an indoor waterfall, a butterfly garden, a swimming pool, vast play areas for families with children, and an array of restaurants and shops. And for passengers with at least a transit of six hours, you can hope on a free city tour.

But, of course, all these would not mean much if they are not supported by efficiency and friendly service.

Ultra-long flights: The competition heats up

Courtesy Qatar Airways

Courtesy Qatar Airways

Qatar Airways has clinched the honour of operating the longest non-stop commercial flight when it commenced operations from Doha to Auckland on February 6. The inaugural flight, using a Boeing 777-200LR aircraft, clocked 16 hours and 23 minutes for a distance of 14,535 km.

Qatar edged out rival Emirates Airlines which also operates to Auckland but from Dubai, and Air India which interestingly flew over a longer distance of 15,127 km from New Delhi to San Francisco across the Pacific (rather than the Atlantic) but advantaged by tailwinds clocked a shorter flying time.

Ultra-long flights are a boon to travellers, particularly corporate executives, who want to skip long transit stopovers or the hassle of connections. But there are others who prefer an intermediate stop to stretch their legs. They work excellently for end-to-end traffic where there is demand between these destinations. But airlines will find it does not make economic sense to connect two points for the sake of flying the distance. One may ask, in the case of Qatar’s new launch, is there adequate traffic between Doha and Auckland – the same question that would have been posed to Emirates?

Clearly Qatar is thinking network connections – not catering to just traffic from Auckland but to encourage travel beyond Doha to Africa, Europe and the Americas, in much the same way that Emirates has built a viable Dubai hub for connecting traffic challenging long-standing hubs such as Singapore Changi. Qantas, which has traditionally used Changi as the hop from Australia to Europe vv has contributed to the growth of Dubai to which it has shifted its hub operations. Now Qantas is rethinking its strategy to make Perth the hub when new technology enables the flying kangaroo to one-hop from London to Perth vv.

The competition has heated up in recent years with more airlines mounting such ultra-long flights. The strategy goes beyond tapping end-point, particularly home, markets, pointing to the importance of developing strong home and secondary hubs, and onward network connections. The squeeze on the competition may ironically persuade more airlines to intercross their networks to make ends meet.