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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Some more Boeing woes: Shoddy work at manufacturing plant

As Boeing works at regaining the trust of travellers in the B737 Max 8 jet (following the crashes of an Ethiopian Airlines jet and a Lion Air jet in similar circumstances), assuring them that the software fix to the anti-stall system will make it the safest aircraft to fly the skies, new issues that have surfaced aren’t helping.

A New Times report (April 23, 2019) stated that the Boeing factory in North Charleston (South Carolina) that makes the 787 Dreamliner “has been plagued by shoddy production and weak oversight that have threatened to compromise safety.”

Whistle-blowers have pointed out defective manufacturing resulting from faulty parts being installed, debris left on planes dangerously close to wiring beneath the cockpits, and pressure to not report violations. The debris includes tools, metal shavings, Bubble Wrap and chewing gum, and it is alleged that customers had found random objects in new planes.

One airline – Qatar Airways – it seems, was so upset that it has since 2014 bought only planes built in Boeing’s main plant in Everett. It may sound ridiculous, but will travellers now go checking where the Dreamliners operated by other airlines were built, as a supermarket shopper would ordinarily do?

While the public may understand the risk of a mechanical failure of any machine, it is quite a different thing when the problem lies in a culture of not caring enough to ensure that the safety of the traveller comes before all else, that kind of trust that travellers must have in the product such as a plane.

Pushing production to meet deadlines at all cost and compromising safety standards can only rattle the traveller’s confidence. Already more than 50 per cent of Americans have said they will not fly the Max jet, even if the problem has been fixed.

And now the concern is extended to the Dreamliner. What next?

The New York Times report raises many concerns, top of which is how the management had turned a blind eye to complaints by the staff. Some of them alleged they had been punished or fired when they voiced concerns.

Two former managers said they were pushed to cover up production delays and employees were told to install equipment out of order to make it appear production was on schedule. In fact, Qatar’s beef was that Boeing was not being “transparent” about the cause of production delay.

What about the Federal Aviation Administration (FAA)’s role in all this, particularly when in the Max investigations the agency the agency had been censured for allowing Boeing to self-certify?

According to the New York Times report, an FAA spokesman, Lynn Lunsford, said the agency found metal silvers in several planes certified by Boeing as free of debris.

The FAA issued a directive in 2017 requiring that Dreamliners be cleared of shavings before they are delivered. However, it was determined that the issue does not present a flight safety issue.

Boeing has all along insisted the Max is a safe aircraft and that there are procedures in place to correct errors presented by the anti-stall system. The software fix to be implemented is meant to make a safe aircraft “safer”.

Boeing CEO Dennis Mullenberg, courtesy CNBC

Today Boeing CEO Dennis Mullenberg echoed the same line, saying on Monday April 29 that the pilots of the fateful Ethiopian Airlines flight did not “completely” follow the although Ethiopian officials said earlier they did but could not control the plane.

Mr Mullenberg said: “When we design these systems, understand that these airplanes are flown in the hands of pilots.” Without saying as much, the competence of the pilots or their familiarity with the procedures has been called into question. “Going forward we have identified a way to improve,” he added, “I am confident that that again will make one of the safest airplanes in the air to fly”

Those words of assurance have since been uttered often and will continue to be repeated as Boeing faces the uphill task of regaining trust in the improved Max jet. More than their airline customers – some of whom have stood staunchly by Boeing – it is the majority of travelling end-users that they need to convince.

Airbus A380: Big is not necessarily beautiful

Courtesy Airbus

BIG is not necessarily beautiful. Now that Qantas has cancelled its order for eight Airbus A380 superjumbo jets while Emirates, the largest operator of the double-decker jet, is also considering switching some orders to the smaller A350, the future of the world’s biggest aircraft hangs in the balance.

A Qantas spokesman said: “These aircraft have not been part of the airline’s fleet and network plans for some time.”

Clearly things are changing and the preference is trending towards a smaller but more fuel efficient aircraft.

The A380, which can carry as many 850 passengers, is supposed to cater to the rising demand for seats and at the same time relieve airport congestion. However, ten years after its inauguration, the industry is yet again shifting. It may seem the ideal solution moving more people at the same time. But as more airlines compete with non-stop flights, filling to capacity becomes increasingly challenging.

Qatar Airways Group CEO Akbar Al Baker said: “As an aircraft, it is very well suited for routes that require high capacity. We have successfully deployed it in markets where we see this large volume of passengers and operate to slot-restricted airports.” However, he was of the opinion that “this aircraft is very heavy (and) has very high fuel consumption.”

Besides, its size does not allow the flexibility to use it on other less populated routes which are dependent on seasonal demands.

Qatar has 10 A380s in its fleet. Other major operators include Singapore Airlines (24), Lufthansa (14), Qantas (12) and British Airways (12). But none comes near Emirates’ fleet of 109 with more than 50 on order.

Qantas considers “crazy” ideas for ultra-long flight

Courtesy Reuters

Qantas is taking the lead in raising the bar for the ultra-long flight. And it is understandable why. The Australian flag carrier will be launching the world’s longest flight from Sydney to London in 2022 – a journey of 20 hours and 20 minutes.

Qantas is already flying non-stop from Perth to London, but the flight (17 hours and 20 minutes) is shorter than Qatar Airways’ 18-hour flight from Doha to Auckland and Singapore Airlines (SIA)’s flight from Singapore to New York (closer to 19 hours).

However, not many people may think staying up in the air for that long a time is the best way to travel. So the task for Qantas is to shift that mindset. According to the airline, their Perth-London experience has shown that health and wellness are the main concerns of passengers, and these may be translated into “comfort, sleep, dining, entertainment, and state of mind”.

The package goes beyond providing more comfortable seating, noise-reduced headsets and food specially designed to help the body adjust to the journey.

The limited space of the aircraft’s pressurized cabins and its complete lack of view pose a big challenge. So pre-flight programs become an option.

Qantas has introduced a lounge at Perth International with ‘light therapy’ showers, hydration menus and yoga classes to reduce the effects of jetlag. But this facility is only open to customers travelling in business, gold, platinum and platinum one Frequent Flyers, Oneworld emerald and sapphire customers, and Qantas Club members and their guests.

What about the rest of the travelers who are travelling in economy? These are the passengers who probably need more convincing than premium passengers. Unless, as in the case of SIA’s Singapore to Newark flight which offers only business and premium class seats (there again, certain privileges may not apply to the lower class).

That said, what really matters is what happens on the flight. According to a Qantas study, suggestions include common spaces for stretching (now there’s the rule about not conglomerating), a cafe and stand-bar (which is not new even for the long-haul), exercise bikes and guided meditations.

Think cruise, as it were, although that’s not quite a fair comparison. But they all seem to be saying: If you can’t sleep through the flight or enjoy the view outside, and when you are tired after watching several movies or getbleary-eyed reading, you want to be doing something else or simply to get out of your seat.

Qantas said it is thinking outside the box and considering some “crazy” ideas. That will certainly change the flying experience, cost aside. It may mean the return of luxury air travel at least for the ultra-long haul.

But it is a strategic investment for the flying kangaroo “because of where Australia is situated on the globe,” said Phil Capps, head of customer experience. He added, “we’ve always had to push the boundaries of long-haul flying to ensure our passengers arrive at their destination ready for the next stage of their journey.”

While more airlines are battling it out in the long and ultra-long haul arena, the real competitor for Qantas may be SIA since there may still be many travelers who prefer to break their journey and because Singapore Changi Airport is the indisputable airport for transiting. The corollary is that SIA will be equally challenged to keep them coming through Changi.

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.

2018 Skytrax airline awards: Largely the same winners

Top airlines remain largely the same ones as last year’s.

Yet again we note how the top ten airlines remained largely the same ones as last year’s. If you’re good, you’re good, so it seems, and consistency won the day.

Singapore Airlines (SIA) which was second last year switched places with last year’s winner Qatar Airways. All Nippon Airways (ANA) and Emirates Airlines held steady in 3rd and 4th position. Cathay Pacific moved down one rung to 6th,, exchanging places with EVA Air. Lufthansa held its 7th position. Garuda Indonesian followed Hainan Airlines up one notch to 8th and 9th position respectively. The only new entrant to the list was Thai Airways International, which actually only moved up one rung from 11th last year, edging out Etihad Airways as it fell from 8th to 15th position.

So much for the excitement as the winning airlines, going by the result of the survey, continued to please their customers who found no reason to think otherwise of them.

Unlike some high-brow surveys whose results lean heavily on the premium class, Skytrax does readings across all classes.

Best for First Class was SIA followed by Etihad and Air France. This used to be the realm of Asian and Middle-East carriers, and let it not be a surprise to see two European carriers in the ranking. Lufthansa took 4th place.

Best for Business Class was Qatar followed by SIA and ANA. You would imagine that if an airline is good in First, it should not be too far off in Business. However, Air France was not placed in the top ten list and Lufthansa ranked 8th.

Best for Premium Economy was Air New Zealand followed by Qantas and SIA. It looks like the Pacific airlines are pretty good with this product. Lufthansa and Air France ranked 4th and 5th.. There was an absence of Middle-east carriers because they didn’t believe in such a class. Qatar chief CEO Akbar Al Baker had said: “We won’t roll out premium economy… I don’t think there is room for premium economy in our region, and of course in Qatar Airways. We give you a premium economy seat with an economy class price.” Sounds familiar if you recall the early days when SIA too expressed the same skepticism. However, Emirates has said its new Airbus A380 expected to be delivered in 2020 will feature premium economy.

Courtesy Star Alliance

Best for Economy Class was Thai Airways followed by SIA and Qatar. This category was dominated by Asian carriers with the exception of Lufthansa in 9th position.

Only these six airlines were placed in all three categories of First, Business and Economy (excluding premium Economy since not all airlines offer this sub-class): ANA, Cathay, Emirates, Lufthansa, Qatar and SIA. You can then rest comforted that whatever class you travel with these airlines, you will be treated without discrimination.

But is the Skytrax survey a good guide in choosing which carrier to fly with? Generally people can agree on makes a good airline. What matters when you travel with an airline? For the long haul, seat comfort is an important feature. Inflight entertainment, if you look for some distraction and are not otherwise doing something else or trying to catch up on shuteye. A good meal, if you are not one who will not eat airline food no matter what (unfortunately this is not featured in the Skytrax survey). Cabin cleanliness, of course, and that includes the condition of the washrooms. How often do you see the crew give it a clean-up and spraying some kind of deodorant to try and make it as pleasant as it possibly can be? Above all, the service provided by the cabin crew, to be treated in a friendly manner and with respect. Not forgetting service on the ground in the event that you may need assistance, as when your bag is damaged or has not arrived with you.

Perhaps the ranking for some of these more specific services may be of some help:

Best Economy seat (First and Business should be way better anyway): 1st Japan Airlines, 2nd SIA and 3rd Thai Airways.

Best cabin crew: 1st Garuda, 2nd SIA and 3rd ANA.

Best inflight entertainment: 1st Emirates, 2nd SIA and 3rd Qatar.

Cleanest cabin: 1st ANA, 2nd EVA and 3rd Asiana Airlines.

Best airport service: 1st EVA, 2nd ANA and 3rd Cathay.

But, of course, you can’t expect a single airline to be best in all categories, but you get a pretty good idea of where they all stand, perhaps with exceptions.