The fact that Dubai World Central (DWC) has opened its doors for cargo flights despite ongoing construction is a low-key effort to prove to the world that the economic downturn is over and that the city is on its way to recovery. The timing of this partial opening of what will eventually be the world's largest airport begs the question: what is Emirates planning?
DWC and Emirates Airlines have a symbiotic relationship, with DWC taking advantage of Emirates' growth and Emirates leveraging DWC's strategic location. Emirates is in a position to link the world through its hub, and makes no secret of its intention to do so. The backlog of nearly 200 aircraft orders to add to its existing fleet of 149 confirms the company's ambition to connect every possible major city in the world via Dubai.
Yet, many question whether the market can sustain this unbridled growth in such a tightly regulated industry. While bilateral agreements, open skies policies, and the creation of single-skies undisputedly improve operating conditions for any airline business, the process of easing regulated airspace is slow, and will be greatly limited by the imposition of strict green regulations as early as 2012. Moreover, the process applies primarily to North America and Europe; the emerging markets in India, China, and Southeast Asia have yet to reap such benefits. Should this regulated landscape remain unchanged, Emirates' aspirations will not be sustainable. However, the company is betting on its ability to ease these restrictions, and it no doubt has the capability to do so.
Emirates' order for 32 Airbus A380s at the ILA Berlin did more than increase its total A380 fleet to 90 aircraft. Such an announcement was highly unusual at this low-profile event and suggests a well orchestrated plan to garner government support for Emirates' expansion. Germany is clearly a key target, but while the Airbus order may bring a much needed economic contribution, it will come at a price as the airline will expect to obtain greater access into the German market in addition to obtaining favourable slots at key airports. The additional air transport taxes imposed recently on Lufthansa will allow Emirates to increase its footprint on German territory. Importantly, this suggests that the German government is willing to overstep its home airline in favour of a foreign carrier if it means more money and more jobs. Moreover, it means that Emirates will not stop short as it strives to accelerate the ease of bilateral restrictions globally, to realise its vision of growth.
Furthermore, Emirates is ripening its business before its intended IPO which is subject to government approval. As the airline and government are currently more or less one entity, such an approval should be easy enough to secure as long as it benefits the country as a whole. Since DWC is situated directly between Dubai and Abu Dhabi, it will likely render the original Dubai airport and Abu Dhabi obsolete. As a result, the financially struggling national airline Etihad Airways would no longer be viable as a stand alone business and consolidation with the Emirates Group would be the only face-saving exit strategy.
Farnborough is expected to witness large scale orders from both Emirates and Qatar Airways, as they compete for media headlines. Both airlines have ambitious growth plans; Emirates is on a non-stop growth quest, and Qatar Airways intends to be the next door competitor with the potential to join Star Alliance. These two carriers are expected to place the most orders in the wide-body aircraft category.
Finally, the knighthood of Emirates' Executive Vice Chairman, Sir Maurice Flanagan earlier this year in recognition of his services to British Exports, could not have come at a more strategic time as Farnborough looms on the horizon. Rolls-Royce and Airbus are expected to benefit, and it would not be surprising if more products that support the British economy are procured by Emirates during the show.
Max Sukkhasantikul is a Commercial Aviation Consulting Analyst with the Frost & Sullivan Aerospace & Defense Practice. His primary focus is to monitor and analyze emerging trends, develop forecast models, assess business cases, analyze end-user and competitor strategies, and develop recommendations for companies across commercial aviation markets.
For more information, or if you would like to speak directly with Max Sukkhasantikul, please contact Monika Kwiecinska, Corporate Communications, at monika.kwiecinska[.]frost.com.