CASES
CASE
12
EMIRATES AIRLINE IN 2017*
Within three decades, Emirates Airline went from a small
start-up to one of the world’s biggest carriers measured by
international passenger mileage. Started in 1985, the airline
deviated from the strategy of most other airlines to use its
position between the U.S., Europe, Africa, and Asia to connect flights between distant pairs of cities such as New York
and Shanghai or London and Nairobi. Tim Clark, the firm’s
president, referred to these as “strange city pairs.” No airline has grown like Emirates, whose expansion qualifies it to
claim the crown of the freewheeling sultan of the skies.
Its strategy of flying large number of passengers all
around the world would have been difficult without the
* Case prepared by Jamal Shamsie, Michigan State University, with the
assistance of Professor Alan B. Eisner, Pace University. Material has been
drawn from published sources to be used for purposes of class discussion.
Copyright © 2017 Jamal Shamsie and Alan B. Eisner.
introduction of Boeing 777 long-range planes and Airbus
380 superjumbos. In particular, Emirates has managed over
the years to radically redraw the map of the world, transferring the hub of international travel from Europe to the
Middle East. Dubai, the hub of Emirates, which currently
handles over 80 million passengers each year, has become
the world’s busiest airport for international passengers.
A new terminal, the largest in the world, was recently built
at a cost of $4.5 billion just to accommodate the almost 240
Emirates aircraft that fly out to 145 destinations around the
world (see Exhibit 1).
Recent developments, however, such as the drop in
oil prices and the growth in terrorist attacks have led
to a decline in demand. Many companies, particularly
in the Middle East, have been cutting back on travel
for their employees, reducing the premium revenue that
Emirates has been generating from first and business
EXHIBIT 1 Top Global Airlines
There are several rankings of the world’s airlines, but a few have consistently been rated highest in service over
the last five years. These are listed below in no particular order.
Started
Main Hub
Fleet
Destinations
SINGAPORE
1972
Singapore
108
63
CATHAY PACIFIC
1946
Hongkong
161
102
EMIRATES
1985
Dubai
221
142
THAI
1960
Bangkok
91
78
ASIANA
1988
Seoul
85
108
ETIHAD
2003
Abu Dhabi
102
109
EVA
1989
Taipei
68
73
AIR NEW ZEALAND
1940
Auckland
106
58
GARUDA
1949
Jakarta
119
102
QATAR
1994
Doha
146
146
ANA
1952
Tokyo
211
73
SOUTH AFRICAN
1934
Johannesburg
60
42
VIRGIN ATLANTIC
1984
London
40
30
QANTAS
1920
Sydney
118
42
LUFTHANSA
1953
Frankfurt
273
190
Source: Skytrax.
CASE 12 :: EMIRATES AIRLINE IN 2017 C75
class passengers. Growing fears about terrorism have
led passengers to cut back on international travel and to
reduce connecting through the Middle East. This has led
Emirates to switch from the A380 to the smaller Boeing
777 on some routes.
The largest U.S. airlines have alleged that Emirates, like
others such as Etihad and Qatar, have received subsidies
from their government. These subsidies have, according to
these claims, provided Emirates with an unfair advantage.
Tim Clark, the president, has responded to such charges
by insisting that his carrier has never received government
subsidies or obtained free or cheap fuel. The airline has
always disclosed its finances, used international auditors,
and posted regular quarterly profits (see Exhibits 2 to 5).
In fact, according to its financial statements, Emirates has
shown profits for the last 27 years. “We are confident that
any allegation that Emirates has been subsidized is totally
without grounds,” Clark declared.1
In fact, Emirates claims that it has worked hard to
achieve its leading position by offering onboard amenities,
like bars and showers on its aircraft, which other carriers
find frivolous (see Exhibit 6). Beyond this, it points to the
high standards of service from its crew that speak many languages and come from many countries. Emirates’ service
manager, Terry Daly, employs an inspiring quote: “I may
not remember exactly what you said. I may not remember
exactly what you did. I will always remember exactly how
you made me feel.”
EXHIBIT 2 Performance Highlights
Year Ended,
31 March
Passengers Flown
(thousands)
Profit or Loss
(AEDm)
2005
12,529
2,619
2006
14,498
2,652
2007
17,544
3,339
2008
21,229
4.451
2009
22,731
2,278
2010
27,454
3,565
2011
31,422
5,443
2012
33,981
1,813
2013
39,391
2,839
2014
44,537
3,254
2015
49,292
5,893
2016
51,853
8,330
Source: Emirates Airline.
EXHIBIT 3 Income Statement (United Arab Emirates Dirham)
Consolidated Income Statement for the year ended 31 March
2016
2015
83,500
86,728
1,544
2,091
Operating costs
(76,714)
(82,926)
Operating profit
8,330
5,893
220
175
(1,329)
(1,449)
142
152
7,363
4,771
(45)
(43)
7,318
4,728
193
173
7,125
4,555
Revenue
Other operating income
Finance income
Finance costs
Share of results of investments accounted for using
the equity method
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to non-controlling interests
Profit attributable to Emirates’ Owner
Source: Emirates Airline.
C76 CASE 12 :: EMIRATES AIRLINE IN 2017
EXHIBIT 4 Balance Sheet (United Arab Emirates Dirham)
2016
2015
82,836
80,554
1,317
975
522
544
2,580
920
494
619
Derivative financial instruments
-
21
Deferred income tax asset
3
4
87,752
83,627
Inventories
2,106
1,919
Trade and other receivables
9,321
8,589
12
342
Short term bank deposits
7,823
8,488
Cash and cash equivalents
12,165
8,397
31,427
27,735
119,179
111,362
801
801
(1,179)
(168)
Retained earnings
32,287
27,253
Attributable to Emirates’ Owner
31,909
27,886
496
400
32,405
28,286
513
202
40,845
42,426
Deferred revenue
1,596
1,650
Deferred credits
1,090
207
440
521
3,762
3,589
4
-
48,250
48,595
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments accounted for using the equity
method
Advance lease rentals
Loans and other receivables
Current assets
Derivative financial Instruments
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Capital
Other reserves
Non-controlling interests
Total equity
Non-current liabilities
Trade and other payables
Borrowings and lease liabilities
Derivative financial instruments
Provisions
Deferred income tax liability
continued
CASE 12 :: EMIRATES AIRLINE IN 2017 C77
EXHIBIT 4 Continued
2016
2015
27,037
27,770
35
34
Borrowings and lease liabilities
9,260
5,382
Deferred revenue
1,316
1,244
Deferred credits
139
49
Derivative financial instruments
737
2
38,524
34,481
86,774
83,076
119,179
111,362
Current liabilities
Trade and other payables
Income tax liabilities
Total liabilities
Total equity and liabilities
Source: Emirates Airline.
EXHIBIT 5 Cash Flow Statement (United Arab Emirates Dirham)
2016
2015
Operating activities
Profit before income tax
7,363
4,771
Depreciation and amortisation
8,000
7,446
Finance costs - net
1,109
1,274
(Gain) / loss on sale of property, plant and equipment
(367)
(132)
Share of results of investments accounted for using the equity method
(142)
(152)
21
32
733
669
(5)
(17)
(12)
-
(585)
(534)
(62)
(68)
(168)
(213)
(2,234)
194
454
(5)
14,105
13,265
6,535
3,478
Adjustments for:
Net provision for impairment of trade receivables
Provision for employee benefits
Net movement on derivative financial instruments
Gain on sale of investments accounted for using the equity method
Employee benefit payments
Income tax paid
Change in inventories
Change in receivables and advance lease rentals
Change in provisions, payables, deferred credits and deferred revenue
Net cash generated from operating activities
Investing activities
Proceeds from sale of property, plant and equipment
C78 CASE 12 :: EMIRATES AIRLINE IN 2017
2016
Additions to intangible assets
2015
(374)
(157)
(9,504)
(10,269)
Investments in associates and joint ventures
(19)
(12)
Acquisition of a subsidiary, net of cash acquired
(23)
-
Movement in short term bank deposits
665
266
Finance income
231
168
Dividends from investments accounted for using the equity method
128
115
(2,361)
(6,411)
Proceeds from loans
1,213
2,215
Repayment of bonds and loans
(1,703)
(622)
Aircraft finance lease costs
(918)
(951)
Other finance costs
(294)
(341)
Repayment of lease liabilities
(4,055)
(5,628)
Dividend paid to Emirates’ Owner
(2,100)
(869)
(118)
(68)
Net cash used in financing activities
(7,975)
(6,264)
Net change in cash and cash equivalents
3,7696
590
8,393
7,800
3
3
12,165
8,393
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Dividend paid to non-controlling interests
Cash and cash equivalents at beginning of year
Effects of exchange rate changes
Cash and cash equivalents at end of year
Source: Emirates Airline.
EXHIBIT 6 Service For Premium Passengers On Emirates
A380
•
•
•
•
•
•
•
•
•
•
Offer 1,600 channels of in-seat entertainment
Serve Cuvee Dom Perignon, 2000 champagne
Serve Iranian caviar
Serve gourmet cuisine prepared by chefs of 47 nationalities
Offer largest selection of premium wines
Use bone china by Royal Doulton
Use specially made cutlery by British design house Robert Welch
Provide Bulgari-designed amenity kits
Feature a stand-up bar
Offer two on-board walnut and marble design showers *
* Only for first-class passengers.
Source: Emirates Airline.
Launching a Dream
The roots of Emirates can be traced back to Gulf Air, which
was a formidable airline owned by the governments of
Bahrain, Abu Dhabi, Qatar, and Oman. In the early 1980s,
the young sheikh of Dubai, Sheikh Mohammed bin Rashid
al Maktoum, was upset by the decision of Gulf Air to cut
flights into and out of Dubai. He responded by resolving
to start his own airline that would help build Dubai into a
center of business and tourism, given the emirates lack of
significant oil resources.
The sheikh recruited British Airways veteran Sir
Maurice Flanagan to lay the groundwork for the new airline, which he bankrolled with $10 million in royal funding.
He placed a member of his royal family, Sheikh Ahmed bin
Saeed al Maktoum, to the top post. At 26 years old, Ahmed
bin Saeed had just graduated from the University of Denver
in the U.S. Since he had not held a job before, the young
CASE 12 :: EMIRATES AIRLINE IN 2017 C79
sheikh looked to Flanagan in order to figure out how to run
the airline.
However, the speculator growth of Emirates can be attributed to Sir Tim Clark, who was handed the critical task of
route planning. He recognized that about two-thirds of the
world’s population was within eight hours of Dubai, but the
firm lacked the aircraft to take advantage of its location. This
began to change with the arrival of more advanced aircraft,
beginning with the introduction of the Boeing 777 in 1996,
on to the Airbus A380 in 2008. The long range of these aircraft allowed Emirates to develop routes that could link any
two points in the world with one stop in Dubai.
From serving 12 destinations in 1988, Emirates was able
to expand at an amazing rate, particularly after it started
adding Boeing 777s to its fleet after 1996. The carrier continued to grow even through the recession that started in
2008, taking possession of more new aircraft than any other
competitor. “We operated normally. We put on more aircraft.
We carried more passengers,” said Mohammed H. Mattar,
senior vice president of the carrier’s airport services.2
Providing the Ultimate Experience
Emirates strives to provide the best possible experience to
its passengers in all sections of its aircraft. It was the first
airline to offer in-flight viewing in the back of every seat.
“That seems pretty normal for long haul airlines now, but
it wasn’t then,” said Terry Daly.3 A caravan of flight attendants, who are fluent in a dozen languages, pass up and
down the aisles, providing service with a smile. Daly, who
maintains the highest standards for all in-flight services, is
known for having once fired eight service supervisors on a
single day when he discovered that the flight attendants that
they had supervised had deviated from his precise instructions on how to respond to requests from passengers.
From its start, Emirates has also been known for the quality and selection of food that the airline provides, even to
passengers in the back of the aircraft. The catering division
is one of the world’s biggest, a multi-floor maze of monorails,
cameras, vast warehouses of wines and liquors, multinational
chefs slaving over steaming pans, kettles, grills, stretching as
far as the eye can see, along with the latest in robotics, all
of which deliver 115,000 meal trays to Emirates planes each
day. “It’s about making sure the culinary offering is absolutely first class across the airplane,” said Daly.4
But Emirates has always tried to push further and further on the service and amenities that it provides to its
premium-class passengers. Included with a Business Class
ticket is a limousine ride to and from the airport, personal
assistance with the check-in process, and use of one of its
30 worldwide lounges. One of 600 multinational and multilingual members of a welcome team called Marhaba, Arabic
for “welcome,” help all first- and business-class passengers
clear all formalities upon departure and arrival.
Over the years, as Emirates has moved to larger and
larger aircraft, it has found ways to enhance the experience of its premium passengers during flight. The airline
C80 CASE 12 :: EMIRATES AIRLINE IN 2017
pioneered the concept of a suite in first class with its launch
of the A340 back in 2003. With its 50 A380s, the world’s
biggest jetliner, Emirates is able to offer 14 first-class suites,
each with a vanity table, closet, 23-inch TV screen and electronic doors that seal shut for total seclusion.
First-class passengers also have access to two enormous spa showers, a first in the industry. An event planner who flew first class said, “To walk onto the A380, to
have an average size bathroom, a seven minute shower, full
size bath towels and your own attendant is pretty amazing.”5 All premium-class passengers—both in first and
business class—have access to a big, circular lounge, with
a horseshoe-shaped stand-up bar in the center, for which
Emirates forfeited a number of business-class seats.
Grooming a Special Employee
Each year, Emirates holds Open Days in more than 140
cities across 70 countries for the purpose of attracting new
recruits to join its elite force of 18,000 flight attendants from
140 nationalities who speak more than 50 languages. They
are not attracted by the starting salary, which is only about
$30,000 per year, or to the free room and board that comes
with it. They are excited about the possibility of joining an
iconic brand which encompasses people around the world.
The airline offers a vast no-expenses-spared crew training program, where for seven weeks, each new recruit moves
through different departments with specialists in various
areas. Emirates carefully trains all its employees, from those
who check in passengers to those who serve them on their
planes. Only about 5 percent of the applicants make it through
the selection process. The low acceptance rate pushes people
with diverse backgrounds to compete in an American Idol
style brains-and-beauty contest for a chance to travel around
the world as a member of an Emirates cabin crew.
The exterior of the Emirates’ state-of-the-art training
facility resembles the fuselage of a jetliner. Inside, everyone
pays particular attention to the flight attendants, who must
make sure that everyone on the aircraft receives the highest
level of service on every single flight. This is particularly
important for a carrier whose flights are of long duration
because they serve destinations across all continents.
By the end of their training, the newcomers have been
instructed in aspects of posture, etiquette, safety, and evacuation. There are strict standards for the color of the lipstick,
the shade of the hair, and even the style of the lingerie.
According to a recent report, the crew, who are 75 percent
women, have an average age of 26 years, compared with
an age of over 40 at U.S. airlines. Their weight is carefully
monitored, their makeup mandatorily reapplied regularly,
and unwed pregnancy is not allowed. Everything must go
well with the pinstripe khaki uniform, the color of sand, with
white scarfs billowing like exotic sails. Women must adhere
to certain hairstyles that the crowning blood-red hat will
work with. “When walking through an airport terminal, it’s
usually a Catch Me If You Can movie moment, with passengers all turning their heads,” said one of the new recruits.6
Like everything else, Emirates goes over the top in what
it calls Nujoum, the Arabic word for stars, by including motivational team-building exercises in its training program.
Travel writer Christine Negroni, who participated in one of
these, described the experience that the new recruits typically go through. “It is a combination of a customer service
experience and a come-to-Jesus rally, highly produced like a
Hollywood spectacular. If you had told me that Disney produced it, I wouldn’t doubt it. By the end of the day, they are
whipped into a frenzy of feeling What can I do for Emirates?”7
Communicating to the Masses
In spite of the extra touches and amenities that Emirates
can provide for its passengers, the carrier discovered
from focus groups that their name was not well known in
many parts of the world where they were expanding. They
realized that they needed to create a message they could
use to develop their brand among consumers that would
inform them what to expect from Emirates. This message could also be used to motivate existing and potential
employees to rally behind the airline and work to deliver
on its promise.
In its usual style of pushing for the best, Emirates summoned the world’s top 10 advertising agencies to Dubai
to compete for a massive international advertising campaign contract. StrawberryFrog, an advertising agency
that had recently started operations in New York City, was
one of the firms vying for the contract. Its founder, Scott
Goodson, had read an interview with Tim Clark, the president of Emirates, shortly before this gathering of the advertising agencies. “And in that article, he was talking about
his vision, that he wanted Emirates to be a global company
and wanted to make the world a smaller place by bringing
people together,” said Goodson.8
These comments inspired Goodson to come up with
the idea of “Hello Tomorrow,” which allowed his firm to
clinch the contract with Emirates. These words became not
just the theme for an ad campaign but a new way to think
about the airline. Through the use of powerful storytelling,
images, and music, the message portrayed Emirates not just
as a carrier that delivered a superior experience but as a catalyst for connecting a new global culture of shared aspirations, values, enthusiasm, and dreams. In his conversation
with Tim Clark, Goodson said: “Ad campaigns are fleeting.
The power of a movement is that it can change habits and
rally millions.”9
The StrawberryFrog team spent 18 month at Emirates
headquarters educating employees, making them foot soldiers in this “movement” or campaign. In the early spring
of 2012, the “Hello Tomorrow” brand was launched, a universal message in myriad languages in 150 countries. In
television ads, an Emirates steward pushes his drink cart
as a mammoth A380 airplane seems to be literally built
around him, its various parts and personnel coming from
countries spanning the globe, providing proof that the airline is a truly global enterprise.
Chasing Tomorrow?
Even as Emirates has been trying to set itself apart from
other carriers by enhancing the customer experience, it is
facing new challenges. It is trying to attract tourists to Dubai
to replace some of the connecting passengers that it is losing
because of the wars in the Middle East and terrorism there
and elsewhere. It is cutting back on its additional orders for
the Airbus 380 at least until passenger levels rise again.
At the same time, many of its competitors have been
trying to improve on their offerings, particularly for passengers who are willing to pay a little more. Airlines are fighting with each other to attract this more upscale segment as
the higher fares allow them to increase their profits without
having to add capacity. Singapore Airlines, for example, is
trying to beat all competitors by providing a truly enhanced
premium economy section. It will offer wider seats with
more recline, a cocktail table, more storage space, and a
sleek 13.3-inch high-definition screen, the largest in its
class. Passengers will be offered state-of-the-art noise canceling headsets and hundreds of channels of entertainment,
and they will be offered more options on a menu that will
be designed specifically for the premium economy class.
Emirates faces its biggest challenge from its other
U.A.E.–based rival, Etihad, which announced an improvement to the first-class suite that Emirates pioneered 12 years
ago. Etihad introduced, with grand bravado, a three-room,
$21,000 one-way Residence and nine $16,000 one-way oneroom First Apartments, complete with Savoy Academy–
trained butler and private chefs, on its A380 flights. First
offered on flights between Dubai and London, the service
is to be expanded to flights between Dubai and New York
and Dubai and Sydney.
Some industry analysts have questioned the ability of
Emirates to deal with these challenges. Joe Brancatelli, a
business travel writer, recently stated: “I could make the
case that Emirates’ moment has passed. Emirates was the
trendy airline three or four years ago.”10 In a recent meeting
to announce the latest performance figures for the airline,
Emirates Chairman and CEO His Highness Sheikh Ahmed
bin Saeed Al Maktoum brushed away these concerns.
“Over the years, we have always managed to come up with
new products,” the young chairman responded.11
ENDNOTES
1. Mark Seal. Fly me to the moon . . . with a stop in Dubai. Departures
.com, Summer 2014, p. 276.
2. Susan Carey. U.S. carriers claim unfair practices. The Wall Street
Journal, March 6, 2015, p. B 3.
3. Departures.com., Summer 2014, p. 276.
4. Ibid., p. 277.
5. Ibid., p. 277.
6. Ibid., p. 278.
7. Ibid., p. 277.
8. Ibid., p. 310.
9. Ibid., p. 278.
10. Ibid., p. 278.
11. Ibid., p. 275.
CASE 12 :: EMIRATES AIRLINE IN 2017 C81
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