Emirates conundrum: Boeing 777X or 787?
As Emirates reportedly decided to switch up its Boeing orders to put more emphasis on the smaller Boeing 787, rather than the larger yet-to-certified 777X, could it also mark a future where less emphasis is marked on its Dubai hub?
Whenever someone mentions Emirates airlines, the sight of luxury, behemoth aircraft and the ever-growing Dubai International Airport (DXB) hub appears on the horizon. Ever since it was established in 1985, it bullied and muscled its way into the spotlight of airline brands and became a powerhouse in aviation. DXB, as a hub and an airport, grew hand-in-hand with its home airline: from 5 million passengers in 1990 to 86.4 million in 2019.
While the airline had faced its fair share of criticism and concerns of anti-competitive behavior from U.S. airlines, alleging that it had received illegal state subsidies to fuel its growth, Emirates has managed to stay profitable, unlike some of its neighbors.
The current pandemic, however, seemingly ripped its business model apart. With international travel in constant limbo, coupled with no narrow-body or smaller wide-body aircraft in its fleet and no domestic network to fall back on, the company saw its traffic numbers plummet. In March 2020 alone, the airline lost AED3.4 billion ($925.6 million) due to the COVID-19 crisis. In FY2020, the company earned AED90 billion (24.5 billion) of revenue, of which AED75.5 billion ($20.5 billion) was attributed to passenger revenue throughout the year.
“Emirates will and have to look at expanding its point-to-point services. In other words, they can’t rely on that previously successful operating model over the past 15 years anymore,” stated Linus Bauer, Founder and Managing Director of Bauer Aviation Advisory, an aviation & strategy consultancy. If the airline wanted to remain competitive in the coming years, it had to shift more towards point-to-point traffic, rather than rely on the competition-intense transfer traffic, he added.It still operates a downsized network. Pre-COVID, Emirates marked 157 destinations in its network. As of August 19, 2020, the number was 75, according to a press release issued by the carrier.
More emphasis on point-to-point
Its profile of operations, at first glance, has already changed. Adel Al Redha, the Chief Operating Officer (COO) of Emirates, noted that prior to the break out of the virus, 70% of its traffic was transfers. Now, it is a 50% split between transfers and point-to-point operations, as Al Redha told Bloomberg.
Foundations to further increase demand for local traffic into Dubai have been laid out, as the city is an attractive “destination for tourism, meetings, incentives, conferences, and exhibitions (MICE), business and the EXPO2020 next year, which was postponed due to COVID-19,” noted Bauer.
The COO also indicated that the airline is in active discussions with Boeing to swap more 777X orders for the smaller 787 Dreamliner, as the latter “offers better seat capacity.” Emirates has previously engaged in such an ordeal, as it swapped the order for 777X for 30 Boeing 787-9s during the 2019 rendition of the Dubai Airshow. 24 777Xs were crossed off Emirates’ backlog back then. Boeing’s Orders and Deliveries data showcases that it still has 115 unfilled 777X orders from the Dubai-based airline.
Timeline for the folding-wingtip wide-body and the start of deliveries of the Dreamliner to Emirates is very similar. After Boeing once again pushed back the 777X entry date, it is expected that a Dubai-bound 777X would happen in 2022. Meanwhile, the first 787s are set to join the carrier’s fleet in 2023. But Al Redha stated that the airline was still wary of the industry’s ability to return to demand levels that would facilitate the largest twin-engine wide-body by that time.
“We don’t want to dump capacity in the airline when the airline can’t absorb capacity.”
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