BERLIN (Reuters) - Emirates, the world’s largest long-haul airline, is stripping out costs from its business as it adapts to weaker markets and a stronger dollar and the rise of low-cost long-haul rivals, the carrier’s president said on Thursday.
Changing economic conditions are forcing state-backed Gulf airlines, who have moved into many foreign markets from Asia to South America in recent years, to revise their business models and slow their once rampant growth in capacity.
“We are subject to market changes like everybody else is,” President Tim Clark told journalists in Berlin on the sidelines of the ITB travel fair.
One of the changes is the rise of lower-cost long-haul travel, he said, describing it as a “gathering storm”.
Norwegian Air Shuttle (NWC.OL) is putting pressure on established transatlantic carriers with its expansion using longer-range single-aisle aircraft to fly between smaller, cheaper local airports, while flag carriers like Lufthansa (LHAG.DE), Air France (AIRF.PA) and British Airways-owned IAG (ICAG.L) are all working on low-cost long-haul projects.
“The way people travel, their decisions for travelling, the amount of money they’re prepared to pay, new entrants coming to market, long-range single aisles, it’s all changing,” Clark said.
More carriers are looking at using new, more efficient longer-range single-aisle planes for routes where they can be cheaper to operate while being easier to fill than widebody planes, whereas Emirates has an exclusively wide-body fleet.
Clark, who has been with Emirates since 1985, said he couldn’t see that changing, but added: “Maybe others coming behind me will take a different view.”
He declined to provide details or say when any new strategy would be announced but said job cuts were “not in our nature.” “It’s not a revolution, it’s an adjustment,” he added.
Emirates said in January a thousand staff had left the company in the previous three months “largely through natural attrition.”
“We are attending to the business in terms of examining, streamlining and stripping out costs,” Clark said, adding that Emirates is one of the “lowest cost operators in the international market.”
A decision on whether to introduce a premium economy class had also not yet been taken. “I can’t at this moment say premium economy is the right way to go,” he said, adding that Emirates wanted to be sure it wouldn’t lose business class passengers to premium economy.
That seemed to contradict comments he made in December that premium economy would be rolled out “within the next year to 18 months.”
The Dubai-based carrier has previously said it’s looking for ways to boost ancillary revenue including introducing fees to pre-select economy seats and allowing passengers to buy entry to its lounges.
Meanwhile, he said that Emirates did not want to speed up deliveries of its final 25 Airbus A380s, due from 2021, because it doesn’t have the space to deploy them at Dubai airport.
Emirates saw profits drop 75 percent in the first half of its current financial year and Clark said the year had been “tough.” Yield decline remains an issue, but the decline has not worsened, he said.
Reporting by Victoria Bryan; Editing by Alexander Cornwell, Greg Mahlich