Q. Some of your competitors accuse Emirates of enjoying an unfair advantage in terms of fuel. Are these allegations valid?
A. Emirates purchases its fuel on the same terms as every other commercial airline at all airports at which it operates, including at Dubai International Airport. In 2007/08, fuel accounted for more than 30% of Emirates' total expenditures, which is comparable with the relevant expenditures of other long-haul international carriers such as Qantas, Singapore Airlines, Lufthansa or British Airways. Earlier in 2008, Emirates shared the aviation industry’s pain with respect to record high fuel prices. For the first six months of the financial year ending September 30, 2008, Emirates produced a net profit of Dhs 284 million (USD 77 million) - down 88% compared to Dhs 2.36 billion (USD 643 million) net profits for the same period in 2007 and meant that Emirates’ fuel costs were higher than budgeted by Dhs 1.7 billion (USD 469 million). From a historically low base, the relevance of oil to Dubai over the last few decades has been steadily diminishing to the point that today oil related GDP represents only 5% of Dubai’s total GDP.
Q. What about landing charges? Do you pay for those?
A. Emirates pays the full published landing charges at Dubai International Airport and does not benefit from any form of volume related discount there. The levels of airport charges at Dubai International Airport are comparable with those at other airports in the Gulf region - such as at Doha, Bahrain and Abu Dhabi - as well as with those at selected airports in Asia.
Q. And taxes?
A. Emirates is liable for all applicable taxes in all countries on its network. There are no income and corporate taxes in the UAE for any business, except for foreign banks and foreign oil companies. In addition to Emirates, all other airlines operating to Dubai International Airport benefit from the tax free regime in the UAE - which preceded Emirates’ creation in 1985. Also so far Emirates has provided the Government of Dubai with dividends to the value of USD 776 million, in return for USD 10 million in start up seed capital which was given to the airline in 1985. For the most part our critics in the industry are the ones who enjoy the greatest subsidy of all, which is protection from competition, provided by their own governments.
Q. To what extent does Emirates rely on sixth freedom traffic? (The right to carry passengers or cargo from a second country to a third country by stopping in Dubai)
A. Sixth freedom traffic is an important element of the passenger mix for almost all international carriers. Other airlines such as Lufthansa, British Airways, Cathay and Singapore Airlines all draw passenger traffic over their home hub airports from different points on their network. Further Emirates offers the people and businesses of cities such as Glasgow, Newcastle, Hamburg, Dusseldorf, Perth and Brisbane the ability to conveniently connect over Dubai to the many points on the Emirates network. And tourist numbers coming to Dubai have been increasing year on year since the 1980’s - to the point that it is now one of the biggest outbound markets for the UK and Germany.
Q. What is the relationship between Emirates and the Government of Dubai?
A. Emirates is wholly owned by the Government of Dubai, but is run as a fully commercial and independent entity. Emirates is fully and independently audited to the highest international standards by external auditors PricewaterhouseCoopers. Emirates’ accounts and annual reports, which have been published since Emirates' early days, are fully accessible on the internet at www.theemiratesgroup.com. A recent UBS research report said: “An overview of the audited financial accounts contains no material surprises once one gets used to seeing consistent profits at an airline… Emirates’ key competitive advantage is its relative youth (the fleet and the company), the location and efficiency of the Dubai hub, and strong management.”
Q. What makes Dubai tick?
A. Dubai’s corporatist model has its origins in the city’s historic position as an Entrepôt, which has free trade at its core and where the population is diverse, tolerant and multicultural. Whilst there is a close relationship between the Government and many of Dubai’s strategic commercial entities, Dubai is at its essence driven by entrepreneurial principles. Each commercial entity is an independent company with its own profit targets and operational autonomy. Such a system is not dissimilar to the corporatist structures followed in Asia by for example Singapore, Korea or Japan.
Q. Do you have labor cost advantages over say a European or Canadian carrier?
A. Emirates incurs significant social costs to attract and retain the high proportion of staff recruited from around the world on expatriate terms and conditions. On an average every year, Emirates has to bear a total cost of over USD 400 million for expatriate employee benefits - including accommodation costs for employees and children’s education for management, pilots and engineers. Emirates is happy to incur such costs as employees are invaluable.
Q. Why are Emirates’ views relevant to policy makers and other aviation stakeholders?
A. Within the next five years Emirates will have an all wide body fleet of over 200 aircraft, making it one of the top half dozen operators of this type and among the top 20 largest carriers by fleet size overall. In addition, over the course of the last decade Emirates Group has consistently been among the top ten airline groups by various measures of profitability. As one of the world’s leading airlines it regularly engages in national and international policy discussions and debates on key issues impacting the industry. Emirates is by choice not a member of any alliance, believing that customers' interests are best served by remaining independent. We see no tangible benefit from trading-in our own freedom of action. We continue to prefer the flexibility to also make numerous codeshare and interline agreements with other carriers where these are mutually beneficial.