Emirates’ aim to make Dubai a major air hub riles rivals

DUBAI, United Arab Emirates ? Even in this oasis of extravagance, Terminal 3 at the Dubai International Airport startles. It is not merely the world’s largest air terminal. It is the world’s largest building. And all 150 hectares of it were built with one very well-connected company in mind: Emirates, Dubai’s fast-growing flagship airline.

Emirates is pressing ahead with an ambitious expansion, despite the city’s financial near-collapse in 2009. Its executives want to place this Persian Gulf city at the center of a transportation network linking economies like India and China to Europe and the United States.

Since its founding in 1985, Emirates, which is fully owned by the government, has grown into the world’s largest airline by passenger miles flown.

Tim Clark, the president of Emirates and a former British aviation executive, says his airline represents the future of mass air travel. When many carriers are struggling , Emirates has filled its planes, raised fares and turned a profit. It earned $925 million in the six months ended September 30, up from $205 million in the yearearlier period.

On its double-decker Airbus A380s, full bars are standard in business class, and the first-class cabin includes showers. No one pays for food or drinks, of course, on any Emirates flight.

So far, Emirates’ success is partly an accident of geography. Roughly four billion people live within an eight-hour flight from here. But Emirates also enjoys the patronage of Dubai’s rulers, in particular, Sheik Ahmed bin Saeed al-Maktoum, who is its chairman. While airlines in places like Singapore and Hong Kong have also turned those cities into global hubs, Emirates stands apart for the scale of its ambitions.

Rivals are fighting back. SkyTeam, the global alliance that includes Delta Air Lines and Air France/KLM, said that it would add two airlines to counter Emirates’ dominance in the region.

“There is a reason that airlines around the world are afraid of the success of Emirates,” says John Leahy, chief operating officer of Airbus, the European plane maker. “That should strike fear in the hearts of airlines around the world.” Emirates is one of Airbus’s top customers.

Over the next two decades, air travel in the Middle East is expected to grow by more than 7 percent a year, outpacing every other region, according to a forecast from Boeing in 2010.

Emirates’ greatest strides have come from building routes to developing countries long neglected by traditional carriers and providing an alternative to local airlines. Instead of connecting through European hubs , all of its new routes run through Dubai.

Emirates offers 184 flights a week from Dubai to India . It flies to 17 cities in Africa and, in China, to Beijing, Shanghai, Hong Kong and Guangzhou. It runs two daily flights to Bangkok and nine to Australia.

The strategy has prompted a strong reaction . “Emirates’ strategy is aggressive,” says Pierre-Henri Gourgeon, the chief executive of Air France, who complains that Emirates is siphoning off passengers from Europe’s hubs.

Wolfgang Mayrhuber, the C.E.O. of Lufthansa, notes that it took 40 years for Lufthansa to acquire its 30 Boeing 747s in Germany . Emirates already flies 15 A380s, the world’s largest passenger airliners, and has ordered 75 more . (Air France, Lufthansa and British Airways have ordered a total of 39 A380s; only eight are flying.)

After the Canadian government turned down Emirates’ request to fly to Calgary and Vancouver and to increase its flights to Toronto, the United Arab Emirates scrapped a military accord that allowed Canadian forces to use a base near Dubai.

Craig Jenks, an airline consultant based in New York, says Emirates threatens carriers in the one market where these airlines are making money: long-haul international trips.

Rivals express grudging admiration for Emirates. “Emirates recognized the value of a global hub,” says British Airways’ chairman, Willie Walsh.

Government support has been essential. Sheik Ahmed, the uncle of Dubai’s current ruler, plays a role in almost every aspect of air travel into and out of Dubai.

Critics say this tight relationship gives the airline an unfair advantage. Emirates, they say, essentially receives government subsidies, in the form of low tax rates and shiny new facilities like Terminal 3 .

Emirates disputes this characterization, and its executives say Emirates gets no government subsidies.

The airline, however, does have undeniable advantages over competitors. It hires inexpensive workers, usually from the Indian subcontinent, for tasks like handling baggage or working in catering services.

Nathan Zielke, a transportation specialist at the consulting firm Arthur D. Little, estimates Emirates’ costs are 30 percent lower than its rivals’.

An hour’s drive outside Dubai, city planners want to build the world’s biggest airport. It would be able to accommodate 160 million passengers a year. ( Hartsfield-Jackson Atlanta International Airport now handles 90 million a year, more than any other airport . )

So far, Emirates has benefited from the weakness of some airlines in China, India and African nations as it establishes its presence in those and other developing countries.

But in India, the advent of a new generation of quality carriers now offers some appealing domestic alternatives for India’s vast expatriate population, long a growth engine for Emirates.

Emirates executives say they recognize the challenges ahead. “We don’t forget who we are,” says Mr. Clark . “We’re a bus company. We have seats, we have people,” he said. “If we hit the spot, passengers come back.”


By JAD MOUAWAD