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Dubai: Emirates airline could become the world's largest long-haul carrier by 2012 (by seats), according a recent study.
An analysis by the Boston Consulting Group (BCG) predicts Emirates will pose a formidable challenge to Asian and European carriers after it triples its capacity over the next eight years through new orders and bigger planes, citing low labour costs, 24-hour flying schedule and optimal geographic location as ingredients of its success.
Emirates, currently the eighth largest carrier of international traffic, will expand its fleet of 102 aircraft with 47 Airbus A380 superjumbos over the next few years. The airline's net profits rose 25 per cent in 2006, to Dh3.1 billion ($844 million).
"It would be risky for a competitor to assume that [Emirates and Qatar Airways] will not have the resolve to implement their aggressive plans," noted the study, which was quoted in a recent article in Aviation Week.
Key factor
Despite its massive orders, Emirates should be able to run its new fleet through its Dubai hub, which will concentrate heavily on flights in and out of Europe, the report said.
"It is clear that European and Asian airlines are going to be facing large, new blocks of low-cost capacity in the Europe-Asia corridor."
One reason why the Dubai-based airline has been such a runaway success is that it has far lower labour costs than its western rivals. Boston Consulting Group found that Emirates holds a cost advantage of at least 18 to 21 per cent over its western rivals, and on par with what Asian carriers pay.
Acknowledging its geo-strategic location, open skies regime and 24-hour airport, an Emirates spokesperson told Gulf News, "Certainly being based in Dubai has been one of the key factors to Emirates' success."
"Our staff are competitively remunerated as we benchmark salaries against international standards," she said. "It should also be noted that the majority of our staff are expatriates and we incur costs that other airlines do not - for instance providing accommodation for our staff and their families."
The European Centre for Aviation Development (ECAD), a consultancy affiliated with Lufthansa, also found other reasons for Emirates' success. Landing fees are nearly nine times more expensive in Germany than Dubai, it said. And while Emirates pays its cabin crew roughly the same as Lufthansa does, income taxes and other fees force Lufthansa to spend 28 per cent more per attendant than Emirates.
Benefits from geographic location of its hubs
Boston Consulting Group: Emirates benefits from geographic location of its hubs, which can operate 24 hours a day, making possible very high aircraft utilisation.
Emirates, Etihad and Qatar Airways supply around 9 per cent of all long-haul seats globally, but they have 25 per cent of the long-haul aircraft order backlog.
"If it succeeds, Emirates will catapult itself ahead of a dozen bigger airlines to become the world's largest long-haul carrier by 2012."
ECAD: Though cabin crew salaries are comparable, Lufthansa spends 28 per cent more, mainly for income taxes and other labour fees and costs.
Emirates benefits from export credit financing of planes. Only available if planes are built in another country. Thus in Germany, where some Airbus planes are built, Lufthansa can't take advantage of it.
Emirates finances 21 per cent of aircraft purchases with export credit.
Landing fees are nearly 9 times more expensive in Germany than in Dubai.
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