Emirates cuts fares, lures passengers
MANILA, Philippines — Emirates, the biggest international airline, said it will combat a profit squeeze from higher fuel costs by slashing fares to fill its 500-seat Airbus A380s, heightening competition for Air France-KLM and British Airways.
Emirates will resist the urge to cut routes and flights as oil prices threaten the profitability of some destinations and instead aims to stir up demand with cheaper tickets, Tim Clark, the Dubai-based carrier’s president, said in an interview.
“I can understand how irritated some airlines become, because 43 percent of our daily costs are for fuel, and it’s out of our control,” Clark said last week in Paris. “But the last thing you should contemplate is capacity reduction. It’s easy to do, but it has sounded the death knell for so many carriers.”
Industry practice has generally been to halt growth when times are hard and costs high, focusing on the most profitable routes that can sustain higher fares. That strategy is risky because it hurts sales and destroys confidence among passengers, airports, holiday companies and businesses in destination cities, so that traffic often never returns, Clark said on June 20 after a visit to the Paris Air Show.
Qatar Airways Ltd. Chief Executive Officer Akbar al Baker said that the second-biggest Middle-Eastern carrier may operate 190 planes by 2020, 60 more than envisaged, as it follows Emirates in building a long-haul transfer hub to rival London, Paris and Frankfurt. Abu Dhabi’s Etihad Airways, the regional No. 3, is also committed to adding new jets and routes, CEO James Hogan said in an interview in London.
Clark cited U.S.-based Trans World Airlines Inc. and Pan American World Airways as major carriers that have gone bust during his career after fatally paring back their networks.
Emirates will stick with a rapid-growth model based on building Dubai into a high-volume, inter-continental travel hub using a wide-body fleet featuring 90 A380 superjumbos with 45,000 seats, Clark said.
While cutting fares to sell tickets on the 517-berth planes will push up the occupancy level needed to break even, the impact of government spending cuts in many overseas markets means that strategy is more likely to succeed than one based on curbing capacity and raising fares, he said.




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