With just ten minutes to go, tensions are running high inside
Manchester City’s Etihad Stadium. It’s mid September, and the reigning
Premiership champions are a goal up against Arsenal. The posters of the
club’s owner, Sheikh Mansour, are beginning to appear, in anticipation
of another victory.
“Don’t mess with Abu Dhabi!” chants Dave, a 62-year-old lifelong City fan.
Moments later, Laurent Koscielny stuns the 47,805 crowd with a headed goal for Arsenal, sending their fans into ecstasy. Michael , also 62 and a lifelong Arsenal fan, is delirious. “You’ll never beat the Emirates! You’ll never beat the Emirates!”
As the fans spill out of the stadium after the match, one Arsenal fan, almost surreally, begins chanting at his Manchester City rivals: “At least we’ve got the A380!”
Three and a half thousand miles away, sitting in Dubai and Abu Dhabi, the senior management of Emirates Airline and Etihad Airways can hardly believe their luck.
This is not meant to be a good time to be in aviation. The airline industry, which has been in a downward spiral since its peak in 2010, is forecast to earn $4.1bn in profits this year, according to the International Air Transport Association. That's slightly up from the agency’s original estimate of $3bn in profit, yet still 78.6 percent lower than the high of $19.2bn earned by carriers two years ago.
Yet Emirates continues to be one of the fastest growing airlines in the world. In spite of unstable global economic, geopolitical and environmental conditions, it can’t seem to stop making profit. In the first half of the 2012-13 fiscal year, its net profit more than doubled to $464m from $228m in the same period a year ago. It now flies to 126 destinations, up from 114 last year, and 74 countries, compared with 67 last year.
The airline has launched five new destinations since 1 April this year alone. Emirates is already the world’s biggest customer for the Airbus A380, and the largest customer for Boeing's wide-body 777.
Etihad Airways has only been in existence for nine years. Back in 2006, it set 2011 as the breakeven year, yet — against all the odds — it somehow managed to turn in a $14m profit last year. It carried a staggering 8.3 million passengers during the year.
From its hub at Abu Dhabi International Airport, Etihad Airways serves 86 passenger and cargo destinations in 56 countries, with a fleet of 67 Airbus and Boeing aircraft, and over 90 aircraft on firm order, including ten Airbus A380s. It also has equity investments in airberlin, Air Seychelles, Virgin Australia and Aer Lingus.
From codeshares to equity deals, new routes and plane orders — and spectacular sponsorship deals such as the Emirates Stadium in London and Etihad Stadium in Manchester, the UAE airline giants have not only bucked the global aviation trend, but appear to be on a path of unstoppable growth.
The only two people not fazed by the numbers are Emirates president Tim Clark and Etihad Airways CEO James Hogan. Both veterans of the industry, they have also fast become the envy of the airline business.
“We run our business differently. We are opportunist. Our strategies seem to be paying off. Our profits are down but everybody’s profits are down — but we’re making money despite the adversity and the trading conditions elsewhere,” says Clark, speaking from his headquarters in Dubai.
“We have a completely different business model which relies on now a varied 126 destination network spanning the globe to feed our business across our hub from all sorts of places that people in the past thought we were nuts to go to. But now, of course, they’re paying dividends,” Clark adds.
“We are able to keep our head above water, keep on growing our business, relying on a revenue stream that come from fairly geographic distant and somewhat regarded as remote to the airline world. We do not put all our eggs in the same basket with regards to the north Atlantic or south Atlantic. We try and balance the production so that we can take any knocks in the system that come from anywhere.”
A hundred kilometres down the road in Abu Dhabi, Hogan is equally clear.
“The rule book is changing,” he says. “The difference for us is we are a non-legacy carrier, we have been able to take advantage of geography, of technology and, within three hours flying time, the GCC, Middle East and Indian subcontinent is still the region of the world that has open skies.
As the European carriers have retreated back to their hubs it has presented us an opportunity to increase our frequency and connectivity and what we are seeing out of our secondary cities strategy. This is something both Emirates and Etihad have taken advantage of.”
The strategies of Emirates and Etihad are quite different, though the results are the same. Emirates has almost always pushed for organic growth — more routes, more passengers, more planes.
The carrier’s revenue, including other operating income, of $9.7bn during the first six months of its financial year, was higher by seventeen percent compared with $8.2bn recorded last year, largely reflecting a strong passenger yield based on constantly high fuel prices.
Seat factors at the Dubai carrier averaged 80 percent, slightly above last year’s 79 percent. Emirates carried 18.7 million passengers since 1 April 2012, up 15.4 percent for the same period last year.
“We are subjected to the same adverse trading conditions as everybody else be that depressed economies in Europe, high fuel prices, difficulties in government punitive taxation, environmental taxes, we face that just the same,” Clark says.
“The primary driver in all of this is the cost of fuel. If that was down where it should be, which is about $80 a barrel, and the fuel into plane was about 250 cents instead of 340 cents as it is for Emirates today, you would be talking looking a different complexion on international aviation,” Clark adds.
“It would be far more profitable, it would be far more expansive, and it would be far more upbeat. At the moment it is depressed. The mindset of the management of these companies is fairly negative and concerned more about trying to keep their heads above water than growth.”
Down the road in the UAE capital, the most recent figures from Etihad Airways showed an impressive 30 percent increase in its half-year revenues, which climbed to $2.24bn. The carrier’s passenger numbers leapt to 4.89 million during that period, thanks to increased overall capacity and improved seat factors that averaged 77.6 percent from 73 percent in the same period a year ago.
The record results were boosted by the airline’s growing network of codeshares and strategic partnerships which together fed 800,000 passengers into Etihad Airways’ network in the last six months. During the quarter, Etihad Airways took minority equity stakes in Aer Lingus and in Virgin Australia, adding to its minority shareholdings in airberlin and Air Seychelles. Together these five airlines carried 72 million passengers on 376 aircraft in 2011, generating combined revenues of more than $14bn.
“It’s legacy cost structure versus non-legacy cost structure,” explains Hogan.
“Many European carriers are operating out of two hubs, which may have made sense two years ago, but from a productivity or fleet utilisation point of view, it’s a problem for them,” he says. “British Airways doesn’t fly out of Manchester any more; they have effectively said the north of England doesn’t make sense any more and we have taken advantage of that vacuum.
“What you are seeing in our partnerships is that the world is changing; maybe some of the taboos of the past don’t apply any more. Strong commercial decision making — how you build networks — is what it’s all about. But the codeshare and equity deals enable us to stretch our network, while especially with equity partners we can take out more costs.”
Etihad is still on the lookout for more equity deals, with Hogan suggesting that a couple more could be on the cards, “but they have to make sense”. The carrier’s “formula is one of connectivity over Abu Dhabi and that we can move traffic over Abu Dhabi — we have like-minded management teams. We are not majority shareholders so we are not running their businesses for them”.
The fact that airlines like Air Seychelles are moving from a loss of $25m to a breakeven position within a year of Etihad getting involved suggests it is for now a win-win situation for both partners.
Meanwhile, codeshare deals already account for eighteen percent of Etihad’s revenues, a figure that is only likely to increase.
That said, there is no likelihood of Emirates going down the same path in the near future, with Clark adamant that its own business model will continue to deliver results.
Clark says: “That strategy has actually worked very well. It has seen us through many of these types of issues, whether it’s the Gulf wars, SARS and 25 years of trauma in this business because we are subjected to the traumas of what goes on in the world today, the geopolitics, the socioeconomics, the Arab Spring, tsunami in Japan, floods in Queensland, you name it.”
He adds: “We are fairly adept and adaptive of getting the business model to work for us, being fairly quick to react to changes not just of trauma but in changing economic circumstances. When we see opportunities we move quickly and we react to it. We have a lean management structure.
We don’t have the institutionalised structures that some of the carriers that we compete with do. Decisions are made quickly, they’re executed quickly, implementation is quick and we are able to move at a pace that others cannot do.”
While the strategies may differ, what both carriers have in common is a hunger to buy planes and plenty of them. Just over 27 years ago, Emirates flew its first routes out of Dubai with just two aircraft — a leased Boeing 737 and an Airbus 300 B4.
In 2001, Emirates announced the largest order in aviation history, valued at $15bn. A staggering 58 new aircraft, a mix of Airbus and Boeing, were to join the rapidly expanding fleet. Four years later, it announced the largest-ever order for the Boeing 777 family of aircraft — 42 in all — in a deal worth $9.7bn.
Then in 2011 at the Dubai Airshow, Emirates placed the single largest aircraft order in dollar value in Boeing’s history when it requested an additional 50 777-300ERs, worth roughly $18bn.
Emirates order-book stands at more than 230 aircraft, with a total value of approximately $84bn as of November 2011. But this doesn’t mean Clark has any intention of slowing down. Emirates is likely to order 100 planes or more from Boeing, if the plane manufacturer upgrades the design of the wide-body 777 with a newer model.
“If Boeing produced the airplane that we want I can see easily that figure, bearing in mind that we’ve ordered 175 of them,” says Clark, adding: “If it’s as good as we hope it’ll be it’s a natural thing to say, yes, we would probably roll over what we have to what they’re offering with the new aircraft.”
If Chicago-based Boeing was to produce the next generation of the long-haul 777-300ER (Extended Range), its most profitable aircraft to date, an order of 100 jets from Emirates would probably cost more than $31bn considering the list price for the 777-300ERs. That would be Boeing’s largest single order after Emirates ordered 50 of the company’s 777-300ERs in November 2011.
Emirates is the largest customer for the 777-300ER and has 151 of them in its fleet or on order and will start to retire them in 2017. That is in addition to other models in its fleet like the 777-200, 777-300 and the 777-200LR.
Clark says: “We have been trying to get Boeing to build the 777-9Xand 8X and we are working closely with them to persuade them that it’s a good idea to build it. We are not there yet. I guess if they had been there we would have done orders by now but they’re not. The moment you read that Boeing are launching the new 777 you will probably find that Emirates is fairly close behind.”
“Our airplanes start retiring in 2017, the ERs that we have today... they will all have to go and be replaced at some point, so there is a kind of a natural rollover in terms of what we do,” Clark adds.
“Unless Airbus have a 350 programme, but the 350-1000 isn’t of the size of the 777ER today or the new 777. So it’s not something that is that attractive to us at the moment unless they change it.”
That said, Etihad’s pace of growth is equally impressive. Commercial operations only began in November 2003, and it has gone on to become one of the fastest growing airlines in aviation history.
Its current fleet is 65, rising to 71 by the end of the year. The airline announced what was at the time the largest aircraft order in commercial aviation history in 2008, for up to 205 aircraft — 100 firm orders, 55 options and 50 purchase rights.
Last December, Etihad announced it was taking its total order book for the Boeing 787-9 Dreamliner to 41, the first of which arrives in the last quarter of 2014. The order, valued at $9.3bn, will make Etihad the largest operator of the type in the world. The UAE flag carrier has options and purchase rights for an additional 25 aircraft. Meanwhile, airberlin has fifteen Boeing 787s on order with options and purchase rights on a further 20 aircraft.
Over the next fifteen months, Etihad will take delivery of two B777-200 freighters, five Boeing 777-300ER three-class aircraft, and two Boeing 777-300ER two-class aircraft.
Hogan is already looking forward to the fourth quarter of 2014, when the first of the A380s and Dreamliners will arrive.
“The inside of the A380 that we will have in 2014 looks fantastic. I really think we’re going to raise the bar. It’s going to be innovative; it will meet the seat and weight target, but you will see a new product on board. I can’t give too much away, but our A380 is going to be different to what is already out there,” he says.
While the plane orders keep growing, one area both Etihad and Emirates have proved masters of is branding — particularly through targeted sponsorship.
Emirates pretty much changed the way the soccer industry works back in October 2004, when it signed a $160m deal with Premiership club Arsenal for the shirt sponsorship and naming rights to the club’s stadium until at least 2021. The deal was at the time the most expensive of its kind, but has been a huge success, with football fans around the world now familiar with the Emirates stadium in North London.
Not to be outdone, Etihad didn’t wait long after Sheikh Mansour took over Manchester City to become huge sponsors of the club. It signed a ten-year stadium naming deal with the club, reputed to be worth up to $400m.
Whatever the real figure, significantly, much of that cash is being used to develop East Manchester, one of the most deprived areas of the UK. A report from the Save the Children charity last year claimed that levels of child poverty in the city had reached 27 percent, amongst the highest in the country. All of which means that apart from great branding — given Man City won the title last season — Etihad has won praise from the local community.
Hogan says: “When it comes to sponsorship, yes, we look at a return on investment. We generate $5bn in revenues, so have very targeted sponsorships. Man City has been very good for us, we have been fortunate to pick partners where we can really push the brand. We are very selective.
What is important is that you make them work. If you are going to do it, make sure you get the return you are seeking. We can see the return through sales and brand awareness. Man City as a global brand has been very good for us. It’s working.”
But while the soccer stadium deals get all the glamour and attention, both carriers have huge sponsorship deals across the board. Apart from partnerships including AC Milan, Real Madrid, Paris Saint-Germain, Emirates is involved in rugby, horse racing, tennis, golf, cricket, sailing and even Australian Rules Football.
Etihad also has the naming rights to the Etihad Stadium in Melbourne, plus huge involvement in F1, as well as being the main sponsor of the UK Premiership rugby team, Harlequins RFC, and hurling in Ireland through its sponsorship of the Gaelic Athletic Association. The fact is, few sports fans anywhere in the world haven’t heard of either Emirates or Etihad.
So where next for the two giants of aviation? No one doubts that both will keep growing at rapid pace, and Etihad remains on track for second successive year of profitability.
Hogan speaks proudly of a “motivated workforce,” saying: “They are our secret weapon; we are very fortunate that with a 120 different nationalities we have crew that are so enthusiastic. Getting that attitude and going that extra yard is a key differentiator between us and other airlines. “
Clark, meanwhile, is equally bullish about the future of Emirates. “There will be others who will follow and try to emulate what we are trying to do but they need to do it profitably as we do.
We have a plan, which is driven by a business model which was cast in concrete in July 2000, nearly thirteen years ago. We’re not following anybody.” Don’t bet against both men succeeding.
http://www.arabianbusiness.com/fly-me-the-boom--rise-of-emirates-etihad-479731.html?page=4
“Don’t mess with Abu Dhabi!” chants Dave, a 62-year-old lifelong City fan.
Moments later, Laurent Koscielny stuns the 47,805 crowd with a headed goal for Arsenal, sending their fans into ecstasy. Michael , also 62 and a lifelong Arsenal fan, is delirious. “You’ll never beat the Emirates! You’ll never beat the Emirates!”
As the fans spill out of the stadium after the match, one Arsenal fan, almost surreally, begins chanting at his Manchester City rivals: “At least we’ve got the A380!”
Three and a half thousand miles away, sitting in Dubai and Abu Dhabi, the senior management of Emirates Airline and Etihad Airways can hardly believe their luck.
This is not meant to be a good time to be in aviation. The airline industry, which has been in a downward spiral since its peak in 2010, is forecast to earn $4.1bn in profits this year, according to the International Air Transport Association. That's slightly up from the agency’s original estimate of $3bn in profit, yet still 78.6 percent lower than the high of $19.2bn earned by carriers two years ago.
Yet Emirates continues to be one of the fastest growing airlines in the world. In spite of unstable global economic, geopolitical and environmental conditions, it can’t seem to stop making profit. In the first half of the 2012-13 fiscal year, its net profit more than doubled to $464m from $228m in the same period a year ago. It now flies to 126 destinations, up from 114 last year, and 74 countries, compared with 67 last year.
The airline has launched five new destinations since 1 April this year alone. Emirates is already the world’s biggest customer for the Airbus A380, and the largest customer for Boeing's wide-body 777.
Etihad Airways has only been in existence for nine years. Back in 2006, it set 2011 as the breakeven year, yet — against all the odds — it somehow managed to turn in a $14m profit last year. It carried a staggering 8.3 million passengers during the year.
From its hub at Abu Dhabi International Airport, Etihad Airways serves 86 passenger and cargo destinations in 56 countries, with a fleet of 67 Airbus and Boeing aircraft, and over 90 aircraft on firm order, including ten Airbus A380s. It also has equity investments in airberlin, Air Seychelles, Virgin Australia and Aer Lingus.
From codeshares to equity deals, new routes and plane orders — and spectacular sponsorship deals such as the Emirates Stadium in London and Etihad Stadium in Manchester, the UAE airline giants have not only bucked the global aviation trend, but appear to be on a path of unstoppable growth.
The only two people not fazed by the numbers are Emirates president Tim Clark and Etihad Airways CEO James Hogan. Both veterans of the industry, they have also fast become the envy of the airline business.
“We run our business differently. We are opportunist. Our strategies seem to be paying off. Our profits are down but everybody’s profits are down — but we’re making money despite the adversity and the trading conditions elsewhere,” says Clark, speaking from his headquarters in Dubai.
“We have a completely different business model which relies on now a varied 126 destination network spanning the globe to feed our business across our hub from all sorts of places that people in the past thought we were nuts to go to. But now, of course, they’re paying dividends,” Clark adds.
“We are able to keep our head above water, keep on growing our business, relying on a revenue stream that come from fairly geographic distant and somewhat regarded as remote to the airline world. We do not put all our eggs in the same basket with regards to the north Atlantic or south Atlantic. We try and balance the production so that we can take any knocks in the system that come from anywhere.”
A hundred kilometres down the road in Abu Dhabi, Hogan is equally clear.
“The rule book is changing,” he says. “The difference for us is we are a non-legacy carrier, we have been able to take advantage of geography, of technology and, within three hours flying time, the GCC, Middle East and Indian subcontinent is still the region of the world that has open skies.
As the European carriers have retreated back to their hubs it has presented us an opportunity to increase our frequency and connectivity and what we are seeing out of our secondary cities strategy. This is something both Emirates and Etihad have taken advantage of.”
The strategies of Emirates and Etihad are quite different, though the results are the same. Emirates has almost always pushed for organic growth — more routes, more passengers, more planes.
The carrier’s revenue, including other operating income, of $9.7bn during the first six months of its financial year, was higher by seventeen percent compared with $8.2bn recorded last year, largely reflecting a strong passenger yield based on constantly high fuel prices.
Seat factors at the Dubai carrier averaged 80 percent, slightly above last year’s 79 percent. Emirates carried 18.7 million passengers since 1 April 2012, up 15.4 percent for the same period last year.
“We are subjected to the same adverse trading conditions as everybody else be that depressed economies in Europe, high fuel prices, difficulties in government punitive taxation, environmental taxes, we face that just the same,” Clark says.
“The primary driver in all of this is the cost of fuel. If that was down where it should be, which is about $80 a barrel, and the fuel into plane was about 250 cents instead of 340 cents as it is for Emirates today, you would be talking looking a different complexion on international aviation,” Clark adds.
“It would be far more profitable, it would be far more expansive, and it would be far more upbeat. At the moment it is depressed. The mindset of the management of these companies is fairly negative and concerned more about trying to keep their heads above water than growth.”
Down the road in the UAE capital, the most recent figures from Etihad Airways showed an impressive 30 percent increase in its half-year revenues, which climbed to $2.24bn. The carrier’s passenger numbers leapt to 4.89 million during that period, thanks to increased overall capacity and improved seat factors that averaged 77.6 percent from 73 percent in the same period a year ago.
The record results were boosted by the airline’s growing network of codeshares and strategic partnerships which together fed 800,000 passengers into Etihad Airways’ network in the last six months. During the quarter, Etihad Airways took minority equity stakes in Aer Lingus and in Virgin Australia, adding to its minority shareholdings in airberlin and Air Seychelles. Together these five airlines carried 72 million passengers on 376 aircraft in 2011, generating combined revenues of more than $14bn.
“It’s legacy cost structure versus non-legacy cost structure,” explains Hogan.
“Many European carriers are operating out of two hubs, which may have made sense two years ago, but from a productivity or fleet utilisation point of view, it’s a problem for them,” he says. “British Airways doesn’t fly out of Manchester any more; they have effectively said the north of England doesn’t make sense any more and we have taken advantage of that vacuum.
“What you are seeing in our partnerships is that the world is changing; maybe some of the taboos of the past don’t apply any more. Strong commercial decision making — how you build networks — is what it’s all about. But the codeshare and equity deals enable us to stretch our network, while especially with equity partners we can take out more costs.”
Etihad is still on the lookout for more equity deals, with Hogan suggesting that a couple more could be on the cards, “but they have to make sense”. The carrier’s “formula is one of connectivity over Abu Dhabi and that we can move traffic over Abu Dhabi — we have like-minded management teams. We are not majority shareholders so we are not running their businesses for them”.
The fact that airlines like Air Seychelles are moving from a loss of $25m to a breakeven position within a year of Etihad getting involved suggests it is for now a win-win situation for both partners.
Meanwhile, codeshare deals already account for eighteen percent of Etihad’s revenues, a figure that is only likely to increase.
That said, there is no likelihood of Emirates going down the same path in the near future, with Clark adamant that its own business model will continue to deliver results.
Clark says: “That strategy has actually worked very well. It has seen us through many of these types of issues, whether it’s the Gulf wars, SARS and 25 years of trauma in this business because we are subjected to the traumas of what goes on in the world today, the geopolitics, the socioeconomics, the Arab Spring, tsunami in Japan, floods in Queensland, you name it.”
He adds: “We are fairly adept and adaptive of getting the business model to work for us, being fairly quick to react to changes not just of trauma but in changing economic circumstances. When we see opportunities we move quickly and we react to it. We have a lean management structure.
We don’t have the institutionalised structures that some of the carriers that we compete with do. Decisions are made quickly, they’re executed quickly, implementation is quick and we are able to move at a pace that others cannot do.”
While the strategies may differ, what both carriers have in common is a hunger to buy planes and plenty of them. Just over 27 years ago, Emirates flew its first routes out of Dubai with just two aircraft — a leased Boeing 737 and an Airbus 300 B4.
In 2001, Emirates announced the largest order in aviation history, valued at $15bn. A staggering 58 new aircraft, a mix of Airbus and Boeing, were to join the rapidly expanding fleet. Four years later, it announced the largest-ever order for the Boeing 777 family of aircraft — 42 in all — in a deal worth $9.7bn.
Then in 2011 at the Dubai Airshow, Emirates placed the single largest aircraft order in dollar value in Boeing’s history when it requested an additional 50 777-300ERs, worth roughly $18bn.
Emirates order-book stands at more than 230 aircraft, with a total value of approximately $84bn as of November 2011. But this doesn’t mean Clark has any intention of slowing down. Emirates is likely to order 100 planes or more from Boeing, if the plane manufacturer upgrades the design of the wide-body 777 with a newer model.
“If Boeing produced the airplane that we want I can see easily that figure, bearing in mind that we’ve ordered 175 of them,” says Clark, adding: “If it’s as good as we hope it’ll be it’s a natural thing to say, yes, we would probably roll over what we have to what they’re offering with the new aircraft.”
If Chicago-based Boeing was to produce the next generation of the long-haul 777-300ER (Extended Range), its most profitable aircraft to date, an order of 100 jets from Emirates would probably cost more than $31bn considering the list price for the 777-300ERs. That would be Boeing’s largest single order after Emirates ordered 50 of the company’s 777-300ERs in November 2011.
Emirates is the largest customer for the 777-300ER and has 151 of them in its fleet or on order and will start to retire them in 2017. That is in addition to other models in its fleet like the 777-200, 777-300 and the 777-200LR.
Clark says: “We have been trying to get Boeing to build the 777-9Xand 8X and we are working closely with them to persuade them that it’s a good idea to build it. We are not there yet. I guess if they had been there we would have done orders by now but they’re not. The moment you read that Boeing are launching the new 777 you will probably find that Emirates is fairly close behind.”
“Our airplanes start retiring in 2017, the ERs that we have today... they will all have to go and be replaced at some point, so there is a kind of a natural rollover in terms of what we do,” Clark adds.
“Unless Airbus have a 350 programme, but the 350-1000 isn’t of the size of the 777ER today or the new 777. So it’s not something that is that attractive to us at the moment unless they change it.”
That said, Etihad’s pace of growth is equally impressive. Commercial operations only began in November 2003, and it has gone on to become one of the fastest growing airlines in aviation history.
Its current fleet is 65, rising to 71 by the end of the year. The airline announced what was at the time the largest aircraft order in commercial aviation history in 2008, for up to 205 aircraft — 100 firm orders, 55 options and 50 purchase rights.
Last December, Etihad announced it was taking its total order book for the Boeing 787-9 Dreamliner to 41, the first of which arrives in the last quarter of 2014. The order, valued at $9.3bn, will make Etihad the largest operator of the type in the world. The UAE flag carrier has options and purchase rights for an additional 25 aircraft. Meanwhile, airberlin has fifteen Boeing 787s on order with options and purchase rights on a further 20 aircraft.
Over the next fifteen months, Etihad will take delivery of two B777-200 freighters, five Boeing 777-300ER three-class aircraft, and two Boeing 777-300ER two-class aircraft.
Hogan is already looking forward to the fourth quarter of 2014, when the first of the A380s and Dreamliners will arrive.
“The inside of the A380 that we will have in 2014 looks fantastic. I really think we’re going to raise the bar. It’s going to be innovative; it will meet the seat and weight target, but you will see a new product on board. I can’t give too much away, but our A380 is going to be different to what is already out there,” he says.
While the plane orders keep growing, one area both Etihad and Emirates have proved masters of is branding — particularly through targeted sponsorship.
Emirates pretty much changed the way the soccer industry works back in October 2004, when it signed a $160m deal with Premiership club Arsenal for the shirt sponsorship and naming rights to the club’s stadium until at least 2021. The deal was at the time the most expensive of its kind, but has been a huge success, with football fans around the world now familiar with the Emirates stadium in North London.
Not to be outdone, Etihad didn’t wait long after Sheikh Mansour took over Manchester City to become huge sponsors of the club. It signed a ten-year stadium naming deal with the club, reputed to be worth up to $400m.
Whatever the real figure, significantly, much of that cash is being used to develop East Manchester, one of the most deprived areas of the UK. A report from the Save the Children charity last year claimed that levels of child poverty in the city had reached 27 percent, amongst the highest in the country. All of which means that apart from great branding — given Man City won the title last season — Etihad has won praise from the local community.
Hogan says: “When it comes to sponsorship, yes, we look at a return on investment. We generate $5bn in revenues, so have very targeted sponsorships. Man City has been very good for us, we have been fortunate to pick partners where we can really push the brand. We are very selective.
What is important is that you make them work. If you are going to do it, make sure you get the return you are seeking. We can see the return through sales and brand awareness. Man City as a global brand has been very good for us. It’s working.”
But while the soccer stadium deals get all the glamour and attention, both carriers have huge sponsorship deals across the board. Apart from partnerships including AC Milan, Real Madrid, Paris Saint-Germain, Emirates is involved in rugby, horse racing, tennis, golf, cricket, sailing and even Australian Rules Football.
Etihad also has the naming rights to the Etihad Stadium in Melbourne, plus huge involvement in F1, as well as being the main sponsor of the UK Premiership rugby team, Harlequins RFC, and hurling in Ireland through its sponsorship of the Gaelic Athletic Association. The fact is, few sports fans anywhere in the world haven’t heard of either Emirates or Etihad.
So where next for the two giants of aviation? No one doubts that both will keep growing at rapid pace, and Etihad remains on track for second successive year of profitability.
Hogan speaks proudly of a “motivated workforce,” saying: “They are our secret weapon; we are very fortunate that with a 120 different nationalities we have crew that are so enthusiastic. Getting that attitude and going that extra yard is a key differentiator between us and other airlines. “
Clark, meanwhile, is equally bullish about the future of Emirates. “There will be others who will follow and try to emulate what we are trying to do but they need to do it profitably as we do.
We have a plan, which is driven by a business model which was cast in concrete in July 2000, nearly thirteen years ago. We’re not following anybody.” Don’t bet against both men succeeding.
http://www.arabianbusiness.com/fly-me-the-boom--rise-of-emirates-etihad-479731.html?page=4
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