b727fan
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Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 10:55 am

Just curious to know what your take is. Sure, DUBAI is a wealthy glittering city, but what does the future hold when UAE's wells dry up! The Maktoum (sp) family pumps a lot of cash into the Emirates infrastructure. Similarly, the Abu Dhabi royals support Etihad, and by all means, more power to them trying to promote their country and develop a new industry. I wonder if EK or any of the other wealthy Arab states in the Persian Gulf region would survive and do well after their natural resources (well, OIL is their only main export) runs out! What say you on this? Will they face a major crisis r do you think they'll be successful without the oil revenue?!
 
stealthpilot
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RE: Would EK And Other Similar GCC Airlines Surviv

Sat Feb 26, 2005 11:11 am

Firstly I don’t think people will take to this post too well. Emirates and other ‘Arab states’ do well because they have amazing products, their oil reserves aren’t the big reason.

Secondly if their oil runs out, it kinda forces the rest of the world in the dumps wouldn’t you think?

-Nikhil
eP007
 
b727fan
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 11:36 am

Stealthepilot;
My post wasn't aimed to offend anyone, but since you raise a point, can you name me some of the "Amazing Products" that will sustain the idustry?
And also, the point I was making is that these airlines, are mainly subsidized by their governments whose sole revenue rely on oil and natural gas. Yes true, when their oil runs out, the price of gasoline will quadruple, but do you think tourists will still fly these carriers to GCC countries? What will be the attractions? Industries producing ordinary products, let alone amazing?!
Hopefully you get my point. Thanks
 
ACAfan
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 11:38 am

Oh, please...not another UAE/Dubai thread...
Freddie Laker ... May be at peace with his maker ... But he is a persona non grata ... with IATA
 
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aerorobnz
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 1:50 pm

The fact they exist at all is testament to the fact that they are diversifying their
economies to cope with when they run out of reserves.
Flown to 120 Airports in 44 Countries on 73 Operators. Visited 55 Countries and counting. Wanderlust is like Syphilis, once you have the itch it's too late for treatment.
 
rtfm
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 5:00 pm

Well a quick check of the CIA World Factbook reveals that while about 33% of UAE GDP is from oil & gas, their reserves should last about another 100 years at current rate of production. But the Emirates are already diversifying; Dubai in particular seems to be positioning itself as the Singapore of the Middle-East a putting a lot of focus on developing itself as a business centre and a tourist destination. 78% of the employed population are in service industries so there is probably not as high a dependency on oil & gas as some might imagine.
 
usagypsy
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 5:33 pm

I lived in Dubai which, by the way, has almost no oil, and can tell you there is a lot to offer... banking and tourism are very much on the rise - it doesn't need the oil. Etihad has had mixed reviews to say the least and even with the petrodollars from Abu Dhabi, is joking if it thinks its gonna fill A380s out of AUH. The real challenge for EK will be the LCCs....
 
PerthGloryFan
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RE: Would EK And Other Similar GCC Airlines Survive?

Sat Feb 26, 2005 5:58 pm

And also, the point I was making is that these airlines, are mainly subsidized by their governments

An interesting statement (er, allegation) - you have sources for this in regard to EK?

PGF
 
AEROFAN
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 6:42 am

do we really believe that EK or Eithad pay market prices for their fuel? Hedging or no hedging i would guess that their cost structures are remarkably different from all other carriers and thus one of the major reason for their success. what did they hedge at? U$0.10 or thereabouts? Let the oil dissapear and let's see what happens
 
a300
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 6:50 am

UAE, like the USA, has no idea of sustainable development. The massive growth rates seen in EK and Dubai in general are too fast and too large to continue longterm. I have never seen EKs books. As NZ CEO has asked: Let's see the numbers.
Boland Aseman Jayegah Man Ast.
 
PerthGloryFan
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 7:52 pm

do we really believe that EK or Eithad pay market prices for their fuel? Hedging or no hedging i would guess that their cost structures are remarkably different from all other carriers and thus one of the major reason for their success

Well you can call the EK CEO a liar if you like and wear the consequences. In many a reputable aviation journal he has explained how they work - but I guess it's up to you to jduge his crediblity.

But anyway fuel prices are only part of the equation - I would say EK's "success" was based more on their route and schedule structure and their international take on business, not on fuel prices alone.

As for seeing EK's books - I guess it's a case of "I'll show you mine if you'll show me yours".

PGF
 
ozglobal
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 8:38 pm

Quoting Aerofan (reply 8):
Let the oil dissapear and let's see what happens


Yet another anit-EK/UAE thread.

EK is a successful enterprise because it has an excellent business plan integrated with the development of Dubai as a regional transport and economic hub. They are the fastest growing and amongst the most profitable carriers in the world.

Objections:

i) "The get free (or close to it) fuel": That's not what their official communications and financial statements indicate. If you say they're lying, the burden of proof rests with you.
ii) They're heavily "subsidised": Again, provide your sources. If you're extremely profitable, do you need to be heavily 'subsidized'. This may be more of a question of being 'guaranteed' (c.f. Airbus) rather than true non-refundable subsidy.

Conclusion:

Why do so many people, just because their own airlines are struggling take offense at a genuine business success. Looking at UA's loss announcement for Jan, it is clear that it is only partly attributable to fuel prices, there are many other factors that need improving. Therefore, EVEN IF you assume the unproven accusation of dirt cheap fuel for EK, there's a lot of other equally important factors where they are showing enterprise and out-performing the market. Perhaps we need to ask ourselves why this offends us?
When all's said and done, there'll be more said than done.
 
Doona
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 9:35 pm

The idea isn't that Etihad or EK will fill their A380s out of DXB or AUH. Both airlines want to establish their respective bases a stopover points between Asia, Europe and Africa, as well as promoting tourism in their own countries. So the idea is to fill A380s into DXB or AUH, and then mostly distributing PAX over the rest of the networks.
And as far as tourism goes, Dubai has great weather, nice beaches and I'm fairly certain that they're actually building an archipelago... how's that for ambition?
Sure, we're concerned for our lives. Just not as concerned as saving 9 bucks on a roundtrip to Ft. Myers.
 
dxb
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 10:14 pm

B727Fan
Just curious to know what your take is. Sure, DUBAI is a wealthy glittering city, but what does the future hold when UAE's wells dry up.



Before UAE's wells dry up they will increase the fuel price (lets say to $ 500 per barrel) and in that case most of the airlines will stop flying and there will more room for them to fly.  Laugh out loud .

I think it more of route, schedule structure and their international take on business as PerthGloryFan said.
 
b727fan
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 10:45 pm

Dear DXB;
I actually lived in Dubai for about 5 years. I know the region pretty well, and I must say, I admire what the Maktoum family is doing to promote the city. What I meant by my comment "When the UAE wells dry up" is simply this: Do you think the UAE can maintain its glory after 6 out of the 7 Emirates have almost nothing to stand on? Dubai, I give you that, and Abu Dhabi, probably the next one to have a chance, but how about the rest of the 5 Emirates who are virtually unknown to the rest of the world?! Right now they stand on their feet only because they are all members of the union (UAE). Many foreign (and particularly western) firms are established in Dubai due to the unbelievable tax break and incentives they get. And lets be frank here folks, I met many western businessmen and women in UAE who will not make it so well here in the US. The sad mentality over there is that if you are an individual from the western countries, you automatically have an upper hand over some other nationalities. (This isn't meant to start a war here, just look at some classified ads in UAE, and as I said, I lived there and was shocked to find out some of my peers were not getting paid anywhere close to I was! )
So When the oil runs out, will the multi national firms stay in UAE? Will the tourism continue to thrive when other Emirates are lacking sufficient income? Lets face the fact, it will very hard to catch up with Dubai at this point for any of the other Emirates. (For instance whats Sharjah going to do?) So after oil, the main wealthy Emirate will no doubt be Dubai, and I think it will face tremendous challenges keeping the path unless other Emirates can stay on their feet. Sure, I realize this is a theory for now. Thats all, and I certainly do not mean to start a war here! It was a question based on my own Experience in the UAE and wondered what would happen after oil! Thanks.
 
rootsair
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 10:59 pm

Ya wealth is not the only problem. They may face a crisis like anyohter airline in the world. Who would have ever thought Swissair, Pan AM, TWA or other major airlines would go bankrupt 30 years before it happened. Just depends on how well the airline is managed

EK is not shielded from a crisis
A man without the knowledge of his past history,culture and origins is like a tree without roots
 
leelaw
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Feb 27, 2005 11:36 pm

Quoting RootsAir (reply 15):
EK is not shielded from a crisis


Additionally, don't forget the very real threat posed by Islamist/Jihadist groups; they're more than likely casting an ever increasingly evil eye on the emerging "Dubai Disneyworld."
Lex Ancilla Justitiae
 
AEROFAN
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 3:11 am

I live in NYC so that's probably the reason why I'm cynical. The day I believe something that A CEO says is the day I belive the Brooklyn Bridge is on sale.
SQ is arguably the best airline in the world for any number of reason; yet even they are affected by the rise in price of fuel. Isn't it strange then that EK is not feeling it's effects?
 
JoKeR
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 4:52 am

Additionally, don't forget the very real threat posed by Islamist/Jihadist groups; they're more than likely casting an ever increasingly evil eye on the emerging "Dubai Disneyworld."

Speculation... what's it got to do with this topic?
Kafa, čaj, šraf?
 
jmc757
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 5:02 am

Heres my take on it. I can fly from my local airport (8 miles away) to Sydney with Emirates (via Dubai). If I want to fly to Sydney with British Airways I have to travel 100 miles to Heathrow.

Although it may be oil thats got them where they are today, they have now proved themself as a world class airline. They are serving hundreds of regional airports with hundreds more international connections. They have fantastic on-board service, and above all they do all this with very competitive pricing. This is what will keep Emirates going after oil.
 
leelaw
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 5:12 am

IMO, the potential threat from Islamist/Jihadist groups and their sympathizers is not insignificant and must be factored into the EK/DXB/Dubai, etc., equation if you're seeking a balanced appraisal regarding "survivability." The "Dubai Disneyworld" is hardly consistent with their worldview or vision for the Arabian Peninsula. IMO, Dubai is as poignant a potential target to the Islamists/Jihadists as was the World Trade Center.
Lex Ancilla Justitiae
 
JoKeR
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 5:56 am

Dubai is as poignant a potential target to the Islamists/Jihadists as was the World Trade Center.

Woooaaahhhh... this statement can tear-open a can of worms!

Though I agree that terrorism is indeed a great threat to many countries, particularly in the west, one should avoid generalizing the potential terrorist threat against any particular city or state; in this case Dubai... how long is a piece of string...
Kafa, čaj, šraf?
 
leelaw
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 6:23 am

Quoting JoKeR (reply 21):
one should avoid generalizing the potential terrorist threat against any particular city or state


I've been to Dubai and the neighboring Emirates five times in the last six years; my anecdotal experience is that many people living there are seriously considering and discussing this very subject vis-a-vis the rapid social change and economic development of which EK is an integral part.

Why not here as well?
Lex Ancilla Justitiae
 
dxb
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RE: Would EK And Other Similar GCC Airlines Survive?

Mon Feb 28, 2005 10:03 pm

B727fan;
Thank you very much for explaining more about MY city (Dubai). I'm a UAE national born in dubai (that way my user name is DXB) i have tried before to explain to the other members that EK is paying for their fuel (i work in fuel company maybe you are familiar with EMARAT) and they (sometime) take fuel from us and they do pay the bills. But its hard for someone to understand the success of EK.
Thanks a gain.
 
PerthGloryFan
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RE: Would EK And Other Similar GCC Airlines Surviv

Mon Feb 28, 2005 11:03 pm

Aerofan said:
SQ is arguably the best airline in the world for any number of reason;

Aah, now let's talk about an airline that's supported by its government shall we!
 Smile/happy/getting dizzy Is there really any difference between the ownership structure of SQ and that of EK?

and:
yet even they are affected by the rise in price of fuel. Isn't it strange then that EK is not feeling it's effects?

How is EK not affected? From where I am there's not much difference in either airlines' PER - LHR fares. But as jmc757 also says, I don't always want to fly to LHR, I may want to go to BHX, or one of the other many European ports served by EK.

SQ, and for that matter especially QF, don't cut it for my money, their route offerings outside SE Asia are just unimaginative.

Though at least SQ don't whinge and whine about it - they do try stuff out, unlike Dixon and his tales of woe.

PGF
 
odafz
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RE: Would EK And Other Similar GCC Airlines Survive?

Tue Mar 01, 2005 12:17 am

Ok, I think it is time to step in because they are a lot of misconceptions and moreover a sense of "unconscious" racism, you know "towel heads" are doing better than us (white people). Got that diffuse feeling any way. I might be mistaken (hope so).

Quoting B727fan (reply 0):
I wonder if EK or any of the other wealthy Arab states in the Persian Gulf region would survive and do well after their natural resources (well, OIL is their only main export) runs out


If their oil reserves can last for the next 100 years, It is not today the eve of the demise of these airlines. In 100 years from now, with most of oil reserves depleted , there will be no AF, BA, QR, EK and WN flying.

Quoting B727fan (reply 2):
And also, the point I was making is that these airlines, are mainly subsidized by their governments whose sole revenue rely on oil and natural gas. Yes true, when their oil runs out, the price of gasoline will quadruple, but do you think tourists will still fly these carriers to GCC countries? What will be the attractions? Industries producing ordinary product
.

Unless you have proof to support the above statement on subsidies, I will advice you to make this kind of blank statement . I foil runs out , I can assure that price of oil will not quadruple but increase at least by 10 fold. Transportation will be so expensive and the world economic crisis following the depletion of oil reserves will stop any inflow of tourists. do not think for the time being that tourists are flocking in a great number in these regions, however, in their long term strategic plan , The Emirates are building such an infrastructure and the Gulf region (including Oman and Qatar) are trying to diversify their portfolio of revenues on inve4sting on tourism.
Shall I remind you that Alitalia and Olympic Aw both heavily subsidized airlines are on the verge of bankruptcy, shall I remind you also that WN and B6 are making "insolent" profits whereas US , UA, AA, DL and other legacy carriers are fighting to remain afloat. Shall I conclude that WN and B6 are subsidized.

EK, QR, SV , KU (heavy losses for a company that "do not pay its fuel") are paying their fuel. First they must buy it from the refineries and I do not know That ARAMCO and other oil companies are such charity trusts to give away jet fuel.

EK and the other GCC carriers buy their jet fuel either on the spot price (London Petroleum Exchange, NYNEX etc..) or forward contracts . They can hedge it or not. Let me remind you that hedging necessitates a major cash investment (in the form of margins to be deposited) and therefore, there is no surprise that cash rich airlines can hedge their future jet fuel purchases (WN for example) . You know what makes the difference :taxes (sales, value added, excise, duty etc...) that renders jet oil (or any fuel) more expansive in one country than the other. My advice to you would be to ask your senator to urge Mr. Bush to eliminate all direct and indirect taxes on the acquisition of fuel.

What will be the attractions? sandy beaches, the desert, golf courses, camel and horse races, F1 prizes, scuba diving , falconry, car rallies etc...




Quoting Aerofan (reply 8):
do we really believe that EK or Eithad pay market prices for their fuel? Hedging or no hedging I would guess that their cost structures are remarkably different from all other carriers and thus one of the major reason for their success. What did they hedge at? U$0.10 or thereabouts? Let the oil disappear and let's see what happens
.

Oh yes they do , see my comment above.

Quoting B727fan (reply 14):
So When the oil runs out, will the multi national firms stay in UAE? Will the tourism continue to thrive when other Emirates are lacking sufficient income? Lets face the fact, it will very hard to catch up with Dubai at this point for any of the other Emirates. (For instance whats Sharjah going to do?) So after oil, the main wealthy Emirate will no doubt be Dubai, and I think it will face tremendous challenges keeping the path unless other Emirates can stay on their feet. Sure, I realize this is a theory for now. Thats all, and I certainly do not mean to start a war here! It was a question based on my own Experience in the UAE and wondered what would happen after oil! Thanks
.

Unless the multinationals are related to the oil industry they are bound to leave, but let us take for example DUBAI MEDIA CENTER, they will remain there, DUBAI financial center will certainly remain there, all offshore companies will stay there. The master plan devised by the ruling family is that DXB to become a major financial and tourists center in the region a la Singapore or a la Monaco.... The windfall experienced by DXB will profit to the less fortunate emirates such as Sharjah, Fujeirah, and Ras El Kaimah.

Now as all companies in general and airline companies in particular are subject to cycles, expansion, contraction etc. It is the expansion of LCC vis a vis the legacy carriers , before it was the legacy vis a vis railway companies etc..
EK like other airlines is prone to face difficulties , let us envisage for example a SARS or a chicken flue epidemic in the Far East,( SQ and CX were adversely affected by the SARS epidemic a couple of years ago) ,problems with Iran, unstable Saudi Arabia , all of these could affect their operations etc....

I have heard that in the next, few years more than 100 Mio Chinese will travel abroad as tourists, guess which airline companies will take advantage of this surge in Chinese tourism . Long term strategy is a key to future success and EK , QR, TG, SQ, NW,CX and JL are capitalizing (already) on that.
 
CXA330300
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RE: Would EK And Other Similar GCC Airlines Survive?

Sun Mar 13, 2005 10:41 pm

EK could be headed to the expanding-too-fast downfall......I wouldn't be surprised if they go bye-bye in the next decade.
AC/AA/UA/DL/B6/WN/US*/CO*/FI/BA/IB/AF/SK/LX/Sabena*/TK/LY/SA/MN/SW/AM/CE*/CX/CA/MU/JL/SQ/TG/MH/KA/5J