Waterbomber
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Sun Jan 01, 2017 9:28 pm

Talking about ASM and RASM,
I have calculated the EK RASM and CASM from they reportings as follows:

CASM: 0,12 USD / ASM
RASM: 0,13 USD / ASM

This suggests that EK has numbers in line with the U.S. majors, and perfectly alined with UA.
They have thin margins and very high volumes. That by itself is a risk factor.

However, one has to look at the RASM and wonder.
Is it realistic considering their low load factors of below 80%?

In other words, can EK really be charging more than UA per RPM, despite being consistently one of the cheapest options and flying longer routes that have lower RASM?
Or are the revenues inflated to show paper profits and keep the financiers hungry for new lease deals?

In the first case, the risk is that any palpable fall in RASM would wipe-out ay margins that are left over and be multiplied over the huge volume, resulting in huge losses.
In the second case, the risk is the same as the first one, with the addition of the problem that it becomes harder and harder to pump in the required amount of cash, and more specifically foreign currency reserves.

The UAE has about 80 Billion USD worth of foreign currency reserves.
This is not much by any accounts, considering that the UAE's population is 89% foreign nationals.
Another consideration is the on-going exodus. The Telegraph predicted this exodus in 2014 : http://www.telegraph.co.uk/finance/newsbysector/energy/11315032/British-expat-exodus-feared-to-hit-Dubai-amid-oil-price-rout.html

What do you think happens to the UAE foreign currecy reserves if all those foreign workers fly home with their AED savings and exchange them into their local currency? Supposing 8 million workers x 10.000 USD average each, that's the entire foreign currecy wealth of the UAE.

See pge 8 here http://cadmus.eui.eu/bitstream/handle/1814/36375/GLMM_ExpNote_07_2015.pdf
 
airbazar
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Sun Jan 01, 2017 9:45 pm

seahawk wrote:
Before EK fails, EY and QR are gone and when this happens, EK is secure.

Not a realistic assessment in my opinion, for a couple of reasons. First, both QR and EY are much smaller carriers and with very different business models than EK. They are both members of a larger alliance and therefore more diversified. What is bad for EK is not necessarily bad for QR and EY, and vice versa. People need to stop lumping these 3 carriers as if they are similar. Also of relevant importance, QR is government owned so therefore they don't even need to be profitable to stay in business and as long as the world needs oil and gas, Qatar will have money to keep their airline in business. Being smaller airlines also allows for easier adjustments during bad periods.
 
log0008
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Sun Jan 01, 2017 11:15 pm

Thakmks for those calculations WaterBomber, I am not sure how actuate it was but some months ago I saw an report or article on EK and it said they were looking to by the start middle of FY17/18 achieve a 1 cent reduction in CASM (largely from reduction of fleet types to 777/A380 only and staff cuts in management roles) while maintaining RASM and growing load factors by 2-3%. Not sure how true these were or if they are even moving towards them but something to think about.

BTW the article was paywalled on one of the aviation insight websites.
 
Planesmart
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 4:29 am

Some in this thread and others previously, have questioned whether EK results are overstated / flattered. For tax management purposes, could they in fact be understated? EK has tax exposure outside Dubai, which it would be advantageous to minimise.

Sovereign and entity risk are closely related, as both depend on the financial health of the region, plus India, China, EU, UK, US and Australasia.

If EK, with such diversified exposure is considered by many on a.net to not be prepared for the predicted rough times ahead, it must ring alarm bells for air frame and engine OEM's, US3, EU3, the remaining ME2, TK and QF too, especially those undertaking share buy backs, which is completely counter intuitive.
 
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seahawk
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 6:16 am

airbazar wrote:
seahawk wrote:
Before EK fails, EY and QR are gone and when this happens, EK is secure.

Not a realistic assessment in my opinion, for a couple of reasons. First, both QR and EY are much smaller carriers and with very different business models than EK. They are both members of a larger alliance and therefore more diversified. What is bad for EK is not necessarily bad for QR and EY, and vice versa. People need to stop lumping these 3 carriers as if they are similar. Also of relevant importance, QR is government owned so therefore they don't even need to be profitable to stay in business and as long as the world needs oil and gas, Qatar will have money to keep their airline in business. Being smaller airlines also allows for easier adjustments during bad periods.


EY with its money burning investments is in a way worse shape imho and you just confirmed what critics always said about, QR that they are a government airline with unlimited pockets. But I still stand by my point, if the business model of EK faces problems, EY and QR will face the same problems because their hubs are even more dependent on connecting traffic, being in an alliance or not. In fact the way I see a possible ME3 downfall scenario is the following:

- traffic through the hubs thins out
- QR and EY get massive government money to survive
- EK gets the same in response
- the EU, North America and other countries reduce the traffic rights of the those government founded airlines to their markets based on unfair subsidiaries given to the ME3
- the business model collapses
 
[email protected]
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 6:42 am

A typical A.net thread full of hyperbole and almost nothing else.
"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
 
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BobPatterson
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 8:12 am

Waterbomber wrote:
......... UAE's population is 89% foreign nationals.

What do you think happens to the UAE foreign currecy reserves if all those foreign workers fly home with their AED savings and exchange them into their local currency? Supposing 8 million workers x 10.000 USD average each, that's the entire foreign currecy wealth of the UAE.

See pge 8 here http://cadmus.eui.eu/bitstream/handle/1814/36375/GLMM_ExpNote_07_2015.pdf


Strawman proposition, even if you are "supposing". Read further in the document you cited, Many of these foreign nationals are dependents, not workers (15% ages 1-15, many spouses, etc.).

What is your source for the $10,000 in savings per worker? Most of them are probably living paycheck-to-paycheck.
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
WIederling
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 8:51 am

lancelot07 wrote:
PanHAM wrote:
Airlines produce ton Kilometers and passenger kilomaters, resp. miles. The economic impact, the net product (Wertschöpfung) can be measured, It is a Service industry. The total GNP from aviation inustry in Germany alone is around 50 Billion € annually. The Service aspect, meaning the gains for other industries provided by the fact that the Services are avilable to them, is not included in that figure.

The same thing applies to banks and other services. The whole concept of "value added" is marxist nonsense.


Your statement is just another market speak onion layer to hide the parasitic nature of the banking/financial industry.
They have moved away from essential services and are now mostly siphoning off profits made elsewhere.
i.e. a true parasite.
Murphy is an optimist
 
waly777
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 9:54 am

Waterbomber wrote:
Talking about ASM and RASM,
I have calculated the EK RASM and CASM from they reportings as follows:

CASM: 0,12 USD / ASM
RASM: 0,13 USD / ASM

This suggests that EK has numbers in line with the U.S. majors, and perfectly alined with UA.
They have thin margins and very high volumes. That by itself is a risk factor.

However, one has to look at the RASM and wonder.
Is it realistic considering their low load factors of below 80%?

In other words, can EK really be charging more than UA per RPM, despite being consistently one of the cheapest options and flying longer routes that have lower RASM?
Or are the revenues inflated to show paper profits and keep the financiers hungry for new lease deals?

In the first case, the risk is that any palpable fall in RASM would wipe-out ay margins that are left over and be multiplied over the huge volume, resulting in huge losses.
In the second case, the risk is the same as the first one, with the addition of the problem that it becomes harder and harder to pump in the required amount of cash, and more specifically foreign currency reserves.

The UAE has about 80 Billion USD worth of foreign currency reserves.
This is not much by any accounts, considering that the UAE's population is 89% foreign nationals.
Another consideration is the on-going exodus. The Telegraph predicted this exodus in 2014 : http://www.telegraph.co.uk/finance/newsbysector/energy/11315032/British-expat-exodus-feared-to-hit-Dubai-amid-oil-price-rout.html

What do you think happens to the UAE foreign currecy reserves if all those foreign workers fly home with their AED savings and exchange them into their local currency? Supposing 8 million workers x 10.000 USD average each, that's the entire foreign currecy wealth of the UAE.

See pge 8 here http://cadmus.eui.eu/bitstream/handle/1814/36375/GLMM_ExpNote_07_2015.pdf


Sorry to say this, but your anti ME3 posts get more ludicrous by the minute.

Of the expat community, a good chunk are dependents of workers. Of those workers, a good chunk are labourers who most certainly do not have anywhere near your made up $10,000. People of the Indian sub continent make up roughly half of the UAE's population and send back money home weekly or monthly.

Honestly, you've just said they are in line with US majors @ RASM/CASM and yet I do not see you predicting the downfall of the US3. Despite the doom and gloom, EK will post profits for 2016. They simply see the growth slowing and are adapting as would any sensible airline.
The test of first-rate intelligence is the ability to hold 2 opposed ideas in the mind concurrently, and still function
 
lancelot07
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 11:34 am

seahawk wrote:
EY with its money burning investments is in a way worse shape imho and you just confirmed what critics always said about, QR that they are a government airline with unlimited pockets. But I still stand by my point, if the business model of EK faces problems, EY and QR will face the same problems because their hubs are even more dependent on connecting traffic, being in an alliance or not. In fact the way I see a possible ME3 downfall scenario is the following:

- traffic through the hubs thins out
- QR and EY get massive government money to survive
- EK gets the same in response
- the EU, North America and other countries reduce the traffic rights of the those government founded airlines to their markets based on unfair subsidiaries given to the ME3
- the business model collapses

EY and QR have a net to fall into. Their owners are governments with deep pockets. And even so, EY is restructuring its European affiliates. Maybe they are just tired of losing money ?
And then, there is a problem with your 3rd point: Dubai is said to need EK's dividend for a living. No deep pockets there, no net to fall into. Except maybe the deep pockets of their neighbor Abu Dhabi, who might just think it is smarter to take over an airline that at least can make a profit in good times - unlike AB and AZ.

WIederling wrote:
Your statement is just another market speak onion layer to hide the parasitic nature of the banking/financial industry.
They have moved away from essential services and are now mostly siphoning off profits made elsewhere.
i.e. a true parasite.

Your statement is a typical leftist Marxist lie! Banks, just like other brokers, provide valuable services to society. Unfortunately, the banking system is rigged towards financing governments by the diverse Basel-rules, but this is not the invention of banks but of the real culprit, government !
 
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seahawk
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 11:53 am

For me the basic line is that market access will become a problem, if the governments keep the ME3 in the air by heavy use of government money. Without market access the business model is dead. No home country as enough OD traffic to feed such huge airlines.
 
dtw2hyd
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 12:07 pm

Lot of funny arguments here.

Saudi,Kuwait and Abu Dhabi are financial pillars/debt sources of Dubai, how would their airlines will falter but Emirates will thrive with their money.

Qatar and Etihad are state owned, financial difficulties doesn't matter if they want to power through.

QR and EY have flexible economic fleets
Saudia actually has best regional wide body A333R.
EY has been friends with lot of airlines, so it will have no problem extending their partnership. They were able to sell AB/AZ to LH. They can sell 9W share to DL.

Terminating leases on planes no one wants is not easy. Its not a A320/B737 or A332/B787 some one will snatch up instantaneously. A380 has no secondary market and B777 has no resale value. EK lessors are in for a rough ride.

If this was a well run, numbers company management should have adjusted their plans 5 years back, not now under new management.

Also, AI is reducing working force at the rate 9% every year thru retirements. In a year or two AI group(with staff at 50-60 airports) will have a 1:97 plane:employees ratio. When can well run EK (with one hub) match that.

Even before demonetization, AI planed to restructure its high interest debt through Life Insurance Corporation of India, now with cash grab from poor people, same 19 public sector banks who were sucking AI blood may very well ready to restructure debt on their own.
 
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BobPatterson
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 1:23 pm

WIederling wrote:
Your statement is just another market speak onion layer to hide the parasitic nature of the banking/financial industry.
They have moved away from essential services and are now mostly siphoning off profits made elsewhere.
i.e. a true parasite.


Please explain how banks siphon profits.

Please do this by providing a specific example supported by published data.

You might also explain the parasitic nature of a bank deriving profits from a host business (parasites live off hosts).

Thank you.
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
PanHAM
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 3:02 pm

WIederling wrote:
lancelot07 wrote:
PanHAM wrote:
Airlines produce ton Kilometers and passenger kilomaters, resp. miles. The economic impact, the net product (Wertschöpfung) can be measured, It is a Service industry. The total GNP from aviation inustry in Germany alone is around 50 Billion € annually. The Service aspect, meaning the gains for other industries provided by the fact that the Services are avilable to them, is not included in that figure.

The same thing applies to banks and other services. The whole concept of "value added" is marxist nonsense.


Your statement is just another market speak onion layer to hide the parasitic nature of the banking/financial industry.
They have moved away from essential services and are now mostly siphoning off profits made elsewhere.
i.e. a true parasite.


'Xcuse me, but I wrote a short Statement about Airlines, I get a reply from someone calling my Statement "Marxist" which i consider an Insult and then Wlederling says something about "market speak".

Which needs me to point out that the first four lines are my words, the rest of the quotes are not.
Was Erlauben Erdogan!!!
 
anshabhi
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 6:01 pm

[list=][/list]
dtw2hyd wrote:
Lot of funny arguments here.

Saudi,Kuwait and Abu Dhabi are financial pillars/debt sources of Dubai, how would their airlines will falter but Emirates will thrive with their money.

Qatar and Etihad are state owned, financial difficulties doesn't matter if they want to power through.

QR and EY have flexible economic fleets
Saudia actually has best regional wide body A333R.
EY has been friends with lot of airlines, so it will have no problem extending their partnership. They were able to sell AB/AZ to LH. They can sell 9W share to DL.

Terminating leases on planes no one wants is not easy. Its not a A320/B737 or A332/B787 some one will snatch up instantaneously. A380 has no secondary market and B777 has no resale value. EK lessors are in for a rough ride.

If this was a well run, numbers company management should have adjusted their plans 5 years back, not now under new management.

Also, AI is reducing working force at the rate 9% every year thru retirements. In a year or two AI group(with staff at 50-60 airports) will have a 1:97 plane:employees ratio. When can well run EK (with one hub) match that.

Even before demonetization, AI planed to restructure its high interest debt through Life Insurance Corporation of India, now with cash grab from poor people, same 19 public sector banks who were sucking AI blood may very well ready to restructure debt on their own.


Ok we are going off topic, but how do you call them poor who have deposited almost ₹10 lakh crore ($150 billion) collectively since demonetization?
 
sciing
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 6:39 pm

dtw2hyd wrote:
plane:employees ratio

I do not understand what this figure should be good for. I would understand an employee per seat or per million seat mile, but per plane?
Who else should be high for this value than a VLA only carrier, but what else does it show that it is VLA only carrier. Strange, very strange arguments!
 
waly777
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 8:02 pm

sciing wrote:
dtw2hyd wrote:
plane:employees ratio

I do not understand what this figure should be good for. I would understand an employee per seat or per million seat mile, but per plane?
Who else should be high for this value than a VLA only carrier, but what else does it show that it is VLA only carrier. Strange, very strange arguments!


Exactly, it is a ridiculous metric of efficiency when widebody only fleets require more staff per plane vs narrowbody only or a mix of narrow/wide body.

I really struggle to understand how an airline still posting profits during a challenging period is now forecasted to have an end quite close by....
The test of first-rate intelligence is the ability to hold 2 opposed ideas in the mind concurrently, and still function
 
jbs2886
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 8:20 pm

dtw2hyd wrote:
Lot of funny arguments here.

Saudi,Kuwait and Abu Dhabi are financial pillars/debt sources of Dubai, how would their airlines will falter but Emirates will thrive with their money.

Qatar and Etihad are state owned, financial difficulties doesn't matter if they want to power through.

QR and EY have flexible economic fleets
Saudia actually has best regional wide body A333R.
EY has been friends with lot of airlines, so it will have no problem extending their partnership. They were able to sell AB/AZ to LH. They can sell 9W share to DL.

Terminating leases on planes no one wants is not easy. Its not a A320/B737 or A332/B787 some one will snatch up instantaneously. A380 has no secondary market and B777 has no resale value. EK lessors are in for a rough ride.

If this was a well run, numbers company management should have adjusted their plans 5 years back, not now under new management.

Also, AI is reducing working force at the rate 9% every year thru retirements. In a year or two AI group(with staff at 50-60 airports) will have a 1:97 plane:employees ratio. When can well run EK (with one hub) match that.

Even before demonetization, AI planed to restructure its high interest debt through Life Insurance Corporation of India, now with cash grab from poor people, same 19 public sector banks who were sucking AI blood may very well ready to restructure debt on their own.


I would disagree that B777 generally has no resale value. I bet many of the newer / mid-life -300ERs could find homes very quickly. Many A320s, B737s an A332s are much older and are heading to the scrapper.
 
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Channex757
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 8:40 pm

Some wild figures being quited by people who obviously just don't understand the business. EK may have a high employee to aircraft ratio but then again, look at their fleet and cabins for a clue. High numbers of F and J seats. Probably the most F class seats in the air today (proper F class, not the domestic US type). They need more staff per seat!

Same goes with quoting bald load rates. How many of the F and J seats are full? How much cargo is carried? What is Emirates SkyCargo charging for that cargo per kilometre?

The important figures are who is riding upfront in a paid seat and what's under the floor. Not some arbitrary average.

Emirates also has another member of the Emirates Group to consider; DNATA. It's a multiple headed beast of a company and as such it is asset-rich and also a safe bet for people at the moment looking to invest as much of its growth has been funded using asset-backed Islamic finance. Talking about leases is also futile as EK itself uses islamic financing extensively.

There isn't any point trying to come out with paragraphs of screed attempting to analyse EK through the prism of US or European airline models as it just makes the writer look silly. Islamic finance for example. I don't see United or Delta buying their 777s with it! The rules are very different as there is a religious proscription concerning profits from financing in Islam so deals need structuring to be compliant. Basically, money can't be used to make money but it can be used in trade to turn a profit, so Islamic financing is attractive to high net worth individuals in the Gulf and also the Banks. EK takes advantage of that.
 
dtw2hyd
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 9:35 pm

plane:employees ratio is widely used as an efficiency indicator, not sure why suddenly a.net changed the tone to it as irrelevant metric.

~240 planes

Core staff
CC 20000
FC 4000
Engineering 6000

ULH VLAs need 100 CC and 22 FC per plane is kind of norm. CC 24000, FC 5280. If EK is truly a ULH VLA carrier it is 4000 CC, 1280 FC short. But in reality a small % of its flights are ULH.

There are 75,000 non-core employees in the group. No one knows what they are doing.

So EK has higher number premium seats hence high plane:employee ratio argument has no legs.

About B777 resale value, with the help of B787,A350 and Richard Anderson, their values went down drastically. EK still has to pay originally negotiated contract price, if lessors were expecting $80MM residual value originally and now they expect to get $50MM on new leases, someone has to eat the difference.
 
abba
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 10:01 pm

Dutchy wrote:
Danny wrote:
Not sure what is the source of those rumors. The 2015 financials were the best ever.

Good profit margins, excellent ROA, positive cashflows etc.Most of airlines could only wish to have such results.

http://www.theemiratesgroup.com/english ... eport.aspx


Indeed, were is this rumor based on?

If this turns out to be true, then the immediately consequence would be the decision to shut down the A380 line and Boeing will rethink the B779, too much tailor made for EK. But don't think it has any merritt to it.


I'm not sure about this one. Rather the 380 was concived in a pre EK era where the major European and Asian (and perhaps even US) airlines would all have the demarnd to fill the 380. Today they don't because of EK.
 
abba
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Mon Jan 02, 2017 10:07 pm

sciing wrote:
dtw2hyd wrote:
plane:employees ratio

I do not understand what this figure should be good for. I would understand an employee per seat or per million seat mile, but per plane?
Who else should be high for this value than a VLA only carrier, but what else does it show that it is VLA only carrier. Strange, very strange arguments!


Interresting question would be how Ek relates to other similar structured airlines such as SQ and CX? How their numbers are compared to FR is not relevant or to LH and BA for that matter.
 
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BobPatterson
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 1:23 am

dtw2hyd wrote:
plane:employees ratio is widely used as an efficiency indicator, not sure why suddenly a.net changed the tone to it as irrelevant metric.

~240 planes

Core staff
CC 20000
FC 4000
Engineering 6000

ULH VLAs need 100 CC and 22 FC per plane is kind of norm. CC 24000, FC 5280. If EK is truly a ULH VLA carrier it is 4000 CC, 1280 FC short. But in reality a small % of its flights are ULH.

There are 75,000 non-core employees in the group. No one knows what they are doing.

So EK has higher number premium seats hence high plane:employee ratio argument has no legs.

About B777 resale value, with the help of B787,A350 and Richard Anderson, their values went down drastically. EK still has to pay originally negotiated contract price, if lessors were expecting $80MM residual value originally and now they expect to get $50MM on new leases, someone has to eat the difference.


The following numbers for employee groups is taken from Emirates' 2015-16 annual report: http://content.emirates.com/downloads/e ... t_2016.pdf

Cabin Crew..........................21,722
Flight Deck Crew...................3,868
Engineering...........................3,215
Others................................13.352 (ramp, office and other customer-facing staff)
Overseas Stations.................5,866

Subtotal for Airline...............48,023

Subsidiary Companies.........13,182

Total Employees..................65,205

dnata..................................34,117

Total Group.........................99,322

Aircraft: 251

Question: Where are the 75,000 that you claim no one knows what they are doing? The subsidiaries and dnata businesses are listed and described. Those activities are not directly attributable to the airline (which is claimed to have a total of 48,023 employees).

I like to use employees-per-aircraft as a quick, snapshot comparison of airlines. But it must be admitted this can be only a crude measurement, and absolutely worthless when comparing the efficiency between, say, Southwest (70.5 employees) and Emirates (191 employees). Weighting must be done to account for average seats per aircraft. Total seats per fleet would provide a useful measurement. To really be precise one must also compare the percentage/amount of work that is contracted for and not accounted for directly in employee counts/costs, and weight for that also..

On the other hand, just comparing annual load factors tells you that Emirates is much less efficient than Southwest.
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
dtw2hyd
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 1:39 am

Check 2016 H1 report, group total 105,000.

I am not debating FC,CC and Engineering staff which are approximately 30,000. I am of the opinion airline needs more core staff.

105,000 - 30,000 = 75,000 is where the bloat prevails.

251 number, it includes freighters. Do freighters need cabin crew? Totally different discussion, anything possible for a numbers company.
 
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BobPatterson
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 2:21 am

dtw2hyd wrote:
Check 2016 H1 report, group total 105,000.

I am not debating FC,CC and Engineering staff which are approximately 30,000. I am of the opinion airline needs more core staff.

105,000 - 30,000 = 75,000 is where the bloat prevails.

251 number, it includes freighters. Do freighters need cabin crew? Totally different discussion, anything possible for a numbers company.


This still does not support a claim that no one knows what they are doing. Nor does it explain that most of that number has nothing to do with the airline (as opposed to other elements of "the group').
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
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KruegerFlaps
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 3:54 am

dtw2hyd wrote:
Check 2016 H1 report, group total 105,000.


Note that you are referring to the total for the group. The fact that not all employees are working directly for the airline does not mean the rest are bloat. If other parts of the group are providing a return to the group then the numbers might be justified. Or do you believe that airlines don't need catering, cargo loading, ground handling, and so on? These may not be "core functions" of an airline but they are essential functions for its being able to operate. The numbers you are reading include those performing those functions, not only in Dubai but at airports around the world where Dnata and other subsidiaries of the group are present.

Now, it may be that some of the functions performed could be done with fewer employees, but to dismiss all the employees of non-airline parts of the group as bloat is irrational.
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 6:03 am

dtw2hyd wrote:
plane:employees ratio is widely used as an efficiency indicator, not sure why suddenly a.net changed the tone to it as irrelevant metric.

Sorry, I'm an engineer not an MBA. So of course I challenge any stupid metric which makes no sense. Managers and especially consulters are great presenting metrics thinking their audience is quite stupid.
I explained you the problem of this metric comparing airlines with completly different fleet types. I guess everyone understand the problem. We don't get as an argument. You can repeat as you want this makes the metric not better or more conclusive as an argument. It is your problem of a weak argument.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 7:31 am

dtw2hyd wrote:
plane:employees ratio is widely used as an efficiency indicator, not sure why suddenly a.net changed the tone to it as irrelevant metric.

I've worked in commercial aviation funding and best practice for finance, accounting and consultancy companies, as well as solo, for four decades.

Plane:Employee ratio was used as an efficiency indicator when airlines flew all narrow body aircraft, and may still be a factor when comparing exclusively NB operators, or exclusively LCC, or exclusively freight.

Even then, we ignore reported numbers, and convert actual employee numbers to Full Time Equivalent Units (FTEU).

With the widespread use of contracting and outsourcing, using crude employee numbers as an efficiency metric reveals close to nothing about an airlines efficiency.

Plane:Management is a ratio still used, with consultants, again expressed in FTEU, added to the formula.

EK is a numbers based company, with a not insignificant resource constantly monitoring budgetted, actual and predicted efficiency, across the entire business. In respect to commercial aviation, they are THE World's best practice leader or close to it, in virtually every marker, from funding, new fleet acceptance, sponsorship, purchasing, adapting, corporate learning................

May be big, but do not underestimate their agility. For example, what others hire consultants to look at every couple of years, EK are reviewing real-time, using internal and external expertise to peer review the methodology, results, conclusions and action taken.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 8:20 am

The phrasing of this thread was hyperbolic: yes/no to some dramatic bubble bursting.
Maybe that's why what could have been an interesting discussion has degenerated into hysterics.

I'd take a middle position - seemingly management does as well - that EK may have to revise its growth trajectory to something less than stratospheric.
Whether that's tropospheric or Burj Khalifa-spheric seems the better issue. EK will remain huge by any reasonable standard.
The critical market issues seem to be (1) whether EK/ME3 will remain dominant on South Asian long haul, or whether competitors will emerge, (2) whether and by how much EK will retain its lead on the Kangaroo route, and (3) whether and by how much competitors will chip away at EK's lead on Europe-SE Asia.

In addition, EK is now exiting a period of clear fleet efficiency advantage. The A380 and 77W's efficiency advantages have helped EK to offer better comfort and/or cheaper fares versus European competitors flying relatively fewer A380's and 77W's. As the A350 and 787 come to predominate, this advantage will erode or disappear. The A380 and 77W will soon be the least fuel-efficient widebodies in production, though they retain some capital and scale economies over smaller planes.

EK's biggest non-Europe route by ASM is Bangkok. Will European LCC's (DY, LH) steal enough of this traffic with direct flights or drive down its yield significantly? Seems likely.
EK isn't a big player on Europe-China/Japan/Korea, but carries some traffic on those routes that helps fill all those seats. Will the ambitions of FinnAir and AeroFlot for those 6th Freedom pax impact EK? Seems likely. They can offer a much more direct routing, saving pax time and airline money. They're close enough to China to fly with a belly full of cargo too - that's a big piece of EK's profit pie.
India is the big wildcard. Air India seems unlikely to seriously challenge EK unless privatized, but what if, e.g., IndiGo and DY tie up to steal feed from Gulf routings. Could have a major impact on EK.
Australia/NZ seems pretty secure though CX and SIA, for example, will make some inroads as they expand their European networks with the A350.

All in all there are a lot of risks for EK and a very reasonable picture of how their market share is threatened. Market share loss isn't fatal in growth markets (India especially), but EK seems likely to see an impact.
I've always argued that EK is subsidized in one big sense that doesn't show on a balance sheet: its owner displays a risk appetite that no corporate board would ever tolerate. The Maktoums gave TC a long leash to chase the world's traffic; the Mueller hire shows that they're reining their pet in somewhat.

We would need far better data to make an intelligent prediction of EK's future. It's possible that Mueller could push to curtail the A380 order, especially the post-2021 frames, and it's likely that Airbus would be fine with that - those frames will sell at a loss unless there are more A380 orders, which seems highly unlikely. EK could space its 777x orders out further and use more smaller planes in anticipation of DWC - if that materializes similarly to current projections.

Another interesting long-term possibility is a quasi- or actual merger with EY. If EK starts to hurt, EY will be really hurting. That airline is less integral to Abu Dhabi than is EK to Dubai; one could imagine a situation where EY moves to DWC and the royals shell out a high-speed link to Abu Dhabi. It's only ~70 miles. The Maktoums could have built DWC farther south, in less valuable land, but perhaps chose the current location to serve Abu Dhabi some day. EK and EY could maintain separate brands but share codes, which would relieve a lot of competitive pressure and open a lot of connectivity/bank options.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 9:27 am

Matt6461 wrote:
Another interesting long-term possibility is a quasi- or actual merger with EY. If EK starts to hurt, EY will be really hurting. That airline is less integral to Abu Dhabi than is EK to Dubai; one could imagine a situation where EY moves to DWC and the royals shell out a high-speed link to Abu Dhabi. It's only ~70 miles. The Maktoums could have built DWC farther south, in less valuable land, but perhaps chose the current location to serve Abu Dhabi some day. EK and EY could maintain separate brands but share codes, which would relieve a lot of competitive pressure and open a lot of connectivity/bank options.



Agree with your post, however I am not sure about EK hurting meaning EY will hurt as well. If we are taking about an event that hurts EK traffic as well as EY traffic we should include QR as well as that would probably be a conflict in the area that takes away traffic from all the ME3. I think EK will hurt a little (less expansion than thought) due to EY and QR as they will be taking some of the traffic from EK.

Regarding the location of DWC, I think the location was chosen to be close to the Jebel Ali port and that is the reason it is so relatively close to Abu Dhabi. That and there was space around that area as well for expansion probably made it the most suitable location for a new airport.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 9:34 am

dtw2hyd wrote:
Check 2016 H1 report, group total 105,000.

I am not debating FC,CC and Engineering staff which are approximately 30,000. I am of the opinion airline needs more core staff.

105,000 - 30,000 = 75,000 is where the bloat prevails.


You're including the whole of Emirates Group, which include Dnata and others. Those employees cannot be considered staff of Emirates Airline. That would be like counting Delta's refinery workers as airline employees. :crazy:
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 12:09 pm

Obesity is a problem that need to be acknowledged first to fix it.

Airline has 65,192
dnata 38,486
Group 103,678

When you have a 14 level bloated hierarchy it adds up rather quickly. There is no shred of evidence this is a well run numbers company and most likely even Emir doesn't believe that anymore.

Don't worry, CM cut 1/3 of staff at his last assignment, so 1/3 to 1/2 is a good target. Also he is well known to start cutting from the top.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 12:59 pm

dtw2hyd wrote:
Obesity is a problem that need to be acknowledged first to fix it.

Airline has 65,192
dnata 38,486
Group 103,678

When you have a 14 level bloated hierarchy it adds up rather quickly. There is no shred of evidence this is a well run numbers company and most likely even Emir doesn't believe that anymore.


For comparison, does anybody know number of levels in US3 airlines? American Airlines has 113,300 employees, Delta more than 80,000 and United 86,000, so they are big organizations, too.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 1:15 pm

Finn350 wrote:
dtw2hyd wrote:
Obesity is a problem that need to be acknowledged first to fix it.

Airline has 65,192
dnata 38,486
Group 103,678

When you have a 14 level bloated hierarchy it adds up rather quickly. There is no shred of evidence this is a well run numbers company and most likely even Emir doesn't believe that anymore.


For comparison, does anybody know number of levels in US3 airlines? American Airlines has 113,300 employees, Delta more than 80,000 and United 86,000, so they are big organizations, too.


The US3 have fleet sizes multiple times larger than EK's, and their networks are much more complex. In addition, ground staff are included in those numbers, unlike Dnata's separate numbers. One also has to wonder if the Dnata employee numbers are justifyable, even if you include services that they provide to third parties both inside and outside the airport. With 40.000 people, ie 10.000 people rotatig in 2 shifts, you could give every travelling party a choice between a personal butler or a bodyguard, for an hour before boarding.
Last edited by Waterbomber on Tue Jan 03, 2017 1:19 pm, edited 1 time in total.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 1:17 pm

Some very interesting thoughts...

Matt6461 wrote:
I'd take a middle position - seemingly management does as well - that EK may have to revise its growth trajectory to something less than stratospheric.
Whether that's tropospheric or Burj Khalifa-spheric seems the better issue. EK will remain huge by any reasonable standard.
The critical market issues seem to be (1) whether EK/ME3 will remain dominant on South Asian long haul, or whether competitors will emerge, (2) whether and by how much EK will retain its lead on the Kangaroo route, and (3) whether and by how much competitors will chip away at EK's lead on Europe-SE Asia.


My comment is that this seems to be so focused on competitors whereas I viewed EK's big strength as generating markets that their competitors couldn't / wouldn't access. EK excels at taking a city whose local airlines chose not to provide with much international service because it doesn't fit in with their hubbing strategy (think MAN / BA, DUS / LH, BOS / US3, etc) and give it one stop service via DXB to 150+ destinations, some/most of these that were also relatively underserved.

To me the interesting question is: has that model saturated? Has all the sap run out of the tree, or is there more to harvest? If so, how much more? At some point EK's costs increase and opportunities decrease to the point where that person in MAN or BOS thinking of going to DAR or ZNZ decides it's too expensive and does something else with their time and money, and EK decides instead of adding the 143rd A380 (or 116th etc) it's time to stop. When that happens, we will have reached 'peak A380'. Like you, and unlike the thread starter, when that happens, I don't think that when that happens a bubble will burst and the thing will collapse inward. However at some point, saturation will take hold, and whatever incremental opportunities due to more travelers being born each day will be overcome by the cost of buying and operating the N+1th A380.
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 1:53 pm

Waterbomber wrote:
The US3 have fleet sizes multiple times larger than EK's, and their networks are much more complex. In addition, ground staff are included in those numbers, unlike Dnata's separate numbers. One also has to wonder if the Dnata employee numbers are justifyable, even if you include services that they provide to third parties both inside and outside the airport. With 40.000 people, ie 10.000 people rotatig in 2 shifts, you could give every travelling party a choice between a personal butler or a bodyguard, for an hour before boarding.


Capacity-wise, the difference is not multiple times. EK has a fleet of 240 planes with around 440 seats average, or around 105,000 seats total. AA has a mainline fleet of 930 planes with around 170 seats average, or around 158,000 seats total.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 2:30 pm

I think EK's refusal to collaborate with other carriers (unlike QR in Oneworld and EY in their buying spree) will hurt them in the long term. IMO their growth is conditioned by two main issues:

- Real demand between their markets. You can estimulate the market, but what is there for the future? 10 daily to MAN and JFK? There is a point of saturation specially with European, American and Asian carriers being now more competitive.

- Bilaterals. EK is now "blocked" in many main countries like France, Germany and China. Bottleneck effect.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 2:32 pm

Finn350 wrote:
Waterbomber wrote:
The US3 have fleet sizes multiple times larger than EK's, and their networks are much more complex. In addition, ground staff are included in those numbers, unlike Dnata's separate numbers. One also has to wonder if the Dnata employee numbers are justifyable, even if you include services that they provide to third parties both inside and outside the airport. With 40.000 people, ie 10.000 people rotatig in 2 shifts, you could give every travelling party a choice between a personal butler or a bodyguard, for an hour before boarding.


Capacity-wise, the difference is not multiple times. EK has a fleet of 240 planes with around 440 seats average, or around 105,000 seats total. AA has a mainline fleet of 930 planes with around 170 seats average, or around 158,000 seats total.


There is still a 50% higher seat count, which is not insignificant, considering that AA has a lot of ground staff in that staff count that EK puts under Dnata.
It's also not completely true that you need more crews to man long haul flights. On a flight basis it's true, but short haul flights take a crew change everyday, whereas long haul flights only fly one sector plus change per day. Also, we're usually comparing a B77W with a B738, which is not adequate as the B738 has less capacity but still needs the same amount of crews to operate. For instance, a B738 requires 6 crews to operate a morning run and another 6 to operate an afternoon run, so that's 12. The B738 flies less hours, but only because it spends more time in rotations, etc... Your B77W will also only be flying a single flight per day and occupy 10-15 crews, while carrying twice as many passengers as the B738. It's not because crews are sleeping in a hotel somewhere far away, that you need more of them over crews who sleep at home after making regional hops for half a day.
Also, dtw2hyd's objection seems to be with the non-crews, which seem to be excessive for such a small fleet.
200+ support staff per aircraft? One for every occupied seat?
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 2:41 pm

Finn350 wrote:
Waterbomber wrote:
The US3 have fleet sizes multiple times larger than EK's, and their networks are much more complex. In addition, ground staff are included in those numbers, unlike Dnata's separate numbers. One also has to wonder if the Dnata employee numbers are justifyable, even if you include services that they provide to third parties both inside and outside the airport. With 40.000 people, ie 10.000 people rotatig in 2 shifts, you could give every travelling party a choice between a personal butler or a bodyguard, for an hour before boarding.


Capacity-wise, the difference is not multiple times. EK has a fleet of 240 planes with around 440 seats average, or around 105,000 seats total. AA has a mainline fleet of 930 planes with around 170 seats average, or around 158,000 seats total.


AFAIK EK has just 330 departures a day assuming half from one hub, it is a simple operation compared to US3 with at least 3 hubs and lot more departures.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 4:24 pm

Revelation wrote:
this seems to be so focused on competitors whereas I viewed EK's big strength as generating markets that their competitors couldn't / wouldn't access. EK excels at taking a city whose local airlines chose not to provide with much international service because it doesn't fit in with their hubbing strategy (think MAN / BA, DUS / LH, BOS / US3, etc) and give it one stop service via DXB to 150+ destinations, some/most of these that were also relatively underserved.

To me the interesting question is: has that model saturated? Has all the sap run out of the tree, or is there more to harvest?


Thanks this is a helpful conceptual clarification.
I think you're right that EK makes a lot of hay subbing one-stop for bridge hubbing. We don't have hard numbers on that (i.e. comparison of EK flows on routes where one-stop competition is or isn't available), but it jives with the anecdotal evidence.
I still think competition is highly relevant, however. My post focused on the proliferation of non-stops from Europe on LCC's, but additional competition is coming from one-stop options on European/Asian FSC's as well (plus one-stops on LCC's).
EK's role providing the best one-stop option to places like ZNZ and SYD seems secure, but the biggest portion of their business appears to be one-stops to big points like BKK, SIN, MNL. That's where you see ludicrous capacity levels like the A380 shuttle services to BKK.
Take a place like DUS. CX and SQ will be up to daily there soon, if they're not already. That provides additional non-stop, competes with EK's one-stop offerings via often-more-direct routings, and provides one-stop competition against two-stop options such as DUS-DXB-KUL-PEN/KNO/PLM via EK's MH tie-up.
To the extent that one-stop monopolies are EK/ME3 "wells," some may be poisoned before EK reaches max production from them.

US expansion is/was a big part of EK's future. That's primarily 6th Freedom traffic to/from South Asia. http://centreforaviation.com/analysis/e ... ons-222651
FinnAir and Aeroflot, however, have better circuitry potential circuitry to India than EK.
Image

At the moment, both carriers are more focused on 6th freedom traffic across Eurasia, but Indian growth and Chinese sluggishness could easily shift that emphasis.
EK got a lot of their South Asian traffic by out-competing Europe/US legacy JV's/alliances. But it's much easier to beat a bloated LH's A346's than a leaner FinnAir's A350's. And a competent AirIndia or resurgent Jet Airways could be extremely threatening.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 4:51 pm

Always troubles me the fleet of EK, is that possible with mainly two types of aircraft to serve so many destination which are so different one of the other? Does this two types fit to all this destinations?
For me EK pays or will pay the bad utilization of their fleet. They need to follow a KLM or LH model, more A/C types that they fit to a specific route.
:P
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 6:16 pm

Huge kudos for doing so well but there is a *slight* touch of the Eros about them. Pan Am binned their B707s and lost market share trying to connect the network with B747s, by the time the A310s came more nimble carriers were stealing market share. It seems bonkers to me, that EK now have as their entry level aircraft, the B77W. The parallel may not be a strong one, but it's still there.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 7:49 pm

EK can likely extend those 380 lease for as long as they want, long enough to wait for smaller efficient twins.
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 9:38 pm

Matt6461 wrote:
To the extent that one-stop monopolies are EK/ME3 "wells," some may be poisoned before EK reaches max production from them.


Thanks, I hadn't thought of that angle.

It seems EK has 'stolen the lunch' of a lot of incumbents (BA, QF, TG, MH, etc). It will be interesting to see if younger and more nimble carriers return the favor.
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Tue Jan 03, 2017 11:51 pm

Waterbomber wrote:
With 40.000 people, ie 10.000 people rotatig in 2 shifts, you could give every travelling party a choice between a personal butler or a bodyguard, for an hour before boarding.


Dnata are not just a Dubai company. They have operations all around the world. Including all the major Australian airports, 20+ Brazilian airports, airports in China, Pakistan, Philippines, Singapore, Switzerland, Iraq, Romania, and all the major airports in the UK. They are quite spread out.

-CXfirst
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Wed Jan 04, 2017 12:22 am

TasosANG wrote:
Always troubles me the fleet of EK, is that possible with mainly two types of aircraft to serve so many destination which are so different one of the other? Does this two types fit to all this destinations?
For me EK pays or will pay the bad utilization of their fleet. They need to follow a KLM or LH model, more A/C types that they fit to a specific route.

Maybe they will agree with your assessment and end up converting some of their 77X orders to 787-10's. I think you're on the right track with that line of thinking.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Wed Jan 04, 2017 1:09 am

dtw2hyd wrote:
Obesity is a problem that need to be acknowledged first to fix it.

Airline has 65,192
dnata 38,486
Group 103,678



As has been pointed out to you several times, the figures listed are not simply Airline and Dnata. Under the heading of Emirates there is in addition to the actual airline, a whole range of subsidiary companies including, but not limited to, Emirates Flight Catering, Emirates Engineering, Emirates Hotels and Leisure, and so forth, totalling about 50 divisions It may well be the case that these companies and divisions could be run more efficiently but that does not make them bloat.

Emirates Flight Catering supplies not only Emirates but about 100 other airlines as well. Emirates Engineering, essential to keeping EK's own fleet operational also provides services to other airlines both ad hoc and under contract. Again, they might be more efficiently run but being part of the group does not make them bloat. Another area under Emirates is extensive interests in retail, merchandise and duty free. As long as those investments are yielding a suitable return, they can be justified while still allowing for productivity gains to be sought where possible. They may be non-core but the important question is whether they return a profit or enhance the brand.

The other question is whether a business should concentrate on one and just one activity or should it diversify. That isn't a new question but one that has been faced by other airlines and associated businesses in the past.

While you might not know what 75,000 individuals within the group are doing, that doesn't mean that others don't and staffing levels is an issue already being addressed. What we may see is a reduction in numbers in some areas, a holding steady in some areas and even growth in areas where such growth is seen as beneficial.
Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves. - William Pitt Speech, 1783
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Wed Jan 04, 2017 1:23 am

Alas, I fear all your salient points, and those of others, will go ignored because dtw2hyd wants to stick rigidly to his own view.
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Wed Jan 04, 2017 2:18 am

[email protected] wrote:
Alas, I fear all your salient points, and those of others, will go ignored because dtw2hyd wants to stick rigidly to his own view.


Look at the bright side of it :-) The rest of us are benefiting from the discussion. We learn from the viewpoints of others. And it has all been quite civil.
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
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Re: Is EK bubble about to burst and what it means for Boeing and Airbus

Wed Jan 04, 2017 2:57 am

Isn't Dnata providing services not only for EK but also for many airlines at Dubai(and other airports)? I believe its more like Menzies Corp in that it provides ground handling services in many airports. How can those employee count be assigned to EK, while its a separate subsidiary with its own P&L?

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