vfw614
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Emirates' Business Model without the A380?

Thu Feb 14, 2019 12:43 pm

So, as of today, the days of the Emirates' strategy based on the A380 are numbered. What long-term impact will it have on Emirates' position on the airline market and on DXB way to the top of the list of world's busiest airports?

Currently, EK operates a fleet of more than 100 A380 with a capacity of 489 to 615 seats. Their current 77W fleet has between 354 and 427 seats. If my understanding is correct, the 777-9X will not have more than 30 additional seats. So we are roughly looking at a 25-30 per cent capacity reduction if the A380s get replaced by 777-9Xs (unless Boeing comes up with the long proposed 777-10X which would another 40 seats at the most).

Roughly calculated, half of EK's passengers are hauled onboard A380s (EK has 109 A388 and 148 77W/77L), which means almost 30m each year. Replacing the A388 with the smaller 779 will therefore lead to a significant hit in passengers numbers even if using a smaller aircraft may result in higher load factors (as there is no direct correlation between a reduction in capacity of 25-30 per cent and the actual passenger numbers).

I don't see an obvious way out of the resulting dilemma. At a lot of airports Emirates already operates 3 or 4 daily flights, so upping frequency makes no or limited sense (or may be simply impossible, e.g. at LHR). At airports with, say, two daily A380s they could a third frequency when the A380 goes. Those with just one frequency (not sure if there are many) will have difficulties filling two smaller aircraft each day.

And then there is also the issue of the A380 effect when it comes to passenger appeal and market domination. Often Emirates is the only airline that can offer an A380 experience outside the very large airports and really dominates those markets .With the A380 gone, there could be a lower entry barrier for competitors to enter such markets as less capacity is dumped on those by then well matured markets and there will also be no longer an A380 expericence on offer - which may (or may not) be an incentive for the bucket and spade brigade.
 
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United787
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 12:51 pm

Their only choice now is to buy the 747-8i.
 
RJMAZ
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 12:58 pm

I'm sure in 10 years time Boeing will put new engines on the 747-8. Emirates could easily be launch customer.

Emirates replaces their aircraft after 15 years on average. So the bulk the A380's will be starting to retire around 2030.

So if a quarter of the A380 fleet got replaced by 747-8 NEO's then that is enough aircraft to pay for the NEO program
 
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Finn350
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:00 pm

747 is not going to be produced in 2030 in any version.
 
StudiodeKadent
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:03 pm

Given the rise of the mainland Chinese carriers, Emirates may need to shrink over time anyway. And if India's carriers ever become functional and their government becomes less atrociously corrupt and "held together with duct tape," that will take ME3 business away too.

In addition, when EK moves to the new airport, they'll have more slots, so they'll be able to fragment somewhat more and serve more destinations.

Not to mention, LHR is getting a new runway so they COULD get an additional slot.
 
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Channex757
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:06 pm

RJMAZ wrote:
I'm sure in 10 years time Boeing will put new engines on the 747-8. Emirates could easily be launch customer.

Emirates replaces their aircraft after 15 years on average. So the bulk the A380's will be starting to retire around 2030.

So if a quarter of the A380 fleet got replaced by 747-8 NEO's then that is enough aircraft to pay for the NEO program

Utterly barking mad.

The 747-8i is history. Long range quads in general are history as of today. Get over it.

Emirates will rebalance their fleet around the 777-9 and possibly an A350 stretch. Less bargain fares and better yields. Some of the unnecessary frills can be dispensed with such as showers onboard and offered in lounges instead. Their latest 773ERs with First cabins show just how creative and ingenious they can be.
 
evanb
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:12 pm

Emirates will operate the A380 until somewhere between 2031 and 2041. By this time DWC will likely be fully developed and they won't have the same runway capacity constraints that they currently have at DXB. This will allow them to trade capacity for frequency.
 
RJMAZ
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:20 pm

Channex757 wrote:
Utterly barking mad.

If you search my username you will see I have been saying for years that the A380NEO wouldn't happen and that the 747-8 would be in production long after the last A380 comes off the line.

People said I was barking mad and I was called a Boeing fanboy. But I was 100% correct, no bias here just common sense.

Finn350 wrote:
747 is not going to be produced in 2030 in any version.

People are now assuming the VLA market is gone because the A380 got cancelled. The A380 was just a poor quality product. If it wasn't for Emirates with their huge growth stategy and slot restrictions the A380 would have ended production years ago.

The 747-8 is the queen of the freighter industry. Nothing comes close.

The 747-8 has received 55 orders in the last 6 years. That is an average of 9 aircraft per year. It has a production backlog of 4 years. To make it to 2030 it only needs 42 more orders and it has 11 years to get those orders. Do the math. Boeing needs to get less than 4 aircraft orders per year.
Last edited by RJMAZ on Thu Feb 14, 2019 1:37 pm, edited 1 time in total.
 
Blerg
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:26 pm

Since most of these (or all?) A380s don't have an after market, could we see them stick around for much longer than other models in EK's fleet?

Chinese carriers have expanded quite aggressively in the past but how much longer can this last? Especially since Chinese economy is doing so-so.
 
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afterburner
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:34 pm

RJMAZ wrote:
747-8 would be in production long after the last A380 comes off the line.

It may be true, for 747-8F, not -8I.
 
dredgy
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:37 pm

Emirates' business model is not to fit as many people on a plane as possible.
Emirates' business model (as stated repeatedly by Tim Clark and the sheikh dude) is to connect secondary cities to primary and other secondary cities.
Emirates is the airline that lets you fly Adelaide to Zagreb or Kampala to Seoul.

This business model has remained unchanged since the airline was founded and Emirates was seeing success with that long before the A380 and can continue fine without it. The A380 was a very useful piece of equipment that Emirates could utilise to its full potential - but they'll be fine without it. If they can fill an A380 on a route, filling an A350 is a piece of cake.

Reason for 787/A330/Whatever they end up with is because they need to expand into newer markets of smaller cities. Nouakchott, Gold Coast, Almaty etc. Going narrowbody is too much brand dilution (soo many people avoid Qatar or Etihad to Africa or secondary European citiies for example because of high chance you get stuck with an inferior product). Routes that truly require a narrowbody will be left to FlyDubai, and Emirates can go anywhere that it can fill a widebody plane.

The biggest impact to Emirates will be that MANY people (even those not aviation-inclined) will go out of their way and pay a premium to fly on an Emirates A380. So they'd better come up with another flagship product!
 
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afterburner
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:43 pm

RJMAZ wrote:
The A380 was just a poor quality product.

No it isn't. It is one of (or even) the most comfortable aircraft ever. It just doesn't sell well.
Last edited by afterburner on Thu Feb 14, 2019 2:03 pm, edited 1 time in total.
 
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OA940
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:45 pm

The need for EK to replace their A380 is 15 years away. In 15 years EK could be closed down or Dubai could be hit by a meteor shower or Boeing could announce a triple-decker. Point is we're way too far away from the 2030s to start talking about A380 replacements for EK
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a320fan
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:47 pm

Just because they have shrunk their order book and Airbus will wind down production on the model in a few years does not mean the in service frames are just going to disappear. The A380 will continue to form the backbone of EK's fleet for the next decade at least. from 2030 is when I would expect to start noticing them disappearing in larger numbers (assuming global economy and oil prices don't cause any major setbacks to travel demand/operating costs in this time period) In fact with likely no second hand market I expect lessors to offer quite favourable rates for operators to continue flying the whales to avoid sudden influx of aircraft to be stored/scrapped.
A319, A320, A321, A330-200, A380, 737-700, 737-800, 777-200ER, 777-300, 777-300ER, 787-8, Q300
 
JustSomeDood
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:50 pm

OA940 wrote:
The need for EK to replace their A380 is 15 years away. In 15 years EK could be closed down or Dubai could be hit by a meteor shower or Boeing could announce a triple-decker. Point is we're way too far away from the 2030s to start talking about A380 replacements for EK


a320fan wrote:
Just because they have shrunk their order book and Airbus will wind down production on the model in a few years does not mean the in service frames are just going to disappear. The A380 will continue to form the backbone of EK's fleet for the next decade at least. from 2030 is when I would expect to start noticing them disappearing in larger numbers (assuming global economy and oil prices don't cause any major setbacks to travel demand/operating costs in this time period) In fact with likely no second hand market I expect lessors to offer quite favourable rates for operators to continue flying the whales to avoid sudden influx of aircraft to be stored/scrapped.


EK typically has 12 year leases on all their aircraft, the A380 being no exception. Unless their leases get extended significantly many of EK's existing A380s will likely be out by the mid-2020s.
 
AIRT0M
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:52 pm

RJMAZ wrote:
People are now assuming the VLA market is gone because the A380 got cancelled. The A380 was just a poor quality product.



How exactly was the A380 a poor quality product?

I bet you've never been in one. For passengers it was the most comfortable and quiet plane on the market.

Fortunately you still will be able to fly with one for years to come. You should try one ...
 
Fatbus
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 1:55 pm

Late 2030's ! (2039) 20 more years ! Don't get to excited about EK business model having to change . It will change more than once before a 380 replacement happens.
 
evanb
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:05 pm

JustSomeDood wrote:
EK typically has 12 year leases on all their aircraft, the A380 being no exception. Unless their leases get extended significantly many of EK's existing A380s will likely be out by the mid-2020s.


That is for leases, but the many of their A380s are owned on their balance sheet. With a lack of an after market they'll likely fly the owned aircraft longer than 12 years. Their last financial statements listed 102 A380s, of which 58 were on operating leases while the remaining 44 were owned.
 
RJMAZ
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:19 pm

AIRT0M wrote:
How exactly was the A380 a poor quality product?

Airline CEO's including Alan Joyce have said so. This is in regards to his comments of two 787's versus a single A380.

As aircraft becomes bigger the cost per passenger improves in nearly all cases. As an aircraft becomes bigger the risk to fill the plane becomes worse.

Load factors and offpeak suits the smaller aircraft for example 14 weekly 787 flights can easily drop down to 10 weekly flights in the offpeak season. However 7 weekly A380 flights can not be dropped down to 5 weekly flights without losing a large amount of customers.

The A380 provided very little improvement in cost per passenger over the 777-300ER but provided a very big risk to the airline. The 777-300ER provided a big cost improvement over the A330 with very little risk.

If you created a graph with CASM on one axis and airline capacity risk on the other axis it will form a straight line. The aircraft above the line sell very well, the aircraft below the line sell poorly.
 
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:22 pm

evanb wrote:
JustSomeDood wrote:
EK typically has 12 year leases on all their aircraft, the A380 being no exception. Unless their leases get extended significantly many of EK's existing A380s will likely be out by the mid-2020s.


That is for leases, but the many of their A380s are owned on their balance sheet.


I think you've got that wrong. I don't believe EK outright owns a single plane! In their last financial statement, the whole fleet (A380s & 777s) is split between Operating leases and finance leases. They make a big thing about being able to pay their finance commitments through cash flow.
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flee
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:25 pm

Finn350 wrote:
747 is not going to be produced in 2030 in any version.

Currently, the only remaining backlog for the 748-8F is the UPS order.
 
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scbriml
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:27 pm

RJMAZ wrote:
AIRT0M wrote:
How exactly was the A380 a poor quality product?

Airline CEO's including Alan Joyce have said so. This is in regards to his comments of two 787's versus a single A380.

As aircraft becomes bigger the cost per passenger improves in nearly all cases. As an aircraft becomes bigger the risk to fill the plane becomes worse.

Load factors and offpeak suits the smaller aircraft for example 14 weekly 787 flights can easily drop down to 10 weekly flights in the offpeak season. However 7 weekly A380 flights can not be dropped down to 5 weekly flights without losing a large amount of customers.

The A380 provided very little improvement in cost per passenger over the 777-300ER but provided a very big risk to the airline. The 777-300ER provided a big cost improvement over the A330 with very little risk.

If you created a graph with CASM on one axis and airline capacity risk on the other axis it will form a straight line. The aircraft above the line sell very well, the aircraft below the line sell poorly.


None of which makes the A380 a "poor quality product" and that doesn't seem to be what Joyce said at all. :confused:
Time flies like an arrow. Fruit flies like a banana!
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AEROFAN
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:28 pm

dredgy wrote:
Emirates' business model is not to fit as many people on a plane as possible.
Emirates' business model (as stated repeatedly by Tim Clark and the sheikh dude) is to connect secondary cities to primary and other secondary cities.
Emirates is the airline that lets you fly Adelaide to Zagreb or Kampala to Seoul.

This business model has remained unchanged since the airline was founded and Emirates was seeing success with that long before the A380 and can continue fine without it. The A380 was a very useful piece of equipment that Emirates could utilise to its full potential - but they'll be fine without it. If they can fill an A380 on a route, filling an A350 is a piece of cake.

Reason for 787/A330/Whatever they end up with is because they need to expand into newer markets of smaller cities. Nouakchott, Gold Coast, Almaty etc. Going narrowbody is too much brand dilution (soo many people avoid Qatar or Etihad to Africa or secondary European citiies for example because of high chance you get stuck with an inferior product). Routes that truly require a narrowbody will be left to FlyDubai, and Emirates can go anywhere that it can fill a widebody plane.

The biggest impact to Emirates will be that MANY people (even those not aviation-inclined) will go out of their way and pay a premium to fly on an Emirates A380. So they'd better come up with another flagship product!


"The biggest impact to Emirates will be that MANY people (even those not aviation-inclined) will go out of their way and pay a premium to fly on an Emirates A380. So they'd better come up with another flagship product!"

Did you mean to say will NOT go out of their way. Because as written, I would like to know the basis of this supposition.
 
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par13del
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:32 pm

United787 wrote:
Their only choice now is to buy the 747-8i.

So after years of stating that the 748i and the 777W are not competitors to the A380 we now believe it is because the A380 has been cancelled?
How many more seats does the 748i have over the 777W?

Probably best to say that EK will be leaving money on the table by operating smaller a/c because that is all that is available.
 
Amiga500
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:41 pm

scbriml wrote:
None of which makes the A380 a "poor quality product" and that doesn't seem to be what Joyce said at all. :confused:


The A380-800 is a poor quality product. It is a badly mis-matched design with redundant (not the good redundancy) structure and poor aerodynamics.

How the airlines present the interior to passengers (which you may perceive as quality product) is their responsibility and little to do with the airframe.



The lesson from the A380-800 also applies to the CS100 (and to a lesser degree to the 787-8). Get your primary product out first (A380-900, CS300 and 787-9) then expand the line from there. Starting with the shrink has been shown to not work very well.

Airbus had the wit to bin the A350-800 early on.
 
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dik909
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:51 pm

United787 wrote:
Their only choice now is to buy the 747-8i.


Close your eyes and imagine a 747 with EK livery. What do you think of that ?

If you're like me, you cringed and thought, "Ew, no."

Why might this be ?

Perhaps this is because they've relied so heavily on the A380 for their brand identity; they've really made a name for themselves in the past ~10 years via the A380, and I worry that now they're somewhat bound to it.

Or ?
 
evanb
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 2:57 pm

scbriml wrote:
I think you've got that wrong. I don't believe EK outright owns a single plane! In their last financial statement, the whole fleet (A380s & 777s) is split between Operating leases and finance leases. They make a big thing about being able to pay their finance commitments through cash flow.


My original comment was that they own a large number on their balance sheet. Finance leases are on their balance sheet and place "substantially all the risks and rewards" on their balance sheet. This is the definition of a finance lease under International Financial Reporting Standards (IFRS) which Emirates use. They functionally own the aircraft.
 
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:01 pm

StudiodeKadent wrote:
Given the rise of the mainland Chinese carriers, Emirates may need to shrink over time anyway. And if India's carriers ever become functional and their government becomes less atrociously corrupt and "held together with duct tape," that will take ME3 business away too.

In addition, when EK moves to the new airport, they'll have more slots, so they'll be able to fragment somewhat more and serve more destinations.

Not to mention, LHR is getting a new runway so they COULD get an additional slot.

Not how I would have phrased it, but the same result. Connecting passengers benefits the host airline and city by making more destinations available. But this works best at high O&D cities where premium passengers pay for the frequency.

Connecting passengers always are worth less. At a minimum, my employer values my time at the fully loaded charge rate (which is about 2.5x what any employee makes due to taxes, rent, benefits, liability insurance, and management). At times, I'm the critical path and have personally held the work of 400 people until I arrived. That means do not spend the ~2+ hours hubbing costs, get there now! My point is connections will always be low yield.

With the growth of Chinese, Indian, ET, and TK, the era of the ME3 super growth is over. EK must shrink to higher margins to pay for DWC.

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MIflyer12
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:06 pm

evanb wrote:
Emirates will operate the A380 until somewhere between 2031 and 2041.


2041? I'll take the under on that - way, way under.
 
dredgy
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:10 pm

AEROFAN wrote:
dredgy wrote:
Emirates' business model is not to fit as many people on a plane as possible.
Emirates' business model (as stated repeatedly by Tim Clark and the sheikh dude) is to connect secondary cities to primary and other secondary cities.
Emirates is the airline that lets you fly Adelaide to Zagreb or Kampala to Seoul.

This business model has remained unchanged since the airline was founded and Emirates was seeing success with that long before the A380 and can continue fine without it. The A380 was a very useful piece of equipment that Emirates could utilise to its full potential - but they'll be fine without it. If they can fill an A380 on a route, filling an A350 is a piece of cake.

Reason for 787/A330/Whatever they end up with is because they need to expand into newer markets of smaller cities. Nouakchott, Gold Coast, Almaty etc. Going narrowbody is too much brand dilution (soo many people avoid Qatar or Etihad to Africa or secondary European citiies for example because of high chance you get stuck with an inferior product). Routes that truly require a narrowbody will be left to FlyDubai, and Emirates can go anywhere that it can fill a widebody plane.

The biggest impact to Emirates will be that MANY people (even those not aviation-inclined) will go out of their way and pay a premium to fly on an Emirates A380. So they'd better come up with another flagship product!


"The biggest impact to Emirates will be that MANY people (even those not aviation-inclined) will go out of their way and pay a premium to fly on an Emirates A380. So they'd better come up with another flagship product!"

Did you mean to say will NOT go out of their way. Because as written, I would like to know the basis of this supposition.


No, I meant they will. Emirates has stated this many, many times - as have people less favourable to the A380 such as Alan Joyce and AAB. The A380 is king of customer satisfaction and people will absolutely go out of their way to fly on it. Emirates in particular has done a phenomenal job marketing their A380 as the pinnacle of aviation. It’s a very clearly recognisable product - basically every other plane looks the same from the outside.I think research (was paid for by Airbus but not conducted by them) showed that approx 70% of customers who flew on an A380 recognised the product they were flying on compared to 32% or something on other plane types.

Anecdotally and personally I know about 30 colleagues and relatives who have flown the Emirates A380 specifically because it is an Emirates A380. They know nothing about aviation in general, but they know the Emirates A380, no aircraft comes close in terms of recognition (Qantas has made a decent attempt at their 787 here but is a different ballpark). I’ve known 3 separate people to fly Brisbane to Los Angeles via Dubai because of its reputation despite cheaper, much shorter direct flights existing.

Heck, in (very rural, couldn’t even tell you the name of the town) Mauritania (a country Emirates doesn’t serve) I was talking to a kid about how he wanted to travel to France to see the Eiffel Tower and I asked why and he listed off a few things but one was to fly in general, and specifically to “see the big Emirates plane” (ironically he was wearing a Qatar jersey).

Me as an aviation nut - I’ve only flown one A380 in my life (Lufthansa, though am booked on Emirates first class next year. Also flew out of my way - to fly from MRU to JNB I fly MRU-ADD-DXB-MRU-JNB just to try the A380).

Emirates will need to find a way to make its 777 or A350 - or whatever it’s flagship ends up being post A380 - stand out to the layperson. Else they’re just another airline.
 
Breathe
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:16 pm

Other than the showers (which only account for a tiny proportion of EK's customers) and possibly the bar, what will EK really be missing out on other than carrying fewer passengers using the 777-9?
 
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InsideMan
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:18 pm

Amiga500 wrote:
scbriml wrote:
None of which makes the A380 a "poor quality product" and that doesn't seem to be what Joyce said at all. :confused:


The A380-800 is a poor quality product. It is a badly mis-matched design with redundant (not the good redundancy) structure and poor aerodynamics.

How the airlines present the interior to passengers (which you may perceive as quality product) is their responsibility and little to do with the airframe.



The lesson from the A380-800 also applies to the CS100 (and to a lesser degree to the 787-8). Get your primary product out first (A380-900, CS300 and 787-9) then expand the line from there. Starting with the shrink has been shown to not work very well.

Airbus had the wit to bin the A350-800 early on.


It has too much wing for the size, still not a poor quality product either way
 
vfw614
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:32 pm

The point I was trying to make:

By simply replacing A388s with B779s one for one, Emirates will loose up to 15 per cent of its passenger count simply because of reduced capacity (maybe one or two percentage points more if, as suggested above, they are no longer the "A388"-airline, but just more of the same like Qatar, Etihad etc.) Increasing frequencies with smaller aircraft is not a straightforward option.

So is this just a case of "so what, small(er) is beautiful" or an issue of concern?
 
JustSomeDood
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:40 pm

InsideMan wrote:
Amiga500 wrote:
scbriml wrote:
None of which makes the A380 a "poor quality product" and that doesn't seem to be what Joyce said at all. :confused:


The A380-800 is a poor quality product. It is a badly mis-matched design with redundant (not the good redundancy) structure and poor aerodynamics.

How the airlines present the interior to passengers (which you may perceive as quality product) is their responsibility and little to do with the airframe.



The lesson from the A380-800 also applies to the CS100 (and to a lesser degree to the 787-8). Get your primary product out first (A380-900, CS300 and 787-9) then expand the line from there. Starting with the shrink has been shown to not work very well.

Airbus had the wit to bin the A350-800 early on.


It has too much wing for the size, still not a poor quality product either way


That by definition makes it an unoptimized product for the purpose and therefore a poor product to the customers (airlines), the below is a terrible thing to hear from a customer when the A380 was already too big for most airlines capacity wise.

Al Baker wrote:
To me, this aircraft is very heavy, has very high fuel consumption, and that’s because the aircraft structure was built for a stretch. I think Airbus made the same mistake they made with the A330 and A340, which had a common wing. The A380’s structure can take another 100 tons. It would have been better if they had tailor-made the wing to suit the size of the airplane. Which means you would have taken so much weight off the wing that you would have been able to make it very fuel-efficient and then it would have been a perfect airplane.


https://www.airlineratings.com/news/qatars-al-baker-a380-failed/
 
JayinKitsap
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 3:51 pm

It has really been only 5-6 years where EK had more than 50 A380's in their fleet, they seemed more formidable around the year 2010 when they only had a few. Over the next 10 to 12 years EK will migrate down to like 30 A380's in the fleet, covering their highest demand routes.

I am sure that EK will extend leases on planes after like line number 40 that are fully regular production planes, the early leases will be returned.

EK may have changed their order in part that they already have too many A380's on property, don't need more.
 
Aither
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:06 pm

dredgy wrote:
Emirates' business model is not to fit as many people on a plane as possible.
Emirates' business model (as stated repeatedly by Tim Clark and the sheikh dude) is to connect secondary cities to primary and other secondary cities.


...which is possible only if you bring mass volumes of demand at a given point of time at your hub.

Without the A380, all the fleet will need to be downsized in term of cabin capacity. This will increase the overall fleet cost per seat.
You don't evaluate the A380 like other aircraft.
Never trust the obvious
 
sargester
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:26 pm

RJMAZ wrote:
I'm sure in 10 years time Boeing will put new engines on the 747-8. Emirates could easily be launch customer.

Emirates replaces their aircraft after 15 years on average. So the bulk the A380's will be starting to retire around 2030.

So if a quarter of the A380 fleet got replaced by 747-8 NEO's then that is enough aircraft to pay for the NEO program


There isn't going to be a 747 program in about 10 years let alone maybe even 5 years let alone a NEO option
 
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Finn350
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:35 pm

Breathe wrote:
Other than the showers (which only account for a tiny proportion of EK's customers) and possibly the bar, what will EK really be missing out on other than carrying fewer passengers using the 777-9?


You said it - the Bar ;)
 
gsg013
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:37 pm

JustSomeDood wrote:
OA940 wrote:
The need for EK to replace their A380 is 15 years away. In 15 years EK could be closed down or Dubai could be hit by a meteor shower or Boeing could announce a triple-decker. Point is we're way too far away from the 2030s to start talking about A380 replacements for EK


a320fan wrote:
Just because they have shrunk their order book and Airbus will wind down production on the model in a few years does not mean the in service frames are just going to disappear. The A380 will continue to form the backbone of EK's fleet for the next decade at least. from 2030 is when I would expect to start noticing them disappearing in larger numbers (assuming global economy and oil prices don't cause any major setbacks to travel demand/operating costs in this time period) In fact with likely no second hand market I expect lessors to offer quite favourable rates for operators to continue flying the whales to avoid sudden influx of aircraft to be stored/scrapped.


EK typically has 12 year leases on all their aircraft, the A380 being no exception. Unless their leases get extended significantly many of EK's existing A380s will likely be out by the mid-2020s.


I dont follow the inner-workings of EK's business model too well... are you suggesting that EK's A380's are leased? Who is the lessor of these aircraft... As of today what A380's have been returned to lessor and been re-leased to a secondary airline? Are there any? Just worry's me from a credit perspective if EK is going to return 109 A380's to a lessor over then next 10-20 years are they all going to be scrapped or will they find second homes with other airlines?
 
747megatop
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:38 pm

vfw614 wrote:
So, as of today, the days of the Emirates' strategy based on the A380 are numbered. What long-term impact will it have on Emirates' position on the airline market and on DXB way to the top of the list of world's busiest airports?

I don't think it is a question of what long term impacts will A380 have on EK's position on the airline market and on DXB's position of being one of the world's busiest airports.

The question should in fact be; how will these factors play out and affect EK (and ME3) business model -:
a) The emergence of EU - Australia non stops. How many such routes will materialize in the future and be sustainable; currently we have only PER-LHR.
b) Over the past 10 to 15 years India - US non stops have grown from 0 to approx 50 non stops a week now. This has certainly got to be hurting EK and you will see why as you read on.

Considering that a BIG chunk of the lucrative EK transfer is based on the 3 traffic flows - 1) Australia - EU 2) India - US & 3) South/South East Asia (India, Singapore, Thailand, Kuala Lumpur etc.) - Europe; you take these transfer traffic away from EK then EK is in big trouble and DXB traffic statistics fall to the wayside (much like ATL falls out of the top 20 busiest airports list if DL goes away). If India gets it's act together and streamlines it's aviation policies traffic patterns 2 and 3 would come down drastically, after which the new Dubai World Central airport would resemble an oversized parking lot for planes.

So, rather it's the other way round...what impact does EK's transfer traffic business model have on the A380 and we have already seen that. DXB (and EK) just can't sustain with the Dubai is at the center of the world strategy....they should have listened to Boeing's study that said passengers will opt for more point to point travel and gave up investing in a brand new clean sheet VLA.
 
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enzo011
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 4:59 pm

I think you will have to think about premium capacity more than just the numbers. If you look at the amount of J seats on a A380 vs the 777 you will see they are going to lose out on capacity on premium seats, where they already have an inferior J product on their 777's (2-3-2 which is not industry standard or close to leading).

I think it will probably mean that the will keep their A380s as long as possible on heavy premium routes and have the other frames take over on other routes to increase their load factors as their business model was never going to be sustained. There has been numerous threads where people have commented on EK and flying out empty or having to store aircraft and you could say that this has come at a good time for both EK and Airbus. EK gets to take aircraft off its books and not having to replace A380s with more A380s and they get to have smaller aircraft in their fleet that will open up new routes or improve yields on marginal routes they have now. Airbus gets to remove that weight off their necks that is the A380, as sad as that is for us Airbus fans, but it is better for the company in the long run not having to take questions about a product that we all knew was selling for a small loss at best.

The best of all, EK passengers will not have to contend with 9-abreast 787s that is even tighter than the 77W and will be worse when compared to the 777X. If only EK stays away from the 9-abreast A330 then passengers will be the winner (sort of if they don't take the 787).
 
WayexTDI
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 5:15 pm

JustSomeDood wrote:
InsideMan wrote:
Amiga500 wrote:

The A380-800 is a poor quality product. It is a badly mis-matched design with redundant (not the good redundancy) structure and poor aerodynamics.

How the airlines present the interior to passengers (which you may perceive as quality product) is their responsibility and little to do with the airframe.



The lesson from the A380-800 also applies to the CS100 (and to a lesser degree to the 787-8). Get your primary product out first (A380-900, CS300 and 787-9) then expand the line from there. Starting with the shrink has been shown to not work very well.

Airbus had the wit to bin the A350-800 early on.


It has too much wing for the size, still not a poor quality product either way


That by definition makes it an unoptimized product for the purpose and therefore a poor product to the customers (airlines), the below is a terrible thing to hear from a customer when the A380 was already too big for most airlines capacity wise.

Sure make it a poor product for the airlines, unoptimized and missing the market. Still doesn't make it a poor quality product.

Quality has nothing to do with how the product fits in the market. Plenty of extremely poor quality products fits perfectly in their market of cheap disposable this-and-that.
And, many great quality products do not fit in their market.
 
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Revelation
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 5:46 pm

vfw614 wrote:
The point I was trying to make:

By simply replacing A388s with B779s one for one, Emirates will loose up to 15 per cent of its passenger count simply because of reduced capacity (maybe one or two percentage points more if, as suggested above, they are no longer the "A388"-airline, but just more of the same like Qatar, Etihad etc.) Increasing frequencies with smaller aircraft is not a straightforward option.

So is this just a case of "so what, small(er) is beautiful" or an issue of concern?

EK's load factors of late suggest that losing ~15% of their capacity will not hurt.

Also they already have a huge number of A380s and more incoming through 2021 so they should be operating them through 2033.

My guess is that EK already knows which routes really support the A380's capacity and which ones actually benefit from bars and showers.

My guess is that this is a lot fewer than they already have, never mind the incoming ones.

Meanwhile they've already put their first class product on 77W and have the ability to further innovate on 779, A350 and A330.

Yet IMO the glory days of fantasizing about 140 A380s buzzing around DWC are gone for good.

EK's plan all along was to drive till their market hits saturation, and I think they hit it a dozen or two A380s ago.
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Wake now, discover that you are the song that the morning brings
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OA940
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 5:53 pm

gsg013 wrote:
JustSomeDood wrote:
OA940 wrote:
The need for EK to replace their A380 is 15 years away. In 15 years EK could be closed down or Dubai could be hit by a meteor shower or Boeing could announce a triple-decker. Point is we're way too far away from the 2030s to start talking about A380 replacements for EK


a320fan wrote:
Just because they have shrunk their order book and Airbus will wind down production on the model in a few years does not mean the in service frames are just going to disappear. The A380 will continue to form the backbone of EK's fleet for the next decade at least. from 2030 is when I would expect to start noticing them disappearing in larger numbers (assuming global economy and oil prices don't cause any major setbacks to travel demand/operating costs in this time period) In fact with likely no second hand market I expect lessors to offer quite favourable rates for operators to continue flying the whales to avoid sudden influx of aircraft to be stored/scrapped.


EK typically has 12 year leases on all their aircraft, the A380 being no exception. Unless their leases get extended significantly many of EK's existing A380s will likely be out by the mid-2020s.


I dont follow the inner-workings of EK's business model too well... are you suggesting that EK's A380's are leased? Who is the lessor of these aircraft... As of today what A380's have been returned to lessor and been re-leased to a secondary airline? Are there any? Just worry's me from a credit perspective if EK is going to return 109 A380's to a lessor over then next 10-20 years are they all going to be scrapped or will they find second homes with other airlines?


The problem the A380 is facing in the secondary market is its size. It's so big that the cost of refitting it is very high, and most airlines may just be better off by getting the 779 or any other large widebody that's newer and slightly smaller. Maybe BA or some airline at a very congested airport will take them up if they really believe the cost of refitting them and operating an ageing aircraft with limited spare part availability is worth it.
A350/CSeries = bae
 
smartplane
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 6:17 pm

Given the current and predicted constraints on flight crew availability, the A380 will stick around.
 
smartplane
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 6:34 pm

evanb wrote:
scbriml wrote:
I think you've got that wrong. I don't believe EK outright owns a single plane! In their last financial statement, the whole fleet (A380s & 777s) is split between Operating leases and finance leases. They make a big thing about being able to pay their finance commitments through cash flow.


My original comment was that they own a large number on their balance sheet. Finance leases are on their balance sheet and place "substantially all the risks and rewards" on their balance sheet. This is the definition of a finance lease under International Financial Reporting Standards (IFRS) which Emirates use. They functionally own the aircraft.

You are in the industry, so know full well with the dollars involved, commercial aircraft leases really fall under the heading hybrid, meaning where they sit on the Balance Sheet is only part of the story, reflecting the accounting community's demands to see more on than off.

EK are very black and white in respect to IFRS compliance, despite American posters claims to the contrary.

Perhaps ask the OEM about A380 contingent liabilities for another perspective.
 
musman9853
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 6:52 pm

dik909 wrote:
United787 wrote:
Their only choice now is to buy the 747-8i.


Close your eyes and imagine a 747 with EK livery. What do you think of that ?

If you're like me, you cringed and thought, "Ew, no."

Why might this be ?

Perhaps this is because they've relied so heavily on the A380 for their brand identity; they've really made a name for themselves in the past ~10 years via the A380, and I worry that now they're somewhat bound to it.

Or ?



iirc emirates had cargo 747s at one point
Welcome to the City Beautiful.
 
evanb
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 8:00 pm

smartplane wrote:
You are in the industry, so know full well with the dollars involved, commercial aircraft leases really fall under the heading hybrid, meaning where they sit on the Balance Sheet is only part of the story, reflecting the accounting community's demands to see more on than off.

EK are very black and white in respect to IFRS compliance, despite American posters claims to the contrary.

Perhaps ask the OEM about A380 contingent liabilities for another perspective.


I'm not trying to pick a fight here, but my original reference to IFRS was because under IFRS finance leases are raised on the balance sheet (fully) as an asset with associated depreciation. To quote from the Emirates financials: "The increase in depreciation and amortisation charge of 10.7% or AED 889m was predominantly the result of the addition of 7 aircraft on finance lease". The balance sheet treats a finance leases as an owned aircraft, just with the loan debt (as financing) encumbered against the aircraft (like a lien). Technically, the finance lease holder "owns" the aircraft until the finance lease is paid at which point ownership ownership transfers to the airline. But Emirates de facto owns the aircraft the whole time and assumes the risks and rewards related to the residual value. Given the assumption of the risk and rewards the balance sheet recognizes the aircraft as fully owned.

This is very different to how IFRS requires operating leases to be treated. Yes, under IFRS, accountants to want more on than off. They want to recognize the risks and rewards related only to the lease, but not the residual (unless the lease has some residual element to it). It does this by requires future lease obligations to be recognized as liabilities of sorts, and only part of the asset value recognized (limited only to the lease term). They wouldn't assume anywhere nearly as much of the burden related to the residual value of the aircraft at the end of an operating lease as they would under a financing lease - this is my point, under the finance lease, they're the effective owner and will deal with the residual.
 
mxaxai
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 8:25 pm

Revelation wrote:
Yet IMO the glory days of fantasizing about 140 A380s buzzing around DWC are gone for good.

Instead we can now marvel at the sight of 108 A380s buzzing around DXB. Plus 138 77Ws.

Many ridiculed Emirates for their original order for 90 A380s. Now people are happy that they won't reach 140 and hope that their replacement won't be delivered.
 
smartplane
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Re: Emirates' Business Model without the A380?

Thu Feb 14, 2019 8:26 pm

evanb wrote:
smartplane wrote:
You are in the industry, so know full well with the dollars involved, commercial aircraft leases really fall under the heading hybrid, meaning where they sit on the Balance Sheet is only part of the story, reflecting the accounting community's demands to see more on than off.

EK are very black and white in respect to IFRS compliance, despite American posters claims to the contrary.

Perhaps ask the OEM about A380 contingent liabilities for another perspective.


This is very different to how IFRS requires operating leases to be treated. Yes, under IFRS, accountants to want more on than off. They want to recognize the risks and rewards related only to the lease, but not the residual (unless the lease has some residual element to it). It does this by requires future lease obligations to be recognized as liabilities of sorts, and only part of the asset value recognized (limited only to the lease term). They wouldn't assume anywhere nearly as much of the burden related to the residual value of the aircraft at the end of an operating lease as they would under a financing lease - this is my point, under the finance lease, they're the effective owner and will deal with the residual.

Unless Airbus or related parties have underwritten a buyback.

You are quoting definitions. Commercial aircraft leasing is a rainbow, with experts always trying to keep one step or more ahead (or to the left or right, or even re-visiting a door previously believed closed).

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