07 Mar Can Boeing Still Count On Emirates?
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Emirates is most likely known for the big fleet of Airbus (OTCPK:EADSF) A380 it operates, but just like for many airlines, it started small. In 1985, the airline started operations with a Boeing 737-300 and an Airbus A300B4-200, backed by a startup capital of $10 million and aided by Pakistan International Airlines. In 1986, the airline received its first bought aircraft. While war is never a good thing, for Emirates the Gulf War meant that other airlines did operate in the region.
By 1995 the airline had 14 aircraft in service and 30 destinations. Some years later it took over management of Air Lanka for $70 million and successfully rebranded the company. Emirates aspirations became clear in 2000 when it orders 58 aircraft including the Boeing 777 and Airbus A380. Following the 9/11 attacks and a bombing in Colombo, hub of the airline Emirates managed, the airline initially faced difficult times. However, following the crisis in the airline industry, Emirates once again saw its competitors disappear on the Dubai routes. This allowed the airline to grow without any major competition.
In the years after, the airline would start direct flights to the US and expand its fleet to become the biggest long-haul airline in the world. However, the drop in oil prices has also affected Emirates.
United Arab Emirates depends for 66% on export of petroleum products. So the drop in oil prices has decreased oil related travel somewhat, but more importantly it has pressured Emirates’ ability to spend billions on aircraft whereas its budget previously was almost unconstrained. Additionally, passenger load factors have been under pressure since capacity has outpaced demand over the past years, as shown in Table 1, and the airline had to lower its fares to maintain a sufficient load factor.
Table 1: Load factor Emirates
So also for Emirates trees do not grow to the sky and that is also why the airline has not placed any orders with Boeing for the current Boeing 777, despite the program being in dire need for order inflow and Emirates being the largest admirer of the type.
In fact, Emirates has not finalized an order for 15 Boeing 777-200LR aircraft that it was previously eyeballing.