Issues & Trends – Feb 2010
EK’s Pearse quietly confident on restoring yield in 2010
EMIRATES vice president Australia Stephen Pearse has played down the likelihood of the airline seeking additional capacity ex Australia any time soon. Distancing himself from reports that it could approach the government for more flights, Pearse noted that Emirates’ present rights included the flexibility to offer additional seats by deploying larger aircraft, such as A380s, on existing schedules.
His comments came just ahead of the announcement that the Australian Government has granted Etihad rights to double its present 21 frequencies out of Australia. But this is unlikely to have changed Emirates’ stance. Speaking to journalists in Melbourne earlier this month, Pearse made it clear that Emirates’ focus is on pro-actively developing its own offering and not reacting to its rivals, whether they be long-established kangaroo route carriers or new competitors from the Middle
East, Etihad and Qatar.
“We don’t spend too much time focusing on them, we have our own boat to row,” said Pearse.
Emirates’ initiatives in 2010 include a new Asian destination ex Australia and the addition of three more European ports over Dubai.
Kuala Lumpur this month joined Singapore and Bangkok as a major Asian stopover for Emirates with the inauguration of daily three-class A340-500 services ex Melbourne, while the airline will add Amsterdam, Prague and Madrid to its European network on May 1, July 1 and August 1 respectively.
“Kuala Lumpur is a growing conference destination and we expect the route to be popular with both business delegates and tourists,” said Pearse.
He said the addition of the new European ports will give the airline 25 Europe ports, an offering “quite unmatched by any of our competitors”. Stand by for aggressive promotion of Emirates’ Europe options as Pearse makes no secret that “long haul is the mainstay of what we do”.
He is quietly confident that 2010 can be a year in which Emirates can rebuild the yield lost in weathering a “pretty rough” 2009. Commenting on IATA figures detailing the losses suffered by the world’s airlines last year, Pearse quipped: “If you hadn’t slashed your wrists before reading them, you would after reading them.”
At the same time he was pleased with Emirates’ performance in achieving significant expansion in Australia in the teeth of the downturn (adding capacity while some major competitors slashed capacity). And he said Emirates will announce a profit for its financial year to March 2010.
This year, he said, there are signs business traffic is starting to return and yields are firming.
“I’d like to think we’ve seen the back of the extreme discounting that was a feature of 2009,” he said. “It was good for consumers but pretty lousy for us (airlines).”
He said restoring yield to premium seats remained a challenge but was emphatic that the airline remained committed to three class aircraft. “If our competitors move in the other direction, that’s their call,” he said.
Asked about “premium economy”, Pearse retorted: “All our economy seats are premium.”
No doubt he is relying on the quality of the airline’s product to underpin efforts to increase fares yield in 2010.
“We deliver a good product, we have a good brand, we get great feedback so we are not shy in putting out a price that might test the market,” he said. “We are successful and to continue being successful we have to make a profit. To wallow around complaining about yield is not an option.”
Pearse also expressed satisfaction with Emirates’ developing partnership with Virgin Blue which was upgraded over the past year. Australian passengers interlining between Virgin Blue and Emirates have a long-haul baggage allowance on the domestic carrier.
Pearse said he anticipated no changes to existing rates of agents’ base commissions and assured: “The trade remains our dominant form of distribution.”
Pearse briefed journalists at new upmarket Melbourne restaurant, Left Bank, operated by the airline’s subsidiary, Emirates Leisure Retail (Australia). Left Bank and the Noodle House, which adjoins it on Melbourne’s Southbank, are the first examples of Emirates investing in these restaurant franchises outside Dubai.
While investment in these activities might seem to be “stretching” beyond airline operations, Pearse said the carrier has a history of leisure retail involvement in Dubai, and Australia presents good opportunities for it to take the first steps in “internationalising” this business.
Meanwhile the airline has also taken over the Australian coffee house chain, Hudsons, and plans on using its clout to establish the Australian brand internationally. (Emirates already owns the Costa coffee operations in Dubai and the UK but opted to buy Hudsons rather than attempt to establish the Costa brand in Australia.)
However it may be some time before Emirates is tempted to invest further in Australian resort operations following its experience with the Wolgan Valley Resort and Spa in the NSW Blue Mountains. It has taken five years to get the resort up and running. Of this, about 18 months was actual construction time; the rest of the time was spent bogged down in the red tape of obtaining approvals.
Apparently Emirates has subsequently received assurances from state governments eager to attract investment that this experience will not be repeated, promising a “whole of government” approach to expedite resort investment by the airline. But Pearse indicated Emirates will want “to see some money coming in (from Wolgan)” and some recovery in the global economy before looking at other opportunities.