Post 9/11 aircraft orders set Emirates on flight path to $1.5bn profit

Emirates Airline shocked the global aviation world with a 52 per cent surge in annual profits to $1.5 billion last week. But you can trace this success right back to the record $15 billion order for Boeing and Aircraft aircraft placed in November 2001 after the 9/11 terrorist attacks.

Almost a decade later and Emirates has 15 A380 superjumbos in operation out of the 22 it ordered then. Its passenger load is a record 80 per cent, so popular are the new long-haul aircraft with passengers, and they cost 20 per cent less than other aircraft to fly.

Low cost structure

The airline continues to be a huge success because of its foresight and vision, and lower cost structure. There are also none of the jobs-for-life for cabin staff seen on some flagship carriers or their massive pension fund liabilities.

Instead Emirates can employ younger crews from all over the world. It’s a winning formula. Passengers like it.

Dubai is also incredibly efficient as an aviation hub. The airport can operate around-the-clock and the geographic location is ideal for onward connections to all corners of the globe.

Next year the airline will add Rio de Janeiro and Buenos Aires to its schedules and tap more deeply into the rapidly growing South American economy. There is still a long list of high-demand destinations to be reached: from St Petersburg and Berlin to Vancouver on the otherside of Canada.

Eventually Emirates will get to them all, local politics and protectionism allowing. And that will be finally it, and the long period of turbo-charged growth will be over.

Quite what the global aviation market will look like by then is another matter. There will certainly have been much consolidation. Some commentators have even mooted a merger of Emirates and Abu Dhabi’s Etihad but there is no sign of it happening.

IPO?

Probably more immediately on the horizon will be a public listing for Emirates Airliine to allow the Dubai Government to partly exit from this outstanding investment as it did with Dubai Ports World.

How much would the airline started with $10 million in equity be worth today? $30-40 billion? It would depend on market conditions for equities and airlines at the time.

This would undoubtedly be very well received in Dubai and would be a tonic for the local stock market. But it would also be a sign that the Emirates Airline was becoming middle aged and heading for a slower period of growth allied to global GDP rates rather than its exciting business model.