OBG talks to Tim Clark, President, Emirates

Interview: Tim Clark

How can Dubai further enhance its position as a hub for passenger traffic and cargo transhipment?

TIM CLARK: Dubai has implemented a number of measures to ensure that it remains a preeminent global and regional hub for passenger and cargo transhipment. Our aim is to support Dubai’s ambition of becoming the largest international air hub in the world by 2018. I am confident that the existing airport can be adapted to accommodate the vast number and size of airliners that Emirates is committed to obtaining in the coming years. Dubai International Airport’s “SP2020” plan will enable capacity to rise from 60m to 90m passengers by 2018. Thus, Dubai, and we in the aviation sector, must keep working to promote the concept of a global city that welcomes all nationalities to establish operations here. The paramount advantage that Dubai must continue to leverage is its superior infrastructure. The government of Dubai has done an outstanding job promoting and coordinating its vision. Not only have leaders successfully developed a highly efficient road network, a state of the art port operation and a hugely successful airport, but they have also ensured a level of connectivity between each of these entities that is unrivalled anywhere in the world.

To what extent will a significant reduction in airline profitability occur over the medium term?

CLARK: The entire airline industry faces difficult challenges ahead due to rising fuel costs and distressed economies. However, these challenges were not unforeseen, and some airlines were able to act swiftly and implement measures to lessen the impact on their bottom line, while others did not. Those companies that did not act accordingly are suffering the consequences, as evidenced by the bust of a number of carriers and the delicate situation that is confronted by a host of others. That being said, when fuel represents roughly 42% of costs, there is only so much that an airline can do when it is confronted by a rapidly increasing price of oil. Some airlines have entered the derivatives market, but we at Emirates continue to maintain a no-hedging strategy as we want to avoid entering into derivatives with counterparts who actually control the price of fuel. I fear that the sector will be hard pressed to survive an additional surge in oil prices, and this problem is only exacerbated by the European Union’s carbon emissions trading system, which adds to our costs. Perhaps it is time that those controlling fuel prices begin to take greater consideration of not only the devastating impact it is causing to the airline industry, but to the global economy.

How has the timing of the emissions trading scheme (ETS) affected the aviation industry?

CLARK: The recently imposed ETS is a result of rising environmental concerns combined with a global mis-perception that the aviation industry is the primary culprit for the state of the world’s pollution levels. The fact is that the aviation industry, over the past 40 years, has been at the forefront of environmental standards through the development of advanced aircraft design and aerodynamics. As a result, aviation is responsible for producing only 2% of total greenhouse gasses. The automotive industry, which does not have to pay into the ETS, is much more harmful.

The decision to impose the ETS was political, and therefore it has and will continue to have political consequences. In Emirates’ particular case, the EU has promised not to charge us so long as the UAE can demonstrate it has implemented equivalent measures. However, the EU reserves the right to decide whether those measures are in fact equivalent, making the arrangement far less equitable. Regardless, the ETS has an objective to reduce carbon emissions. Whether it will be successful in achieving that objective remains to be seen. Despite the fact that we have real concerns regarding the European approach, at the end of the day we have the same goals, and the economic crisis has only provided further impetus for the airline industry to improve fuel efficiency and reduce emissions.