President of Emirates Sir Tim Clark: Candid discussion during interesting times
The COVID-19 pandemic continues to be front and center in the minds of everyone no matter what occupation or stage of life, and the effects around the globe vary from still raging to almost under control. How does an international airline interpret these wide swinging scenarios and make a plan for going forward?
Right. So, there are obviously some shifts in geographical markets as you presumably go to smaller cities, but also, I mean I think it’s uncontroversial really that there is going to be a significant reduction, certainly in the short term, to business travel. You’ve got a premium economy product now in your 380s, 777s coming through. Do you see that as being because of the circumstances now becoming a more valuable product? Your next door neighbor doesn’t think so, but is premium economy probably a more valuable product as you go ahead now?
Quite honestly, Peter, we wouldn’t be in the premium economy market. We’re just going go it, we didn’t think it added value. And our maths suggest that if we’ve got our demand forecast right and let’s say the no dilution of the business with regard to who actually sits in this cabin, if we’ve got that right, then it’s going to be really, really important to us. We are in the process of trying to establish just how many of the existing fleet we can put through conversion. We’re going to do that at pace. That’s a mega million dollar expenditure, but we’re going to do that. And if the current creative, we’ve only got one of our airplanes with the 380 onboard, to be quite honest, we have been absolutely shocked at the demand for the seats. People have been clamoring to get into them. They have been paying whatever we’ve asked them to pay to get into the cabin because it is a delightful cabin, I say it myself, but it is a beautiful cabin to be in.
And only time will tell when we’ve got the full 380 operation and some of the 777s already with that, will we see benefit to us, but for the first couple of months, this cabin has been completely booked, and it’s been a good test for us to see how we can deliver. But even though we haven’t been delivering the full premium economy, we haven’t changed the menus out, we haven’t changed the wines or et cetera, et cetera, we just provided the seats and goodness me, it’s been very popular. Other carriers that have introduced it, many of our competitors in the European and Asian fields, they swear by it.
And I honestly believe it’ll enhance the income per seat mile, seat kilometer over time, allow our inventory management, [RO 00:25:41] people, to do a better job with regards to the [inaudible 00:25:44] that we offer. And I think, because it is an astonishingly good product, it will be attractive to higher price points of the economy segments rather than in business. There will be some downgrading, I suppose, for some. And to the point about the business market, the segments that are driving so much of what goes on, it is in that area that we could well excel because there may be businesses that want to travel but they don’t want to pay the full monty. So, the premium economy may be one worth doing. So, we’re offering four primary classes, first, business, premium economy, and economy. I think that’s well within our capability delivering and excelling at.
Right. Well, of course, one of the early movers with premium economy was your good partner Qantas. How do you see that partnership evolving now? Is everything rock solid as it was before, or are there changes likely as we move ahead? Given Australia probably isn’t going to be flying internationally for at least another year.
Well, the partnership, I suppose, if you can call… the partnership of those, if you could call it … deep freeze situation. We’re not into Australia or anything like that, but that was what we were, [inaudible 00:27:12] Qantas is not flying internationally. You’ve got enough problems trying to fight domestically with your borders opening and closing every other day. Goodness me, that must be a tough one to run.
Does that change what happened prior to the pandemic? No, it doesn’t. Is [inaudible 00:27:28] Australia, New Zealand important to us? Yes, it is. Is the European [inaudible 00:27:33] police pockets important to Quantas? Obviously yes. Yes, it is. They’re just using smaller aircraft now because they believe that’s probably the way to go.
But the relationship I hope will not change. It’s always been a very good one, hopefully profitable for both sides. And the Qantas team can rely on us to provide quality lift for the consumers that they now won’t be traveling due to traffic there often, because they’ve got smaller aircraft on a jointly coded Emirates aircraft, which I know a lot of the Qantas flyers really value and enjoy judging by the number of people we carry under the co-chair the commercial arrangement.
So, I would think that Qantas would be, I hope, Quantas would be equally keen as we are to restore the relationship, take it out of the deep freeze when we’re through all of this. Yes, you’re right. It seems that the Australian government has view with regard to access during the whole of this year, so do the New Zealanders. So, when that … we’re all said and done, we’re all back up and running, it’d be good for both carriers.
Good. That’s good to hear. And more broadly on alliances, we’re looking at, obviously, an industry that’s going to be very different as we talked about before. Does that impliedly mean that alliances are going to be more important for all airlines and for Emirates in terms of being able to service all the various markets? And for example.
I think it’s an …
It’s an interesting question because obviously in times of distress and difficulty, the NI community has had a habit of forming clusters to protect, if you like, themselves from the trading conditions across the global economy. So, we’ve seen that in the past. And one could imagine then consolidation to alliance being strengthened and strengthen in numbers, et cetera.
On the other hand, there may be a view that perhaps the dominance of the way the alliances work may not be fit for purpose in the new way of doing things. We have multiple white body twins coming out. You’ve mentioned the 321XLR, the 320, and the 737 max, eight, nine, and 10. These change out the need for carriers who hitherto had allowed their geographical markets to be controlled by others. They now have the ability to move to the city pairs that they originally shared value with.
And do I see a little bit more of that? Yes. Prior to the pandemic, it was already been talked about. And that’s not to say that there won’t be groupings, but I would suggest that those groupings may span alliances, that they may involve players in other parts. I mean, Quantas is a OneWorld member, they work with us.
But I can see that the airline managements in the future we’ll be looking at this as, is this not legacy think? Is this perhaps … do we get more value by taking smaller units, twins, flying more often, higher frequency, intercity pairs that we’ve already always allowed others to do for us as part of the alliance business model? I don’t know, but there could be a change there. So, you’ve got this sort of dichotomy there. You’ve got the view that plunge into alliance, protect yourself against the horrible things going on, or take the opportunity to do things slightly differently with partners who may be part of another marriage. Who’s to say?
Probably, yeah. Probably all of the above, given the uncertainty that we’re going through. And obviously it’s not going to be just one decision, it’s going to evolve as you watch things go along. I’d have to ask you too in that context, so Tim, about Etihad, they’ve obviously had their struggles. And I think you’ve talked about them recently in terms of perhaps some sort of relationship. Do you see that as a standoff still that never the twins shall meet? Or is there some improving relationship in future?
No, I’ve always said that there is plenty of [inaudible 00:31:56] to work together, providing we don’t cross over into the sort of anticompetition situation. And there is work going on there. I don’t know what it is, but basically as they continue to downside to a level where Tony Douglas is thinking it’s a manageable proposition, that it’s cash proposition [inaudible 00:32:13], which I think he’s getting there, how we can work together with regard of the partnership and deal with all the back of house stuff.