Emirates airline propels growth with orders worth $24.8 billion

Airbus closed the Dubai Air Show having netted around $38 billion in new plane orders while Boeing booked orders of approximately $17 billion, including for its still-grounded 737 Max.

Sunday 24/11/2019
Visitors walk past a model of an unmanned aerial vehicle during the fifth day of Dubai Air Show, November 21.   (Reuters)
Above and beyond expectation. Visitors walk past a model of an unmanned aerial vehicle during the fifth day of Dubai Air Show, November 21. (Reuters)

DUBAI - Emirates airline signed deals worth $24.8 billion during the Dubai Air Show, placing large orders with aerospace manufacturing giants Airbus and Boeing to power Emirates’ growth and transform its model in the years ahead.

Emirates’ Chairman and CEO Sheikh Ahmed bin Saeed al-Maktoum and Airbus CEO Guillaume Faury announced a $16 billion order from the airline for 50 Airbus A350-XWB 900 aircraft at the beginning of the air show. Emirates later finalised a last-minute order worth almost $9 billion for 30 Boeing 787-9 Dreamliners.

Emirates’ agreements follow a strategic review of its fleet requirements after Airbus in February announced that the production line for the double-decker A380, also known as the Superjumbo, would end in 2021.

Emirates is the largest operator of the A380 Superjumbo, with 112 of the jets in service and 11 on order. Emirates had wanted to expand its fleet of the A380 with an upgraded version but Airbus and engine-maker Rolls Royce have seen international orders for the A380 collapse and were no longer recuperating production costs despite the plane’s estimated $450 million price tag.

The A380 struggled to prove its long-term commercial viability as the hub-and-spoke model it was supposed to uniquely serve in which passengers are flown to a central  hub and then onward on subsequent flights did not thrive at the industry level the way Airbus had predicated. While the hub-and-spoke has worked well for Emirates and the A380 became integral to its fleet and long-haul operations, most international airlines opted for the point-to-point model, which flies customers to their destination in one flight.

The efficiency of fewer flights, more flexibility and lower upfront costs have made smaller widebody twin jets, which also offer more competitive range and fuel efficiency than used to be the case, more appealing than very large aircraft options such as the A380, despite the low costs per passenger they offer.

The deal between Emirates and Airbus supersedes an agreement by Emirates in February for 40 A330-900s and 30 A350-900s after Airbus requested it to drop most of its outstanding orders for the A380.

The Airbus A350-900 variant order by Emirates is a long-range, extra-wide-body, twin-engine plane, which comes with a price tag of more than $300 million. This is Airbus’s first aircraft manufactured with both fuselage and wing structures made primarily of carbon fibre-reinforced polymer.

With more than 70% of its airframe made from advanced materials combining composites, titanium and advanced aluminium alloys, the A350-900 offers a flying range of more than 8,000 nautical miles, enough to fly between Dubai and London 2.5 times without refuelling.

Emirates completed an order for 30 Boeing 787-9 Dreamliners at list prices, with a value of $8.8 billion and deliveries to commence in 2023. As part of the deal, Emirates will reduce its order of the delayed 777Xs, which it ordered in 2014 and is set to become the launch customer for next year, from 150 to 126. Emirates will now purchase 126 Boeing 777X aircraft and 30 Boeing 787-9 Dreamliners, orders with a combined value of $56 billion.

Talks on the 787 Dreamliner had been in the works for two years between Emirates and Boeing but were delayed by uncertainty over the future of the A380 and delays with the 777X given the effect those issues would have on its long-term fleet planning. The first deliveries of 777X have faced delays over durability issues around its General Electric-produced engines.

Having reduced its 777X order, Emirates opted for the smaller 787-9 version of the Dreamliner as opposed to the larger 787-10 version it was considering, a move that opens new potential across its routes with more modest passenger flows and because it can enable greater flight frequencies on existing routes.

Until now Emirates’ fleet was entirely composed of the Airbus A380 and Boeing 777 — it was the world’s largest operator of both jets — but the airline is adapting to industry conditions and slowing international demand for travel with more flexibility by acquiring the Airbus A350-900s and the Boeing 787-9.

One of few in the world that only operate a wide-body fleet, Emirates’ meteoric rise established it as the world’s largest long-haul carrier with a fleet of 234 jets. Conceived in March 1985 with backing from Dubai’s royal family and support from Pakistan International Airlines, which leased it two planes, Emirates operates more than 3,600 flights every week from its hub at Dubai International Airport across a network spanning 85 countries and 161 destinations.

Airbus closed the Dubai Air Show having netted around $38 billion in new plane orders while Boeing booked orders of approximately $17 billion, including for its still-grounded 737 Max. As orders in Dubai and elsewhere reflect, low-cost travel is one of the more robustly growing sectors in a subdued international travel market.

Despite the travel market outlook and its new challenges, however, Emirates remains among a handful of international airlines with the capitalisation and ambition to place orders such those it did during the air show. Next year, Dubai is hosting Expo 2020, which is expected to bring up to 25 million visitors to the emirate.