Full of worldwide promise

Sep 26 2007 by Sarah French, The Journal

EVERY day 278 people take off to Dubai and beyond on Emirates’ new service from Newcastle.

As the region’s first long-haul service, it brings the Eastern world closer and the rate at which tickets are selling shows we’ve been waiting too long for a Dubai-bound flight. As passengers from our region head to the beach or the boardroom, every day an Airbus from Dubai lands back in Newcastle.

It is in this return service, bringing a new set of business people and holidaymakers into the region, where the real opportunity lies for the North-East.

According to Emirates president Tim Clark, the Arab-owned airline will help the region maximise these opportunities.

“Our record is that we create a market not just in the region we’re serving or just in Dubai, but beyond. So suddenly Newcastle becomes part of the network mantra and it is marketed as a destination by us,” he says.

“One of Emirates Holidays’ primary operations is outbound travel. They look at regions and destinations, assess what is good, package it up and start selling it in the Middle East. It’s then a question of how your stakeholders, NGOs and tour operators go out to markets and get people to come here.

“What I’ve seen here is a willingness and an enthusiasm to go out there and bring people in. You have to sustain that energy. People want to go to new places and they want to go much further afield.”

Vice-president for UK and Ireland Vic Sheppard, believes Newcastle could eventually become an airport to rival Heathrow.

He says: “Use Newcastle as a gateway to the UK. My job is to fill aircraft leaving the UK but there are other people all around our network who have the same task. They are the people you need to reach from a tourism point of view.

“Your tourism offices have to find the Emirates team and say ‘this is what we’ve got’ and make a partnership. Someone has to go out there, tell the story and make it a sexy product.”

No doubt these words are music to the ears of those in the region’s hospitality and tourism sectors who were among those at a packed meeting of the Entrepreneurs Forum which recently heard about the benefits of the flights.

Keith Longstaff, senior vice-president of commercial operations for Europe has more ideas on how the region can cash in on the benefits of Dubai-bound flights: “You need to sell products like education. You have wonderful universities and a town that young people want to play in. Go to the educational shows and promote this as a hub of education and learning. It’s an easy sell and it’s another aspect of how you can bring wealth into the area.”

With 86 different passenger destinations to market, Emirates can only do so much for Newcastle – the rest is up to the region. But the desire to help is genuine, the advice invaluable and the potential inspiring.

The region must also rise to meet the challenge. The lack of a major, regional conferencing facility, for example, is a gap which these objective observers spotted immediately.

Mr Clark says: “If you get 5,000 people coming to a convention the spend on the periphery is absolutely astronomical. There is a little bit of a hole in the North-East. We can’t see why there isn’t something like that on the drawing board.”

It is not a problem experienced in Dubai, which is now a glittering metropolis where every sun-loving celebrity wants a home.

It boasts the world’s only seven star hotel, the world’s biggest mall, the world’s biggest waterfront development and the world’s fastest growing tourism market.

Sheikh Mohammed’s ambitious vision for Dubai is now a man-made reality and the city’s own airline has taken full advantage of its central location.

With Beijing, South Africa and Newcastle all under eight hours away, Dubai has fast developed into a new hub bringing far away destinations much closer to Europe.

In establishing itself as the fastest growing airline in the world Emirates has developed its own unique business model.

Mr Clark says: “Our product had to be really, really special.

“We had to deliver a primary facet to separate us out from the mass travel market. We said we would innovate and constantly refresh what we are doing in terms of customer facing products.”

By working with a group of like-minded airlines, aircraft manufacturers and technology wizards, the first generation of passenger gadgetry was born and Emirates was the first to introduce televisions in all three classes.

And by simultaneously keeping costs low, offering value for money for a high quality service and having a broad product offering to insulate against market changes within certain passenger segments, the airline grew rapidly.

“The more we did, the more the market came to us. It wasn’t a question of taking market share, we were creating new markets. We never looked at others as competitors, we were too busy trying to deal with what we had created.”

Any unsold economy seats were soaked up with the creation of Emirates Holidays, now one of the biggest tour operators in the world. With their reputation as adventurous travellers, the Germans were first on the hit list and 15,000 arrived in Dubai in the winter of 1987.

By the late 1990s the entire world was changing. The internet took off and the tradition of booking holidays from a tour operator’s brochure with a high street travel agent was replaced by independent travel and passengers booking their air travel online. The easier it became, the further we travelled.

It has meant exponential growth in international air travel which has doubled in the last 10 years, but even then the potential has been constrained by the availability of aircraft and airport infrastructure.

Mr Clark says: “For every page of product offering by a tour operator in a brochure, there are probably 5,000 alternatives online. Suddenly the world opens up. We were talking to people online in Africa and China. It became apparent that the old travel patterns were rapidly breaking down. This was no longer a planet of people going north to go east. People who had never contemplated travel now wanted to travel.”

Emirates’ ambitious attempt to shift the centre of long-haul travel to Dubai continued as its network expanded. They began in Germany adding the provincial hubs of Düsseldorf and Hamburg, while in England, as well as Gatwick and Heathrow, services began at Manchester, Birmingham, Glasgow and now, Newcastle.

The Emirates president said: “We go where the market is rather than make people come to hubs. We then make our hubs as slick as possible in terms of the transfer process, hope they spend a little bit in duty free and send them on their way as quickly as possible on a non-stop basis.”

After two decades of growth, Emirates is soon to enter a new phase with the arrival next year of the first Airbus A380, the world’s biggest passenger jet.

The airline is proud of its record of working closely with manufacturers on the design of new aircraft. The A380, for example, was on the drawing board but going nowhere before Emirates stepped in.

“Airbus was pretty desperate because Boeing was saying there was no place for a large double decker 555-seater. Nobody wanted it.”

Forecasting ahead, Emirates could see it could easily fill bigger planes. With an initial order for 30 increased to 55, the airline says the A380 will redefine the quality of air travel.

These ambitious yet very carefully considered steps in an overall strategy have resulted in an airline with more money than it knows what to do with. There have been no losses and no bank guarantees. The balance sheet stands at $4bn and the return on investment goes into triple figures.

Their competitors have tried to hold them back by asking governments to keep them out whilst claiming that Emirates’ success is down to free money and free fuel from the Dubai government – claims Mr Clark dismissed as “absolute codswallop”.

When they need money to invest, the banks lend them the cash based on the balance sheet, the way the company is run and the commitment of the team that has stayed the course.

They have remained profitable since the start, last year increasing year on year profits by 100% despite tripling fuel prices, a volatile geopolitical environment, the threat of terrorism and a campaign to make air passengers carry the blame for global warming.

Mr Clark says the airline industry had been slow in setting out what it has done to reduce its environmental impact such as jet engine development, the materials used in the airliner construction and design, claiming that it is the most global warming conscious industry in the world.

He is vociferous in his defence and prophetic over air travel being used as the whipping boy of climate change. “If we take the pasting on this it’s going to damage not only us but the criticality of air transport communications to regions, to national economies and the global economy because without it we are dead.”

It is clear Mr Clark takes any threat to his beloved airline and the industry to which he has dedicated his life personally.

While adapting to changing times, his team remains as committed as ever to the fundamentals of the early business model on which they built Emirates and from which any company, large or small, could benefit by emulating.

The airline was, of course, always part of a bigger masterplan but Mr Clark said what Sheikh Mohammed had planned for Dubai even caught them by surprise. The economy is growing 20% GDP a year as the explosion in real estate (the biggest single buyer of which is the British, primarily from the North of England), telecoms, hospitality, transportation continues while the quality of hospitals, schools, roads, power and water supplies have all improved as a result of some of the $450bn investment in infrastructure.

Emirates is now just one of 120 carriers bringing in seven million people a year to the desert kingdom. The airport is expanding and next year Emirates will get the first of its two exclusive new terminals, the second due for completion in June 2010.

The new service from the North-East is set to make trading easier with a region that is geared up to welcome business.

“The government makes it very easy to do business within Dubai and the UAE. Barriers to entry are non-existent in terms of red tape. Providing you don’t break any rules, you are free to do what you want. You have to go through the economic controls department to get your trading licence, but there is no taxation so what you get, you keep. In the free trade zones, you get on with the job and nobody interferes. There are no duties and no tax on turnover.

“If you go with a focus on the light industries like hospitality and IT there is plenty of room there. It’s becoming more expensive, but at the same time as the dollar has weakened it’s still a very affordable place to do business,” added Mr Clark.

Clearly the Middle East is full of promise for the North-East. Now all the region must do is make sure it is ready for take-off.