Clive Clemson

Strategic Options for in

Aircraft Procurement

______

Clive Clemson Vice President Operations Services, 190

My presentation today, will begin with an overview of the growth of Du- bai and will follow, with some information on how Emirates is suppor- ting that growth through dynamic aircraft fleet planning up to the year 2012 and beyond.

The was originally called the Trucial States and was part of the British Commonwealth, until 1971 when the Country gai- ned its Independence. is one of seven emirates which together, make up the UAE, the capital city is . The UAE is situated to the south of Iran, to the west of and to the east and north of Saudi Arabia. In the 1950s Dubai was simply a small trading port at the mouth of the or river which leads in to the , it attracted many traders who were selling spices and pearls.

In the late 1960s, oil production began which provided a great deal of revenue for the Country. This also created a diversified economy and pa- ved the way for much larger industrial and business development, inclu- ding the setting up of large foreign companies in free zones, many jobs for expatriate workers and a relaxation of property ownership attracting foreign investment and opportunities for expatriate residents. With this growth came Tourism which has become a multi billion dollar industry and includes major sporting events, world class sports & leisure facilities and hotels, large shopping malls, numerous theme parks and a dramatic increase in residential property construction and related mega building projects.

Due to all of this, the GDP has grown at a rate 10% every year over the last 10 years which is the highest in , the home population in 2004 was estimated to be 1.3 million people but by 2010 this is expected to grow to around 4.0 million. Dubai is now the viewed as the Financial Centre of the Middle East region and the Dubai government has set an ambitious target of 15 million visitors per year in to Dubai by the year 2012.

Turning to Emirates now, we consider that our success is closely linked to the visionary leadership of the Dubai Government, in addition to that we are convinced that success only comes about through planning and 191 profit through sustainable growth. Dubai is now the busiest transportation hub in the Middle East and today, around 24 million passengers per year travel in to or through Dubai, including 13 million from Emirates alone, this number is expected to grow to around 60 million by 2010, with Emi- rates passenger numbers growing to over 28 million. Our annual average growth is currently running at around 12% which is expected to continue up to the year 2012 and beyond. At this point I would point out, that Emi- rates is operating in an " Open Skies " environment in Dubai, where arri- val and departure slots are not regulated as they are elsewhere in the World and we are competing with over 100 other airlines, who operate in to Dubai. We are not subsidised in any way, contrary to allegations from various sources who cannot believe that we are profitable through our own self financing and strict cost control initiatives we strongly believe that any which ignores unit costs will do so at their peril.

In order to support the enormous growth of Dubai and Emirates, the air- port infrastructure has been upgraded as part of a US$4.1 billion expansi- on plan announced in 2002. This airport master plan has included the construction of a 3rd passenger terminal which is underground and the first in the World of its kind plus 2 additional passenger concourses both of which will be exclusively dedicated to Emirates. One of the Concour- ses is the only facility in the World specifically designed to accommodate the A380 super jumbo aircraft. Other construction includes a Mega Terminal and 8 maintenance hangars sized for the A380 aircraft. When all of this work is completed by 2008, the capacity of the airport will be 70 million passengers per year. Looking ahead to the year 2025, a new airport is under construction in an area called which is situated in between Dubai and Abu Dhabi and when complete, this airport will have 6 parallel runways, 6 concourses and 2 terminals and will have the capacity to handle 120 million passengers per year. It will be 10 times the size of Dubai Airport.

Clearly, with this tremendous growth in view, Emirates has embarked on an ambitious aircraft fleet expansion plan. Today our fleet is 88 modern wide bodied aircraft which includes the A310, A330, A340 and 192

777 in varying models and configurations. We are receiving new -300ERs every month from an outstanding order and by the year 2014 we plan to double ours fleet size to around 176 aircraft. However this will come about through the phasing out of some older aircraft such as the A330s as and when our new A380s are delivered, we have also or- dered new aircraft types such as the Boeing 777-300ER and the Boeing 777-200LR. We have decided to expand our cargo aircraft fleet as well, today we operate 3 x A310 freighters and 6 x freighters, and these will be supplemented with 8 x Boeing 777-200LRF long range freighters starting in 2008.

We continue to study very carefully, new fuel efficient aircraft types inc- luding the and the A350-900. Both of these new aircraft types are going through dynamic design changes and before we place an order for either type, we want to make sure that any new aircraft will meet our specific mission requirements in terms of its range and the number of passengers and cargo payload it will carry.

The flagship of our fleet will shortly become the new super jumbo, which is a double deck aircraft with a wingspan of 79 metres and we have ordered 45 of them for delivery between 2007 and 2011. This aircraft order represents a US$15 billion investment for us and we are very confident that it will allow us to grow and to expand our global net- work, especially at airports where we are constrained by slots and capaci- ty limitations, it also offers very low seat mile costs. Its nearest competi- tor in some respects is the Boeing 747-400 but its maximum take off weight is 560 tonnes compared to about 450 tonnes on the 747. Its sea- ting capacity in 3 classes will be between 489-517 and up 633 in the 2 class version, these are specifically Emirates configurations and the num- ber of seats will vary considerably from one airline to another. Emirates will operate the A380 on both short and long distance flights, as short as 2 hours and as long as 15 hours, our premium class passengers will be seated on the Upper Deck.

We are facing some challenges in introducing the A380 to our network, as are the other A380 airlines, these challenges include airport compatibi- lity, nominating acceptable alternate airports in case of emergency or 193 weather diversions, access to the Upper Deck, de-icing services at cold weather airports and terminal building limitations. We are overcoming these challenges through regular dialogue with our nominated airports and ground handling agents. At this time Airbus has received 159 firm orders for the A380 from several major airlines, we think that some air- ports will see several A380s on the ground at the same time starting in 2007 especially at airports like London Heathrow and in Dubai of course but at others there may be one A380 flight per day or perhaps one or two per week, in fact Emirates has nominated around 13 airports where no other A380 airline intends to fly them, this presents some unique challen- ges in terms of convincing airports to spend money on developing their facilities to cope with this aircraft due to its size and the volume of pas- sengers that it will carry. 194

“Strategic Options for Airlines in Aircraft Procurement”

Clive Clemson Vice President Emirates Operations Services

My Presentation Today

• Some background information about Dubai itself and its growth plans

• expansion plans 195

Emirates’ success is closely related to the growth of Dubai…

H.H. Sheikh Ahmed bin Saeed Al-Maktoum Chairman, Emirates Group

“As develops into a globally influential travel and tourism conglomerate, it mirrors the vibrancy and progress of the U.A.E and Dubai.” 196

RAS AL KHAIMAH

Qatar UMM AL QUWAIN

AJMAN DUBAI SHARJAH FUJAIRAH

ABU DHABI

United Arab Emirates Oman 197

Dubai – direct access to 5.5 billion people

Europe

725 685 Asia

4887 2005 2030 Dubai 3918

Africa 2005 2030

1398 888

2005 2030

…growing to 7 billion in 2030 !

Source: United Nations World Population Prospects 2002 Revision Note: Figures in million

Dubai

• Dubai originated as a small trading port at the mouth of the Dubai creek

• A tradition of trade and free enterprise created a haven for the region’s merchants

• Early settlers from Iran and India were attracted by Dubai’s budding prosperity

• International trade formed the foundation of Dubai’s rapidly increasing riches 198

Dubai

• Oil production began in the late 1960s. Dubai has since developed a successful diversified economy, with non-oil sectors producing the vast majority of GDP

• Financial and commercial centre for the UAE and the entire Middle East

• Offers a highly energised business environment, with the infrastructure and resources to cover the full spectrum of global business needs

• Dubai’s growth and success is a result of the entrepreneurial spirit of its leaders

Unstoppable growth of Dubai

2004 2010

Home population 1.3 million 4.0 million

Hotel guests 5.4 million 15 million

Hotel beds 38,300 117,300

Dubai Airport passenger traffic 21.7 million 60 million

Emirates passengers 12.5 million 28.4 million

Source: Department of Tourism and Commerce Marketing (DTCM), Dubai Civil Aviation (DCA) 199

The fastest growing city in the world

• GDP grew at an average annual rate of 10% over the last 10 years – the highest in the world

• Investments in the real estate sector alone are estimated at US$50 billion by 2010

• Continuing government investment in airports, free zones and other infrastructure

• Successfully attracted foreign companies to set up in Dubai

• Relaxation of property ownership regulations have attracted foreign investors and expatriate residents

Dubai’s Mega-Projects

Palm Deira The World

Palm Jebel Ali

Palm Jumeirah

Dubai today New Downtown and

Arabian Canal 200

Palm Islands – 8th wonder of the modern world

• 3 man-made islands – adding 520 kilometres of shoreline • The world’s largest man-made islands – visible from space • US$6 billion project, completion between 2006 and 2008 201

Palm Deira – the largest of the three

• Home to an estimated 500,000 residents when completed in 2008 • Covers an area of 80 square kilometres 202

The World

• 300 man-made islands in the shape of the world • US$3 billion investment, ready in 2008

The World

• Each island is named after a country, region or major city

• Access is only by sea or air

• Gives the chance for the wealthy to purchase their own island

• Owners can develop their islands for personal or commercial use - preferably in keeping with the country’s name and nature

• Prices range from US$11m to US$36m per island

• A quarter of the islands have been sold – e.g. Rod Stewart bought an island representing the UK 203

The New Downtown

• US$20 billion development comprising: – Burj Dubai, Dubai Mall, master planned communities with 8 hotels 204

Dubai Mall

• The largest shopping mall in the world

• 12 million sq ft (larger than 50 football pitches)

• Set to be the next fashion capital of the world

• World’s largest aquarium

• Waterfalls, lakes, musical fountains

• Olympic-sized ice rink

• US$6 billion investment

• Completion in 2007

Dubai Waterfront

• World’s largest waterfront development (larger than Manhattan) • 750,000 residents, 150 hotels • First phase of the Arabian Canals project – 75km of waterways 205

Dubailand

• World’s largest tourism attraction (Twice the size of Disneyworld Florida, 100 times the size of Monaco)

• US$9.5 billion development project – US$4.9 billion already attracted

• Includes 55 new hotels and resorts with a total of 50,000 rooms

• 3 billion sq ft of developed infrastructure and housing for 300,000 residents

• 200 individual projects in 6 themed worlds: – Attractions and Experience World – Sports and Outdoor World –Eco Tourism World – Themed Leisure and Vacation World – Retail and Entertainment World –Down Town • 200,000 visitors per day forecast during peak operational periods

• Completion in 4 phases between 2007 and 2020 206

Dubailand

Dubailand attractions

Dinosaur park

Ski resort

Space world

Sports world 207

Mall of the Emirates • US$1 billion project is world’s largest outside America - opened in September 2005 • Incorporating Ski Dubai - the world’s third largest indoor ski resort • New 400-room Kempinski hotel

Dubai Marina

• US$4 billion residential project estimated to house 120,000 residents • 11 km waterfront development with 700 berths • Phase 1 consisting 6 tower blocks and a hotel already completed • Additional phases will include 42 towers of Jumeirah Beach Residence • 120+ tower blocks upon completion of all phases in 2013 208

Dubai Marina and The in March 2005

Planned residential developments

Estimated residents Dubai Marina 120,000 International City 60,000 120,000 750,000 Burj Dubai and New 150,000 Downtown Dubailand 350,000 Jebel Ali Airport City 800,000 Dubai Waterfront 750,000 Total 3,100,000 209

Major sporting events

Dubai Rugby Sevens

Dubai World Cup

Dubai Desert Classic

Power Boat Racing

Shopper’s Paradise

• Dubai Shopping Festival – Month-long event attracted 3.3 million local and foreign visitors in 2005

• Dubai Summer Surprises – 10-week program of children’s activities attracted 1.57 million visitors in 2004

• Dubai Airport Duty Free: annual turnover of US$300m, myriad product range, luxury car raffles

• City of Gold: generates about US$4b annually – 20% of the global gold trade passes through Dubai

• 37 different shopping malls spread across town 210

Dubai Metro

• Construction started on the first light rail project in the region • Completion expected in September 2009 (first phase) • US$3.9 billion investment • Driverless trains will serve 55 stations along 70km of track • 1.2 million users expected on an average day

Emirates’ success is based on thorough planning and profit through sustainable growth 211

Dubai

The strength of the Dubai Hub

London Moscow New York Dubai

Johannesburg Sydney

Connecting primary to primary cities with 1 stop in Dubai… 212

New Glasgow York Dubai Shanghai

Accra Cochin

Sydney

Connecting primary to secondary cities with 1 stop in Dubai…

Birmingham

Casablanca Dubai Nagoya

Kuala Lumpur Dar Es Salaam

Perth

Connecting secondary to secondary cities with 1 stop in Dubai 213

Emirates Passenger Growth

Annual average growth: 19.3 % Annual average growth: 12.0 % 40

35

30 30.4 25 Historical 20 Forecast 15

Passengers (million) 13.9 10 12.5

5 2.6 0 7 8 9 0 1 2 3 4 6 7 9 0 1 2 /9 /0 /0 /0 /0 /1 6/9 8/9 1/0 5/0 8/0 0/1 95/96 9 97 9 99 00/0 0 02 03 04/05 0 06 07/08 0 09/1 1 11

79 destinations in 2005/06 214

How will Dubai’s airport infrastructure accommodate this significant growth?

Before Dubai International Airport …

… the first regular air service in Dubai used the creek with ’ flying boat in 1937 215

Dubai International Airport In the 1960’s… • Opened on September 30, 1960 with a 1,800m runway • The airport had the capacity to handle aircraft size up to DC-3 • In 1961, 10,000 passengers and 772 scheduled flights used Dubai International Airport

Dubai International Airport Today… • Second terminal opened in 2000 - a US$540m state-of-the-art facility • Capacity to handle over 20 million passengers a year • 27 contact gates • 25 Food and Beverage Lounges • 5,400m2 of Dubai Duty Free with 30,000 different product lines • Finest Surprise Car Draw • Millennium Millionaire Raffle • 100 luxuriously appointed rooms • A fully equipped business centre • A health club with swimming pool, spa and gym 216

Dubai International Airport

Dubai Airport Expansion Plan

• US$ 4.1 billion expansion plan announced in 2002

• Third passenger terminal and two additional concourses, exclusively dedicated to Emirates

• Concourse 3 is the only terminal in the world specifically designed for A380 operations

• Construction of Cargo Mega Terminal

• Expansion and upgrading of airfield facilities – New aprons, taxiways, roads, tunnels, runway extension etc. • Full completion expected in 2008 – Capacity to handle 70 million passengers per year – 170 wide body aircraft parking spaces – 23 A380 stands 217

Entrance to Terminal 3 218

First and Business Class Check-In

Economy Class Check-In 219

Sky Train

Balcony Overlooking the Central Area 220

Emirates’ own projects

• centre – US$353m facility to accommodate fleet expansion will be one of the largest in the world – Completion in early 2006

• Engine test facility – One of the world’s largest and most sophisticated facilities – Completion due in January 2007

• New EK Group Headquarters – US$191m headquarters – Completion in mid 2007

Dubai International Airport 221

Passengers at Dubai International Airport (DXB)

140

120

100

80 Capacity at Terminals T1, T2 & T3

60

40 Passengers (millions) 20

0

0 9 1 3 06 08 17 011 013 015 024 2005 20 2007 20 2009 201 2 2012 2 2014 2 2016 20 2018 201 2020 202 2022 202 2 2025

Emirates Other airlines

Jebel Ali International Airport (JXB)

• 10 times the size of Dubai Airport

• 140 square kilometres

• 6 concourses and 2 terminals

• 6 parallel runways

• 120 million passengers p.a.

• 12 million tonnes of cargo p.a.

• Estimated investment of US$8.2b

• Encircled by an Airport City 222

Jebel Ali International Airport (JXB)

Jebel Ali Airport City • An integrated city that will be a hub for the aviation and supporting industries – Aviation City – regional headquarters, maintenance facilities of aviation companies – Dubai Logistics City (DLC) – world’s largest multi-modal logistics hub – Commercial City – future business centre comprising over 850 high-rise towers – Exhibition City – US$2.2b facility will have 19 exhibition and conference halls – Residential City – mix of luxury estates and affordable airport staff housing

• US$547m Phase 1 comprises runway, cargo and passenger terminals and the DLC

• Construction has started on Phase 1 and will be ready in September 2007

• Will host an estimated 900,000 residents – 10% of which will be employed by JXB

• Linked to the rest of Dubai by the new

• Planned express railway link between Jebel Ali Airport and Dubai Airport 223

Emirates as a Global Brand

Sponsorship

“Sports sponsorships provide an international platform to connect with our customers. We believe sponsorship is one of the best ways of getting closer to our customers.” - HH Sheikh Ahmed, Chairman, Emirates Group

FIFA World Cup Germany 2006

• First-ever airline to be an official sponsor of the FIFA World Cup • Main sponsor of FIFAworldcup.com 224

Other Sporting Events

Yachting –Team New Zealand

Dubai Rugby 7s

International Cricket Council Golf – Munich Open

“ Emirates Fleet Expansion Plans”

Clive Clemson Vice President Emirates Operations Services 225

Emirates Launch • Launch date: 25 Oct ’85 • Starting Capital: $ 10,000,000 • 3 aircraft • 3 Destinations - , , Mumbai

B727- 200 226

A300-600

Emirates Fleet Today A310-300 4 A330-200 29 B777-200 9 B777-300 22 A340-300 8 A340-500 10 B747F 6 Total 88 227

A310-300F

B747 – 400F & B747 -200F 228

A330 - 200

A340 - 500 229

B777 - 200 and B777- 300

Emirates does not own or operate any short haul or narrow bodied aircraft 230

Outstanding deliveries

A380-800 43 A340-600 12 B777-300ER 44 B777-200LR 10 A380-800F 2 B777-200LRF 8 B747F 2

Emirates Fleet Growth

1985 3

2006 88

2014 176 231

The Emirates Group in 2006

Over 26,000 employees

Dubai International Airport

• The home of Emirates Airline and the premier business and leisure destination airport of the region • Handling over 105 airlines operating to 145 destinations per day • Handling over 22 million passengers and nearly 1 million tonnes of cargo per annum • US$ 4.1 billion investment plan which includes

9 a dedicated underground terminal for Emirates 9 2 passengers concourses …which will open in 2007 and 2008 respectively 232

“Strategic fleet planning for the future”

• B787-10

• A350-900

• A340-600

• B777-200LR

• B777-300ER

• A380-800

Innovation in the Passenger Cabins 233

Boeing 787-10 Dreamliner

A350 - 900 234

A340 - 600

Airbus A380-800 – Passenger

Endurance Typical configurations Endurance Typical configuration

11+ hours 14+ hours

MTOW - 510T } 533 seats - 3 class MTOW - 560T } 500 seats - 3 class

MZFW - 369T } 653 seats - 2 class MZFW - 361T }

MLW - 394T } MLW - 386T } 235

• Why Emirates is confident about the A380 • How it will benefit our Commercial Business • The effect on Airports • The Passenger Experience

Why Emirates is confident about the A380

• In 2000 our intention was to purchase only 7, to operate on our trunk routes, e.g. Dubai to London

• We then looked at other potential opportunities across our fleet and network 236

• Where else could we profitably operate a 550-seater aircraft ?

• In 2001, Emirates increased its order from 7 to 22 aircraft, in both, 2 and 3 class configurations

• In 2003, a further order was placed for 23 aircraft, making 45 in total, for delivery between 2006 and 2011

Emirates will operate 45 A380s by 2011 237

A380 - 800F

• It will create flexibility in both route and fleet planning

• Lowest seat mile costs of any aircraft type available in the market, which will help all airlines to cope better with falling fare yields

• A380 will allow us to grow and to increase capacity on some routes without adding frequencies 238

The A380 effect on Airports

• At some airports, there will be multiple A380 services, at others it could be one flight per day or 1 or 2 per week. Airlines and passengers will not want to experience any degradation in service standards

• Some airlines may find themselves the sole A380 operator, to certain airports. Emirates has already identified 13 airports where that is the case, where only Emirates has shown interest in operating the A380 on a scheduled basis

The effect of the A380 on airports

• Airport compatibility • More passengers normally equates to more retail spend • Growth in passenger numbers is good for everyone • Orders for the A380 are expected to grow in the coming years and this means that airports which do not invest in their infrastructure now could be at a disadvantage 239

When will Emirates’ A380s be delivered ? (Subject to change) No. of Year Aircraft 2007 9 2008 5 2009 9 2010 13 2011 9 Total 45

How many seats will they have ?

Configuration Total Seats 3-Class (ULR) 489 3-Class (LD) 517 2-Class (HD) 631 240

What are some of the challenges that Emirates has identified in introducing the A380 to its Network ? ¾ Airport Compatibility ¾ Suitable en-route and destination alternates ¾ Direct Upper Deck Access ¾ Ground Safety and Risks ¾ De-icing at cold weather airports ¾ Terminal building constraints ¾ Ground handling (Towing & Pushback Operations)

A380 compared to the B747 241

The 1st A380 Gate in Dubai 242

“Emirates has clearly shown its ability to turn

vision into reality, as its growth and success

over almost two decades has shown.”

Noel Forgeard previous Airbus Chief Executive Officer 243

“Vielen Dank für Ihre Aufmerksamkeit”