Clive Clemson

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Clive Clemson Clive Clemson Strategic Options for Airlines in Aircraft Procurement ____________________________________________________________________ Clive Clemson Vice President Operations Services, Emirates 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 United Arab Emirates was originally called the Trucial States and was part of the British Commonwealth, until 1971 when the Country gai- ned its Independence. Dubai is one of seven emirates which together, make up the UAE, the capital city is Abu Dhabi. The UAE is situated to the south of Iran, to the west of Oman and to the east and north of Saudi Arabia. In the 1950s Dubai was simply a small trading port at the mouth of the Dubai creek or river which leads in to the Persian Gulf, 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 World, 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 aviation sources who cannot believe that we are profitable through our own self financing and strict cost control initiatives we strongly believe that any airline 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 Cargo 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 Jebel Ali 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 Boeing 192 777 in varying models and configurations. We are receiving new Boeing 777-300ERs 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 Boeing 747 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 Boeing 787 Dreamliner and the Airbus 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 Airbus A380 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 • Emirates Fleet 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 the Emirates Group 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
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