The Emirates Group History

Address:

Airline Centre
P.O. Box 686
Dubai
United Arab Emirates

Telephone: 971-4-2144444

State-Owned Company
Incorporated: 1985
Employees: 6,500
Sales: AED 5.59 billion ($1.52 billion) (2000)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 488119 Other Airport Operations; 488999 All Other Support Activities for Transportation; 56152 Tour Operators

Company Perspectives:

We have prided ourselves on our ability to stand alone without needing subsidies or being a member of a major alliance, in order to tailor our services to our own customers' needs. Key Dates:

Key Dates:

1959:: Dubai National Air Transport Association (DNATA) is formed.
1985:: Dubai forms its own airline: Emirates.
1993:: Emirates forms partnership with United Airlines.
1997:: New training and maintenance centers open.
1998:: Emirates buys a 40 percent stake in Air Lanka.

Company History:

The Emirates Group is composed of airport services provider DNATA (the Dubai National Air Transport Association) and Emirates Airlines. Owned by the government of Dubai and based at the busiest airport in the Middle East, Emirates has flourished under the sheikdom's 'wide open skies' policy, in spite of the restrictions placed on it by other countries. The airline, renowned for its luxurious in-flight service, was unique among long-haul airlines in that it had not joined a global alliance such as the Star Alliance or oneworld by the beginning of the new millennium.

Origins

Dubai, a fishing village at the southern end of the Arabian Gulf, has grown to become one of the leading trade centers of the Middle East, fueled at first by pearls, then petroleum. The Beni Yas tribe assumed control of the town around 1830. The Maktoum family led the tribe throughout the 19th and 20th centuries. Dubai became one of seven sheikdoms in the United Arab Emirates, which was formed in 1970.

As the British pulled out of Dubai in the late 1950s, Sheikh Saeed Al Maktoum decreed an open seas, open skies, and open trade policy, to develop the country into a regional crossroads for trade and tourism. He also required all government agencies to make a profit. The country was aiming to eliminate its dependence on its finite oil reserves within 50 years.

The Dubai National Air Transport Association (DNATA) was formed in 1959. By the mid-1980s, DNATA had grown to 2,500 employees. In addition to providing support services at Dubai Airport, the company served as sales agent for 26 airlines. Dubai had been used as a stopover on routes between Europe and the Far East since the days of Imperial Airways (precursor to British Airways), which landed its flying boats there en route to Australia. Its open skies policies kept its airport among the busiest in the region.

Gulf Air began to cut back its service to Dubai in the mid-1980s. As a result, Emirates Airlines was conceived in March 1985 with backing from Dubai's royal family, whose Dubai Air Wing provided two of the airline's first aircraft, used Boeing 727s. (An Airbus A300 and Boeing 737 were two others.) Because of Dubai's unique political structure, wrote Douglas Nelms in Air Transport World, Emirates could be described as both government-owned and privately held, though most considered it state-owned. It was required to operate independent of government subsidies, however, apart from $10 million in start-up capital.

Maurice Flanagan was named managing director of the new airline. Formerly of the Royal Air Force, British Airways, and Gulf Air, Flanagan had been seconded to DNATA in 1978 on a two-year assignment as assistant general sales manager.

Chairman was Sheikh Ahmed bin Saeed Al Maktoum, nephew of the ruler of Dubai. Only 27 years old in 1985, he had graduated from the University of Colorado just four years earlier (his degree was in political science and economics). Sheik Ahmed also became chairman of Dubai Civil Aviation and DNATA itself. Although he lacked any direct experience in the airline industry, Sheikh Ahmed embraced his new role, learning to fly a variety of aircraft along the way. As Lisa Coleman duly noted in Chief Executive, he was indeed experienced in one area that would be the new airline's defining trait: luxury. From the beginning, Emirates boasted a tradition of providing the best creature comforts available at 40,000 feet.

The first flight, Dubai-Karachi on October 25, 1985, was a Pakistani connection in more ways than one. The airline leased the aircraft, an Airbus 300, from Pakistan International Airlines. Bombay and Delhi were the other two earliest destinations. From the beginning, Emirates flights carried both passengers and cargo.

Emirates was profitable within nine months. During its first year, it carried 260,000 passengers and 10,000 tons of freight. Gulf Air, part owned by the much more wealthy neighboring emirate Abu Dhabi, had previously dominated air traffic in the region. Its profits fell more than 30 percent during the first year of its new rival's operations, however, prompting Gulf Air to drop its privatization plans. The next year, Gulf Air posted a loss.

In its second year, Emirates also posted a loss, before setting out on decades of profitable growth. One reason for the success of Emirates was its aggressive marketing. Another was the high level of in-flight service in its new Airbus aircraft, which it outfitted with generously spaced seating.

In 1986, Colombo, Dhaka, Amman, and Cairo were added to the route network. Emirates launched daily nonstop service to London (Gatwick) on July 6, 1987 with two new Airbus A310s. This complemented the overnight flights British Caledonian was sending to and from Dubai. Other destinations added in 1987 were Frankfurt via Istanbul, and Male (Maldive Islands). Emirates lacked a regional feeder network since most of its neighboring countries were shareholders in rival Gulf Air.

This impressive early growth came as the region was experiencing a business downturn, with the Gulf War a contributing factor, and the subsequent laying off of expatriate workers--both bad news for the air travel industry. In its second year, competitors accused Emirates of starting a price war. The airline countered that its lower fares were stimulating traffic, not stealing it from its rivals. By the end of 1987, Emirates was serving 11 destinations.

'The Finest in the Sky' in the 1990s

Emirates Sky Cargo, which operated as a separate entity, carried 25,000 tons of freight in fiscal 1989. In the early 1990s, a number of Asian firms began using Dubai as a warehousing center for European deliveries. Emirates expanded its route network into the Far East in 1990, serving Bangkok, Manila, and Singapore. Hong Kong was added in 1991. Emirates added Paris, Rome, Zurich, and Jakarta in the summer of 1992.

About the same time as it was extending its reach into Asia, Emirates was courting long-haul business travelers. Calling itself 'the finest in the sky,' the airline toned down its Arabic identity for a more 'corporate' feel, positioning itself as a competitor to global carriers such as British Airways and Singapore Airlines.

Emirates was one of the world's fastest growing airlines. Revenues increased by about $100 million a year, approaching $500 million in fiscal 1993. It carried 68,000 tons of cargo and 1.6 million passengers that year. The Gulf War, ironically, had benefited Emirates by keeping other airlines out of the area. Emirates was the only airline to continue flying in the last ten days of the war, although it had to cover increased insurance premiums and higher fuel costs (flying around the war zone added an extra ten hours to flights).

A partnership agreement with US Airlines entered in the fall of 1993 allowed Emirates to offer around-the-world service. It had previously inked cooperation agreements with Cyprus Airways.

By 1994, 60 international airlines were flying to Dubai. Emirates was connecting 32 destinations with its 15 aircraft. It was the sixth largest of eight Middle East carriers. Despite its small size, the airline had accumulated numerous awards by lavishing attention and money on passenger and cargo service. It was the first airline to install personal video systems in all seats, for example. Flight attendants celebrated special occasions with in-flight cakes and Polaroid cameras. Passengers flying first class were served six-course meals on Royal Doulton china.

Emirates took in $643.4 million in the fiscal year ending March 30, 1994. Income increased more than eightfold, to $24.4 million. The young airline had 4,000 employees and carried two million passengers a year between 34 destinations with a fleet of 18 Airbus aircraft.

Seven state-of-the-art Boeing 777s worth $1 billion were on order since 1992 to satisfy long-range ambitions. They began to arrive in the spring of 1996. One of the planes was used on a new service to Australia (Melbourne) via Singapore. Emirates placed a large order with Airbus later in the year. In spite of the large capital expenditures, the Dubai government had laid out only $50 million since the airline's inception.

A total of 92 air carriers were serving Dubai in the mid-1990s. Emirates was able to flourish, however, in spite of restricted markets abroad and intense competition at home. The Dubai government had been promoting the country as an escape from European winters with great success, much to the benefit of Emirates. (Dubai's summertime weather was grueling, with Fahrenheit temperatures and relative humidity readings in the 100s.) Abroad, its route network was expanding in the Pacific and Africa.

In 1997, Emirates was flying a dedicated freighter to Amsterdam, a point not on its network of passenger routes, in cooperation with KLM Royal Dutch Airlines. It carried about three million passengers during the year. The growing cargo business accounted for 16 percent of the airline's revenues.

Emirates opened a unique, $65 million training center in January 1997. It was built in the shape of an airplane. The airline was then able to provide advanced simulator training for its crew members--who represented 50 different nationalities--and flight and maintenance personnel from around the world. In the fall of 1997, a new air-conditioned maintenance center allowed the group (which consisted of Emirates Airlines and DNATA) to solicit third-party contracts in that capacity as well.

A record group profit of AED 371 million was achieved in 1997-98. Emirates executives planned a slowdown in the airline's growth in the late 1990s to stabilize its expansive route network.

In May 1998, Emirates paid the Sri Lankan government $70 million for a 40 percent stake in Air Lanka. Emirates received almost full management rights as the Sri Lankan flag carrier was in debt and operating at a loss and had needed new capital to upgrade its fleet.

A new, lighthearted advertising campaign launched in January 1999 enjoined travelers to 'Be good to yourself. Fly Emirates.' One ad aired in Britain featured a business class passenger calling his dog with the on-board phone.

Emirates signed on in May 2000 as the first launch customer for the Airbus A3XX, designed to be the largest civil aircraft ever built. Emirates justified purchasing the 481- to 656-passenger super jumbo to maximize its use of scarce takeoff and landing slots at crowded airports like London's Heathrow. The airline planned to order up to a dozen of the planes, with the first to be delivered in 2006.

Toward the end of 2000, Emirates was planning to start ultra-long-haul service to the East Coast and West Coast of the United States as well as nonstop flights to Australia and Argentina. Traffic continued to grow at an impressive clip (20 percent) in 1999-2000, and Emirates executives planned to sustain that.

Principal Divisions: Emirates; Dubai National Air Transport Association (DNATA).

Principal Competitors: Gulf Air; British Airways plc.

The Emirates Group History

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