Emirates, noted for luxury planes with showers and bars, is considering cheaper long-distance flights to fend off aggressive competition from low-cost carriers.
"More and more international network carriers will be starting to move into the long-haul, low-cost market," Emirates president Tim Clark told reporters in Berlin. "That will be the shape of things to come."
Traditional airlines such as Deutsche Lufthansa and Air France-KLM are trying to expand their low-cost offerings as discount carriers including Norwegian Air Shuttle and Singapore’s Scoot push into the sector’s most lucrative segment.
The rivalry is burdening network carriers like Emirates as terrorism, Middle East economic slowdown and the UK’s EU exit weigh on travel and reducing fares.
Emirates, which has exploited its Persian Gulf location to turn its Dubai hub into an intercontinental crossroads, has had a particularly rough year. Low energy prices have sapped demand for lucrative premium bookings from executives in the oil and gas industry, while terrorist attacks in Europe have scared off travelers from Asia.
Profit at the parent company Emirates Group plunged 64% in the first half to 1.3-billion dirhams. The group said last week that revenue growth was damped by a strong US dollar and currency restrictions parts of Africa.
Airlines operated in a world "fraught with volatility", Clark said. Difficult conditions are especially troublesome for Emirates, the world’s largest international carrier, as it has ordered $112bn in aircraft it must somehow fill at a profit.
Emirates’s fleet consists of about 250 planes, including Airbus A380 superjumbos that seat up to 600 passengers. It is to get another 50 A380s, and will get one Boeing 777-300ER a month for the next two years.
The carrier will stick to its orders, in part because the A380’s size gives them a lower per-seat operating cost compared with that of many rivals. This enables Emirates to break even at a lower ticket price. New York-based JetBlue Airways, for instance, plans European expansion as early as 2019, relying on far smaller narrow-body planes.
The outlook for fares and passenger demand for the rest of this year "looks fairly flat, but we’ll continue to grow our business because we have planes coming", Clark said. "Full-service network legacy carriers will have to adjust their businesses for what will be a fierce segment."
Bloomberg
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