Page 282 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

264 Dubai & Co.

long-haul flights. The airline relies heavily on the classic hub-and-
spoke model of airline routing; in fact, more than half of Emirates’
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Dubai passengers are in transit to other destinations. If the hub
were less conveniently located, making the system work would
have been more challenging. Another key factor has been the air-
line’s access to capital—it is owned by the government of Dubai.
The government’s investment in Dubai International Airport and in
the emirate overall has given Emirates Airlines the room it needed
to grow so dramatically. In other markets, such cooperation
between the airport authorities and leading airlines would be diffi-
cult to achieve.
Emirates Airlines also enjoys a significant cost advantage over
competitors. Fuel is secured at low prices, staff costs are modest,
and labor unions are nonexistent. On top of all that, there are no cor-
porate income taxes to pay. In a 2005 analysis, the Economist found
that the airline’s costs were “closer to Ryanair, Europe’s leading
no-frills carrier, than to British Airways, Air France–KLM, or
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Lufthansa.” Part of the savings is passed on to customers, and part
of it contributes to the firm’s profits. Emirates is poised for sus-
tained growth despite the increased competition in the region, and
especially from Abu Dhabi’s Etihad Airways. Its cash position is
formidable: its CEO has said it could fly for six months without
charging a single passenger and still be solvent. 40
In the years ahead, expect to see more GCC-based firms in infra-
structure-linked sectors emerging as global competitors. In addition
to Dubai Ports World and Emirates Airlines, two more Dubai-based
firms fit the mold: the real estate firm Emaar and the hospitality firm
Jumeirah International. Emaar has rapidly expanded to several
Middle East markets, including Egypt, Morocco, and Jordan. Emaar
Saudi Arabia is the engine behind King Abdullah Economic City, and
Emaar has announced plans for a project in Pakistan as well. Emaar
also acquired John Laing Homes, a US homebuilder, in a 2006
41
deal valued at just above $1 billion. Jumeirah International, whose
flagship property is the sail-shaped Burj al-Arab hotel in Dubai, has
multiple properties in London and owns the Essex House hotel off
New York’s Central Park.
These firms, and others, are likely to become more prominent
worldwide as they apply their ambition, expertise—honed in the
Gulf’s infrastructure-friendly environment—and capital to creating