Tell me this. Do you enjoy negotiating?
I spent my life doing it. I suppose I do. I've got teams of people that do it for me now. The ones I used to do, whether it be aeropolitics or aircraft or commercial.
And what's the secret you tell them? What's the secret for negotiations? Look, boys and girls, this is the deal.
Well, outthink them. Know exactly what they're likely to be negotiating. Know their position and then have the counterposition ready before you enter the negotiations. And also you've got to be fairly quick on your feet. You've got to think carefully. You've got to think articulately. Do not go off on a tangent. Do not overreact to things. Be measured about what you do. But be firm and fair about how you go about it. If you're trying to consummate a deal, try and see that they need a margin. So do you. So somehow you get there.
Tell me who was the hardest then to negotiate with.
Airbus. Yeah. But they were great fun. It was like games of chess all the time. And I think we got some really good deals as a result of all the work that we did with them.
It was 1985 and there were two aircraft. Today there's more than 270. We're at Emirates HQ along with Sir Tim Clark, the president of the company. It's just turned in a $5.8 billion profit for the last financial year. And this man and the team are responsible for nearly 20% of the GDP of Dubai. So Tim Clark, welcome to The National.
Did you ever think when you joined this company in 1985 that you'd get to such a staggering number of nearly $6 billion in profit and have this colossus that it is?
In a word, no. In 1985, what we were looking at in those days was the likes of Gulf Air, Kuwait Airways, Saudi, Egypt Air, Royal Air Morocco, Jordanian, MEA. These were the kind of carriers that were the Middle East stalwarts and we thought at that stage, and I believe probably when the government formed it for whatever reasons that we know, that's probably where they thought we would go with all of this. But things have changed.
You went much further than that, I would say, but this goes back to probably how you grew up or the era that you grew up in, which was the 60s and the 70s and the sort of sheer elegance of travel. Did that influence your plans, your imagination?
From a personal point of view, I had watched in the 10 years between 1975 and 85 when I worked for Gulf Air. I followed and I was part party to the way they developed their inflight product and the whole of the passenger services side of things. And if those of us remember the old tristars of Gulf Air, they had a big bar in the back of first class. They had a boutique service. You can start to see how some of the seeding of those ideas started to appear in Emirates later on. So I was exposed to what became a hugely successful carrier in those 10 years. Certainly I was there and it outsurpassed and outperformed all its peer group, whether the ones I mentioned, Kuwait Airways, etc. And when the government invited people like me to come across and map out what the airline was going to look like, in the back of my mind I was thinking the Gulf Air that I knew I just left and how this could transpose itself into the working model of the Emirates of the future. But in those days, we were thinking we would be a regional carrier. We'd be operating a few long-haul operations and mainly doing the job of serving the countries around Dubai, the UAE. Didn't quite work out that way.
Was that a moment for you with Sheikh Ahmed where you sat down and went, okay, we're going to go for gold?
Well, obviously it required a certain amount of persuasion to go from 737s and things like that to go into the big league. And there was a certain amount of trepidation. Of course there would have been. I said, well, if we do this right, what you're competing against today, read 85, is our levels of mediocrity. Very constrained in what they do and how they do it. Many of the carriers that we are competing against are state-owned. So you had Lufthansa, Air France, BEA had merged, but they were still very much in the legacy of civil servants. So it wasn't very difficult to envision how you could penetrate that kind of morass of what I call mediocrity in the way they went about planning their products, planning their route networks generally, predetermined by the way traffic moved after the Second World War and how they aligned what they did with the old colonial powers. So they tended to bring everything over their hubs wherever you wanted to go. So it wasn't then difficult to look at what could happen if we were to reassess how that traffic would flow if we provided the connectivity. So in the early days this was a little bit of an experiment. It was not without its risk because we were committing the shareholders to quite a lot of money in terms of what they had originally thought we were going to do. But as we picked that one up and it started to scale, then the rest became history in the early 90s.
And it became a very competitive landscape. You had British Airways, Virgin. Is it fair to say an upstart from Richard Branson? You had Willie Walsh of British Airways, you had Virgin. Did you ever look at them and sort of go, I want that crown? Because British Airways really did reinvent itself. Did you look at that and go, I want that crown? I want to be the premier airline of the world?
Well, I think the ruler of Dubai in the very early stages had said that Dubai had to be number one in all sorts of things. You probably remember many, many times, did he. And he wanted the airline because by that time we were scaling at pace. We got the 777s, latterly the 380s, etc. And the more we did, the more we got, the more successful we became. So then I think the government began to be even more convinced that we could be number one. Whatever. That wasn't what we set out to do. We just set out to grow this model, doing a lot of things differently to other carriers. And of course they then got very upset about that and accused us of taking money from the government, being subsidized and all the other things just because we were so successful in what we did and we were quite prepared to be fairly brazen in how we did this, whether it be products coming to the market, the way we designed airplanes, designed the interiors of airplanes, went well beyond what the normal carriers had done in the past. So our voice began to be heard in a manner that you talk about Willie Walsh, there are many, many people I grew up with that came into my sidelines.
Was there a moment in that speed of growth where you said, yeah, actually, you know what? We've made it. We're done. I made a billion bucks. Got a lot of new aircraft. This is the top.
No, you're talking to the wrong guy about that. No, this was onwards, upwards. You know, for me, I couldn't see a point when I looked at the way we could now reach most cities on the planet, how the 380 was scaling our operation, I thought there is so much more to do even today. Even though we said we have 270 aircraft, well 271 if you include our little corporate jet, and the 300-odd aircraft we have on order, and how the network is going to expand over the next 10 or 15 years, you really haven't seen anything yet. So there's a lot to do. At no point did we actually say, well, that's it, we've reached the limit of our capabilities. And at the same time of course you saw many other new carriers in the region say, well, hey ho, we need a bit of this, why don't we change our business model. So you saw Qatar Airways form, you saw Etihad form, Oman Air form, lately Riyadh Air. A lot of these carriers are picking up on the business model that we constructed back in the early days. And I think they're making quite a good job of it, frankly.
You think any of them can actually catch up? I saw Tony Douglas last week when I was in Riyadh. Great salesman. Sells a great story. But have you enough of a moat around Emirates that actually nobody can catch up with this, or is that a folly to think like that?
Well, you should never really rest on your laurels, quite honest. It's something you need to keep on top of. So we'll continue to do it the Emirates way, which is hugely innovative in what it does in its products both on the ground and in the air. It will continue to grow its network. It will continue to make demands on the aviation community with regard to aerospace OEMs, the way we go about designing airplanes. We've got a lot on the table at the moment. And we're making demands of the carriers. So we will continue to do that. The likes of Riyadh Air, a new kid on the block, Tony would be delighted to be referred to as, but good luck. We were there once, don't forget. And I was asked the other day in Seville, is there enough room for everybody? And I said, you asked me that 35 years ago and then you asked me when Etihad was formed and Qatar Airways was formed and look how these carriers have expanded and actually quite successfully. So why would it be any different for Riyadh Air given what's going on in Saudi Arabia?
But to expand means you need additional new fleet. The A380 will sunset. We'll come back to that in a moment. Now, Boeing is a very contentious issue for yourself and for Michael O'Leary in terms of what they promised and what they're not delivering. The 777X is now delayed to 2027. So, Tim, when realistically can you say to me, man, I feel confident I will get a 7X.
Well, to be quite honest, we had been working with Boeing, as you know, very closely over the last few months, few years. We had a belief that we would have our first aircraft in the last quarter calendar of this year. And all our seats and galleys and televisions all ready to go. Now, that doesn't look as though it's going to happen. So when they say they pushed it to 27, that's a 12-month period. Am I looking at the first quarter, second quarter, third quarter, fourth quarter? To be quite honest, we had made our own plans with regard to when we thought it was going to happen. Fortunately, as you will have read, back from 2021, we took the decision to revitalize the old fleet. So, and thank goodness we did that and we didn't start getting rid of them, etc., only to find we have a huge capacity hole. So that refurbishment is going on. So if the 777 comes in late 27, it's bad news for us. It's seven years after we expected it to happen.
Do you think it's going to be the back end? Realistically, what has Kelly promised you? The back end of 27?
They don't know. They don't know. They honestly don't know.
Well, you've already spent $5 billion, I understand, and change. It's an incredible kind of number in terms of refurbishment. Have you asked Boeing to step up to the plate and contribute towards that?
Boeing are fully aware of the damage it has caused Emirates. And the quantification of that damage is one of those things that's out there. Of course, it is. And I see that they already plan for a charge of five or six billion dollars as a result of this further delay. You know, in the end, we're interested in getting this aeroplane in. We're not after trying to extract value from these people because they're about it. It'll have to happen at some point, but the main focus is getting this aircraft out. After all, it was our initiative that got this whole thing started in the first place in 2010. And we thought by 2020 or 2021 we would have the aircraft flying. So, 17 years later, we might have it, and that's something we're more concerned about than receiving the damages. Of course, we will have that conversation with Boeing. How we deal with that is an internal matter.
In terms of your ambition to expand, does this materially constrain your ability to break new profitable ground?
It's already having that effect. We have many, many, many routes on the drawing board which we would like to execute now and can't. Fortunately, we've got 13 A350s of the number that we've ordered. And they will sort of keep the wolf from the door for the time being. And also the retrofit of more and more aircraft of the old fleet keeps our head above water, allows us to grow capacity but at a much lower level than we used to do in the past.
This is prime time that we're here at HQ. Delivery is there. The A380 is something that for me I can remember sitting on it for the first time and it's pretty staggering, and when you get to sit in business class it's even more staggering. But don't worry, I've been in all the cabins. When that winds down, we got a model of it here. When that winds down, is it the end of an era?
I cannot persuade either side of the ledger to build a lookalike. They are very, very risk-averse as you could imagine, both for whatever reasons. And Airbus seems to be fairly content with large numbers of single-aisle going out the door and making their balance sheet look very good. I don't see the innovation or flair that I used to see in the 70s and 80s and the early 90s. So the notion that we would have something like a 380 replacement, which I reckon could be 20, 25% less in its operating cost than the current one, is something that they're not prepared to do.
I don't know. I think in the last 20 years there's been a huge amount of trauma — geopolitical, socioeconomic — and these kind of things very much affect the way airline boards go about the business. So when you had the 2008-09 financial crisis, remember that's when the 380 came to market in 2008, just as the bottom fell out of the global economy. And the old stalwarts who were very much in charge of the airlines then were removed and in came the lawyers, the finance people, etc., to stabilize companies which were in deep trouble because of the collapse of demand. So if you look at all of that and the wars and insurrections that have been going on, the geopolitics of the planet, etc., it's not surprising the airline community is a little bit risk-averse. So the element of wanting more things like the 380 or getting the 777 into the air or getting a bigger 350 or getting Airbus to think larger scale is not supported by all the other CEOs in the business. So if they were to come up with a business case, ask people what they would think about the 380 replacement — bearing in mind it is barking obvious that it needs to be replaced given the slot constraints that we face — you'll probably find that they would be saying, 'Ho hum, we couldn't fill these airplanes.' This is what they used to say in the early days. Filling 500 passengers on an airplane like the 380 is extremely difficult for them.
But now we've gone beyond revenge tourism. I mean, I've been on your planes in the past six months, sir. There is no room. I mean, they are rammed and completely full. And you're able to charge a pretty premium as well.
Yes, we do. And I have to be quite honest, people like me, I'm a pragmatist, I'm an optimist, etc. Nothing really phases me, but I do see some interesting evolutions in demand and the pattern of demand. For instance, prior to COVID, we were charging much lower fares, people traveling once a year. Post-COVID we charge much more and people are now traveling twice a year. So what does that mean? It means that our elasticities forecasting were completely wrong prior to COVID. We could have charged more and got away with it, so to speak. But now we get a much higher yield, considerably higher yield per se kilometer. And the aircraft are running at 80, 85% seat factor. So for something like a 380, once you get above 57, 58%, you're making money. So it's something that when we started accumulating these profits, the first thing I did after COVID said, right, we're going to use that money, put more back into product, we're going to start lifting part of that. That was the redesign of the airplanes, redesign of the product and the refurbishing of it. So always keep yourself ahead of the game. Use the money that you get in the good times to put back into your product, reinvest in your product, so that when things get tougher later on — they always do in our business — but you're in a good space then to continue your operation.
It's interesting because financially the world's had a phenomenal run. Equity markets are on fire. There's a very bullish sentiment in the stock market. Economies around the world are doing fine. We haven't had a jolt to the system since 2008 really. We had COVID obviously which was quite traumatic. Do you worry that the cycle is running long? Do you think we're towards the middle of a cycle? How do you —
I'm not one of these people who really believes in the cyclical nature of economy because the global economy is one of those things that can be easily manipulated, it can be directed, it can be channeled and this is what we see. So you never know what is going to happen next. All you've got to do is what we learned in the 40 years that we've been operating is that these things happen and they come in great shapes and sizes. The 1998 currency crash in the eastern economies, and I can name all sorts of things going on whether it be Gaza, whether it be the Iranian-Israeli issues and all the things in our particular part of the world as well as what's going on in the Pacific or in Europe, etc. What you have to do is your model has got to be strong enough and insulated enough against all of these things. The bigger we've become and the greater our reach and the stronger our brand, we found that we've been able to absorb these knocks and continue to grow and be profitable. So we've got to a stage now where we've got a huge amount of experience in managing these things. And if you look at all the traumas in the last 40 years, a lot have been in this part of the world.
