Emirates Shifts Planes East as Trump Ban Stymies U.S. PlansBy
U.S. load factors are ‘percentage points’ lower than usual
Airline looks at adding capacity to Malaysia, Pacific region
Emirates will shift aircraft to destinations in Malaysia, Oceania and Africa as the airline seeks alternatives after eliminating 25 weekly flights to the U.S. in the fallout from President Donald Trump’s travel restrictions.
Planes on U.S. routes usually fly more than 80 percent full in the summer season but are now “percentage points” less than that, hurting the flights’ profitability, Emirates President Tim Clark said Thursday in an interview at company headquarters in Dubai. The airliners might be redeployed to markets ranging from countries in the Pacific to Africa and Europe, he said.
Emirates can reinstate the flights if the U.S. relaxes H-1B work visa and general entry rules, helping traffic, Clark said. “Unintended consequences need to be dealt with by the U.S.,” as the country is also losing out on “pretty robust and powerful spending” capacity of families making leisure visits from the Middle East, he said.
The state-owned carrier outlined plans Wednesday to scale back capacity as of May on five of the 12 U.S. routes it serves, citing the country’s tightening visa restrictions and a ban on carrying personal electronics from some locations, including Emirates’ Dubai hub. The capacity cutbacks mark an unusual move for an airline that in recent years was known for huge plane orders to add flights and routes across its network, which currently comprises 155 destinations.
The flight reductions are also a sign that Emirates is backing down from an ambitious expansion that Clark was pushing in defiance of U.S. competitors’ efforts to fend off Persian Gulf airlines from their home market. Chief Commercial Officer Thierry Antinori outlined plans in 2013 to serve 15 U.S. cities by 2018, and Clark predicted three years ago that the market would become one of Emirates’ three largest sources of revenue.
The airline had a “difficult” fiscal fourth quarter and the U.S. travel ban “hasn’t helped,” Clark said. Emirates, which is set within weeks to announce earnings for the year through March, is paying close attention to its operations to boost profitability. The tighter U.S. travel rules have affected summer bookings from western Asia, the Middle East and North Africa across most segments, Clark said.
“Where we were facing difficulties and challenging times this year, it has worsened slightly in the last quarter,” he said in a Bloomberg Television interview with Guy Johnson. “The company will not make a loss, our cash remains robust and we’ll make the adjustments that we have to to the business to ensure that we can restore profitability to the levels it used to be and get our cash growing to levels it was.”
Emirates’ traffic growth rates have already been fading. The carrier posted its first annual revenue decline in a decade for the 12 months ended March 2016, and sales since then have been hurt by lower oil prices reducing Middle East business travel as well as terrorism attacks in western Europe, Turkey and North Africa that have discouraged tourism.
“All airlines face this at some point in their history,” Clark said. “We’re no different, because we’re profit-driven and have no subsidies whatsoever from the shareholder. Any good business makes adjustments to its production in areas if things look less robust than they used to.”
Emirates has no plans to suspend any U.S. routes, Clark said. The flight reductions are temporary, and new aircraft it’s receiving this year will still be assigned to the affected cities when “things restore themselves to some kind of equilibrium” in the market. Emirates will continue to consider potential orders at U.S. planemaker Boeing Co., as well as European competitor Airbus SE, as it looks at narrow-body aircraft.