Emirates Air Competing With Other Carriers

Dubai government-owned Emirates has turned a profit, even as it assembled an array of 92 aircraft - one of the world's youngest fleets - and a smorgasbord of 83 destinations.

Emirates' operating costs are thought to be 40 percent lower than European rivals like KLM, according to UBS. It also benefits from Dubai's investments in infrastructure and zero tax rate, as well as the sheikdom's cheap labor costs. Salaries are kept low by laws that, for now, prohibit unions. Emirates also operates without a less profitable short-haul fleet or legacy costs like pension burdens.

And Emirates looks set to keep its costs down, ironically, by spending around $12 billion for 45 of Airbus' double-decker A380 super-jumbos, the forthcoming long-haul passenger jet with 555 seats in its smallest version. Each A380 is expected to operate around 13 percent more cheaply than a Boeing 747, the UBS report said.

To cope, Dubai is expanding its airport to handle 70 million passengers a year, which could put it behind Atlanta as the world's busiest airport.

Emirates caters to what was until recently an underserved region, with a Persian Gulf airport midway between Europe and Asia. It also consistently brings home awards on its service.

Dubai is a booming destination in its own right - for Brits, the second most popular beach destination outside Britain - with guaranteed sunny weather that draws in tourists and delays few flights.

Emirates focused first on Asia. Its debut destination was Karachi. Now, analysts say Asia is one of the industry's few growth markets. Gulf cities rely hugely on expatriate workers from India, Pakistan, Europe, Australia and increasingly, the Far East and North America.

Emirates and other Gulf airlines are cashing in as more workers flow to jobs here, while stealing passengers from European carriers flying to Asia and Australia, and Asian carriers flying to Europe.

Gulf-based carriers led by Emirates are going to form an ever-larger part of the global airline industry, according to research from JP Morgan.

"European carriers have not seen a competitor like this before," adds the UBS report.


AP Business Writer Lauren Villagran in New York contributed to this story.


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