Investment Research Analysis Risk Management Emirates Airlines

Company Overview

Emirates Airlines shortly referred to as the Emirates, is Dubai’s flag carrier, set up in 1985 as a subsidiary of the government corporation The Emirates Group. The Emirates Group (Emirates Group) provides domestic, regional, and international air transportation services. Emirates Group offers flight services, cargo and ground handling, catering, and travel services.

Emirates Airlines is one of the two divisions of the Emirates Group. It is the largest airline in the Middle East, operating from its hub at Dubai International Airport. The carrier flies the biggest Airbus 777 and Boeing A380 fleet in the world, exceeding 250 aircraft. Its expanded destination network includes 153 points on six continents. The company is distinguished for its inflight entertainment, regionally inspired cuisine, and luxury service. It also operates the world’s longest scheduled flight from Dubai to Auckland. Its cabin-crew staff is about 21,000 people.

Founders

• Ahmed bin Saeed Al Maktoum

Sheikh Ahmed bin Saeed Al Maktoum began his aviation career in 1985 when he was appointed President of the Dubai Department of Civil Aviation. In the same year, he became Chairman of the newly founded Emirates and helmed the airline launch with two leased aircraft to two destinations from Dubai. Today, he leads the Emirates Group, which includes dnata. Sheikh Ahmed has contributed immensely to Dubai’s global stature as a leading business, tourism, trade, and transport hub, with aviation now accounting for 28% of its GDP.

• Maurice Flanagan

Sir Maurice Flanagan was a British businessman who founded Emirates Airlines as the CEO and executive vice-chairman of the Emirates Group. He spent 25 years with BOAC and British Airways and held senior management positions with British Airways. In 1978, Flanagan was appointed director and general manager of Dubai National Air Travel Agency, and 7 years later; the Dubai government employed Flanagan to found Emirates, which was an immediate success. In 1990, Flanagan was appointed group managing director of the Emirates Group and became vice chairman and group president in July 2003. He was appointed executive vice chairman in 2006.

Board of Directors

Ahmed Bin Saeed Al Maktoum

Chairman

• He began his aviation career in 1985, became Chairman of the newly founded Emirates, and helmed the airline launch with two leased aircraft to two destinations from Dubai.
• Leads the Emirates Group, which includes dnata.
• With several leadership roles in government, his role in formulating policies and strategies has helped strengthen Dubai’s vision, economy, communities, and culture. He patronizes many charitable organizations and has won prestigious national and international accolades.
• Has a bachelor’s degree from the University of Denver, Colorado, USA. The Royal Aeronautical Society honored his achievements in aviation with a fellowship at the 1994 Farnborough Air Show, UK. In May 2013, he received an honorary degree of Doctor of Science from City University London – Cass Business School.

Tim Clark

President, Emirates Airline

• Joined Emirates airline’s founding team in 1985 as Head of Airline Planning and became President in 2003.
• Before joining Emirates, he was a route planner at Gulf Air, which had recruited him from Caledonian Airways. He also was Managing Director of Sri Lankan Airlines until 2008.
• He holds a degree in Economics from London University, UK, and is a Fellow of the Royal Aeronautical Society. He also holds an honorary doctorate from the University of Middlesex and an honorary degree from the Newcastle Business School at Northumbria University, both in the UK.

Michael Doersam

Chief Financial Officer, Emirates Group

• Responsible for managing Finance Strategy, Financial Reporting, Treasury, Management Accounting, Global Financial Services, and Insurance at the Emirates Group.
• He joined Emirates in 2006 as Vice President for Outstation Finance and Risk Management, overseeing the airline’s finance activities across 80 countries and the Group’s credit risk management.
• In 2008, he was promoted to Senior Vice President of Group Finance, and in 2021 he was appointed to his current role.
• Michael holds a Diploma in Business Administration from the Private University of the German Federal Reserve Bank, a Diploma in International Management from INSEAD Business School, and a Certificate of Advanced Studies from the University of St. Gallen.
• He is actively engaged with the aviation industry as chair of the Airline Financial Advisory Council of the International Air Transport Association (IATA) and guest lectures at the University of St. Gallen.

Executive Team

Adnan Kazim

Chief Commercial Officer, Emirates Airline

• Adnan Kazim leads Emirates’ Commercial Operations across the airline’s vast network of nearly 160 destinations in 86 countries, including major departments in Dubai such as e-Commerce, Retail & Contact Centers, the Emirates Skywards loyalty program, and Emirates SkyCargo.
• He also heads the airline’s Strategic Planning and Revenue Optimization teams, which are critical functions, and his teams play an integral role in supporting the airline’s commercial success.
• Joined Emirates in 1992. His career graph rose quickly, and he successfully led the airline’s commercial regions, appointed in senior management roles that included Senior Vice President of Gulf, M.E. & Iran, and Senior Vice President of Africa.
• His vast experience helped him transition into a leadership role to shape the airline’s growth strategy in fleet planning, market expansion, and governmental relations. He most recently held the Divisional Senior Vice President, Strategic Planning, Revenue Optimization & Aeropolitical Affairs role.
• Adnan graduated from Al Ain University, UAE.

Abdulaziz Abdulla Abdulrahman Al Ali

Executive Vice President Human Resources, Emirates Airline & Group

• Joined Emirates in 1986 and has been an integral member of the Emirates Group for 35 years.
• In July 2003, he became Emirates’ Executive Vice President of Human Resources.
• Responsible for the Group’s HR strategy, which manages the overall provision of the human resources function, including policies, training and development, hiring, and retention.
• He is also responsible for the Group’s medical services department and Emirates Aviation University.
• Mr. Al Ali graduated with a BA Honors in Mathematics from the University of Essex, England. He earned a post-graduate MSc in Mathematics from the University of Wisconsin, Milwaukee, USA.

Ali Mubarak Al Soori

Executive Vice President of Chairman’s Office, Facilities/Projects Management and P&L

• Joined Emirates in 1986.
• Responsible for directing the Emirates Group’s varied procurement activities and has been a leading figure in the construction of various assets and building facilities around the globe.
• Oversee multiple projects in our multibillion-dollar property portfolio and the hospitality sector, including the Emirates Headquarters building, the dnata Travel Centre, and the Emirates Engineering Centre.
• Managing returns on our hotel, commercial, and accommodation assets.

Adel Al Redha

Chief Operating Officer, Emirates Airline

• Joined Emirates in 1988
• Taken on broader responsibilities with the growth of the company. His experience over the years has covered all aspects of operations and logistics, including engineering, flight operations, service delivery, airport services, network operations, and aircraft procurement.
• Appointed to his current role in 2013. In his various roles with the company, he was instrumental in introducing ab initio cadet programs, engineering apprenticeships, and training in air transport management for UAE nationals pursuing careers in aviation.
• Expanding Emirates’ engineering and maintenance department, including developing the state-of-the-art engine maintenance shop and establishing the Emirates Flight Training Academy.
• Key participant in the definition of aircraft specifications and in scoping Emirates products in relation to cabin interiors and inflight entertainment.
• She was instrumental in digitizing all aspects of operations, most recently by introducing paperless cockpits and biometric machines, and automated passenger movement systems within the airport.
• A Fellow of the Royal Aeronautical Society, Mr. Al Redha holds a Bachelor of Science in Engineering Technology/Aircraft Maintenance from the University of Northrop, USA, and a Master’s degree in Air Transport from Cranfield University, UK.

Nigel Hopkins

Executive Vice President of Service Departments, Emirates Airlines

• Appointed as the Executive Vice President. Service Department in Emirates Airline in June 2005.
• Manages the company’s finance, treasury, IT, legal, and insurance services.
• Previously headed the Group Finance team as Senior Vice President and held several other roles on the Finance team before that.
• A Fellow of the UK Association of Chartered Certified Accountants.

Insider Shares

As for the major holders of the shares for Emirates Airline, it can be broken down into several categories, including the percentage of shares held by all insiders, the percentage of shares held by institutions, the percentage of float held by institutions, and the number of institutions holding shares, having the value of 5.33%, 60.47%, 63.87%, and 129 respectively. As for the last 6 months, the total insider shares held are 336.61 million dollars.

Product Positioning

Emirates Airlines’ main products and services include the Chauffeur-drive, Lounges, Ground Services, ICE, In-flight entertainment system, catering, cabin, and many others, which are all related to air transportation to some extent. Emirates Airlines has some subsidiaries, such as Emirates Tour, Emirates Holiday, Congress Solution International, Arabian Adventure, etc.

According to the estimation, the company has employed approximately 59,519 employees to manage its worldwide operations, leading to an annual revenue of 25.1 billion dollars, with the airline’s net income of about 288 million dollars.

Emirates Airlines has many advantages, including various flight lines and destinations, loyal customers with high satisfaction, strong government support, and so on. Among all of them, being rich in oil can be considered the advantage that its competitors find most difficult to overcome. Dubai is one of the world’s leading oil-rich countries, and Dubai’s royal family owns Emirates Airlines. It means that the company has an unlimited supply of oil. In other words, the company doesn’t have to worry about fuel costs.

Yet, the major problems that Emirates Airlines faces now are the regulations and the covid-19 pandemic, which the abovementioned advantages cannot solve. As for the regulation part, the reason that Emirates Airline is established as a Middle Eastern company, compared with some local airline companies in the American and Western markets, it faces tougher regulations, thus being less well-known. On the other hand, as for the consequences of the pandemic, since a major component of UAE’s economy is contributed by tourism, as people became less willing to travel due to the covid-19, no matter how much cost fuels Emirates Airlines has, its revenue will only decline.

Competitive Analysis Globally

Emirates Airlines is a famous airline company based in Dubai, UAE. Started in year 1985, their operations were started with two aircraft, Boeing 737 and Airbus 300 B4. This airline is considered the largest airline in the Middle East. It operates about 3,600 flights per week from the Dubai International airport, which inspire travelers across the globe with its wide network of destinations, thus providing world-class service. There are several competitors for Emirates Airline, globally speaking:

Asia:

• Etihad Airways

Etihad Airways is the second largest airline in UAE. Established in the year 2003, it is headquartered in Abu Dhabi and owned by the Abu Dhabi Government. This airline operates about 1000 flights per week and covers 55 countries worldwide. It offers customers a network of 110 passengers and cargo destinations across six continents with more than 120 aircraft. Etihad is one of the business divisions of the Etihad Aviation Group. Apart from the airline services, Etihad also operates Etihad Holidays and Etihad Cargo. It has established its own airline association called Etihad Airways Partners, which includes Air Serbia, Jet Airways, and Air Seychelles. The main strength of this airline is being centrally located, thereby providing access to Asia and Europe.

• Qatar Airways

Also a top Emirates competitor, Qatar Airways is a state-owned airway headquartered in Qatar and established in 1997. The airlines link over 150 international destinations with a fleet of about 180 latest-generation 180 aircraft.

It is the youngest international airline serving about six continents. The company functions flights to various leisure and business destinations across the globe. It has strategic partnerships with Royal Air Maroc and Cathay Pacific. Qatar Airways has strong support from the Government of Qatar. It has the biggest advantage of being located in an oil-rich state, which greatly supports Qatar Airways’s finance.

• Fly Dubai

A Dubai aviation company, Fly Dubai, established in 2008, is owned by the Government and is a low-cost airline.  The airline operates in about 95 destinations and serves the Middle East, Asia, Europe, and Africa. It started off its aviation operations with almost 50 Boeing 737-800 NG aircraft. Over the years, Fly Dubai started its operations in many countries worldwide and currently flies about 1,400 flights per week. It has about 500 pilots and 1,000 cabin crews serving the flight. The main strength of this airline is that it has had a quick rate of growth since its formation. It has a strong operational airport having a high passenger flight rate. As this airline is one of the fastest-growing airlines and aims to make travel more affordable, Fly Dubai is a top Emirates competitor.

• Malaysia Airlines

Malaysia Airlines is an airline company that operates from Kuala Lumpur International Airport. The airlines offer air transportation services in and around Malaysia and other destinations like Europe, the Americas, Australia, Africa, and the Middle East. This airline also handles commercial services, including government and corporate travel, charter services, and flight simulator. Malaysia Airlines maintains two subsidiary airlines called MASwings and Firefly. Inter-Borneo flights are taken care of by MASwings. Firefly functions flights from Penang and Subang International Airport. Malaysia Airlines also has a freighter fleet which is taken care of by its sister company MASkargo.

• Turkish Airlines

A famous airline in Turkey, Turkish Airlines serves many non-stop destinations from one airport. It is the first airline company in Turkey. This airline started its aviation journey with five aircraft in the year 1933. At present, it has about 326 aircraft flying to about 120 countries. It also provides services like maintenance and repair to the aviation sector. It is a member of Star Alliance which is a global airline network. Over the years, it has gained a high-quality flying experience for its passengers. It provides various in-flight services like lounge facilities and in-flight entertainment, highlighting the brand. It has a strong association with the sports team and has also sponsored many events, which increased the brand equity of Turkish Airlines.

• Saudi Arabian Airlines

Saudi Arabian Airlines is a well-known airline in Saudi Arabia. The company provides air transportation services for passengers, baggage, and cargo. This airline is available across the world. Established in 1945, it started its operations with a single twin-engine DC-3. Later the airlines went on to purchase more engines, thus forming the largest airline in the world. At present, Saudi Arabian Airlines owns about 140 aircraft which include the latest jets like B777-268L, B787-9, Airbus A320-200, Airbus A330-300, and Airbus A321.

• Cathay Pacific

Cathay Pacific Airways is a famous aviation company in Hong Kong. It has its head office and main hub at Hong Kong international airport. Established in 1946, this airline’s operations and subsidiaries have services passenger and cargo to almost 19 destinations in about 60 countries across the globe.

Europe:

• Lufthansa

Lufthansa is an aviation company and the largest German airline.  It has operations worldwide. The main business segments of Lufthansa include maintenance, logistics, overhaul service, and catering. This airline is a part of Star Alliance, which includes Thai Airways, Air Canada, and United Airlines, making it the world’s largest alliance.

• Air France

A leading airline company in France, Air France was formed in 1933. Air France is the number one French airline and is considered a leading player in three main activities: cargo transport, aircraft maintenance, and passenger transport.

• British Airways

British Airways, the largest airline company in the United Kingdom, was formed in 1974. The British Government established it to manage two nationalized airline corporations, British European Airways, and British Overseas Airways Corporation.

US:

• Delta Airlines

Delta Air Lines, Inc., typically referred to as Delta, is one of the major airlines of the United States and a legacy carrier. One of the world’s oldest airlines in operation, Delta is headquartered in Atlanta, Georgia.

Risk Factors 

The pandemic has greatly affected the air travel industry for the worse, and this has led to new risk factors. The main financial factors Emirates Airlines faces are Covid 19 travel restrictions, interest rates, currency, and market risks.

• Covid Travel Restrictions and Geopolitical Uncertainty

During the start of the pandemic, many airports suspended flights to prevent more Covid 19 cases. The TSA reported a 96% drop in air travel, with nearly 80% of hotel rooms empty in the US. The coronavirus has halted flights, and thus many airlines have reported net losses.

• Interest Rate Risk

Fluctuations in interest rates affect borrowings and savings. To manage this, Emirates targets a balanced portfolio approach and uses hedging solutions such as interest rate swaps. After considering the impact of interest rate swaps, almost 62% of Emirates Airlines’ net debt was on a fixed interest rate basis, with the remaining 38% being on floating interest rates.

• Currency Risk

Due to reduced operations, movements in the exchange rate have had an insignificant adverse impact of AED 150m on Emirates’ operating results. Emirates uses forward contracts, currency swaps, and natural hedges to manage exchange rate movements.

• Market Risk

This is the risk where a financial instrument’s fair value or future cash flows will fluctuate because of changes in market prices (such as the cost of jet fuel). Due to rising inflation, average oil prices have remained persistently high.

• Direct Operating Costs

Direct operating costs include aircraft-related handling costs and inflight catering. These costs have increased by 70.7% to AED 10 billion.

• Credit Risk

This is the risk where a specific loss allowance is recognized when Emirates becomes aware of a customer experiencing financial difficulty. Trade receivables are written off once management has determined that such an amount will not be recovered.

• Liquidity Risk

This is the risk that Emirates may be unable to meet its obligations associated with financial liabilities when they fall due and to replace funds when they are withdrawn.

Emirates Airlines manages its liquidity by:

• Maintaining rolling forecasts of Emirates’ liquidity position based on expected cash flows
• Monitor and optimize working capital needs, liquidity ratios, and net current assets against industry standards
• Maintaining debt financing plans and diversified credit lines

Emirates is exposed to various financial risks that involve analysis, evaluation, acceptance, and management of some degree of risk or combination of risks. They have aimed to achieve an appropriate balance between risk and return and to minimize potential adverse effects on its financial performance. Emirates has risk management programs carried out under guidelines approved by senior management. Their risk management procedures are designed to identify and analyze these risks, set appropriate risk limits and controls, and monitor the risks and adherence to limits by means of reliable and up-to-date information.

Stock Price Analysis

Background

The Dubai government is the sole owner of Emirates Group, but they do not invest new money into the company or interfere with the airline’s running. Emirates Airlines is the largest airline in the Middle East and trades on the Abu Dhabi Securities Exchange. Emirates Airlines is a subsidiary of Emirates Group, headquartered in Garhoud, Dubai, and is owned by the government of Dubai’s Investment Corporation of Dubai (ICD).

The ICD is a sovereign wealth fund of the government of Dubai, with a mandate to manage the government’s portfolio of commercial companies and investments. In 2022, the ICD reported assets worth USD 305 billion and a revenue of $62 billion. In 2007, the government of Dubai transferred the majority stake in the National Bank of Dubai (NBD) and Emirates Airlines to the ICB. Subsequently, on March 6th, 2007, Emirates Bank International merged with NBD to form Emirates NBD (ENBD). Emirates NBD is owned by the Dubai government and is one of the largest banking groups in the Middle East in terms of assets.

Currently, the only way to invest in Emirates Airlines is through Emirates NBD stock, as investors cannot invest directly in the airline. Instead of looking at Emirates Airlines stock, the focus should be on Emirates NBD stock. Still, we should also remember that the stock is not completely representative of Emirates Airlines’ stock.

Stock Price Since IPO

Emirates NBD (ticker symbol: EMIRATESNBD.AE) was listed on the Dubai Financial Market on October 16th, 2007, for AED 8.10. Since, the stock has grown to AED 13.85 (as of 8/18/2022), a 70.99% increase since IPO, and a return of 3.32% YTD. Emirates NBD pays a dividend of 3.30%. The 2022 yearly high for the stock was 15.50 (3/3/2022), and the yearly low was 11.80 (7/6/2022). The stock trades with an average volume of 3.2 million and has a market cap of 87 billion.

• Owned solely by the Dubai government (ICD)
• A subsidiary of Emirates Group
• Traded on the Abu Dhabi Securities Exchange (ADX)
• The majority stake transferred to ICD (NBD and Emirates Bank merger)
• Listed through ENBD (unable to invest directly)
• During the pandemic, the stock fell from AED 13.9 in Jan. 2020 to 6.56 Apr 2020, a 52.80% decrease.
• Since then, the stock price has recovered gradually to pre-pandemic levels

Source from Investopedia

• AED 13.85 (8/18/2022)
• 70.99% increase since the IPO
• YTD return of 3.32%
• Yearly high 15.50  (3/3/2022)
• Yearly low 11.80 (7/6/2022)
• The average trading volume of 3,280,696
• Market Cap 87 bn
• Pays dividend of 3.69%
• Stock price in consolidation from the latter half of 2021 to the first quarter of 2022

Target Market Research

Learning about Emirates Airlines’ target market can help assess how its product or service fits into a specific market, how well it will perform, and identify which markets are worth pursuing and which are not.

Target Market:

The target market of Emirates Airlines is upper and upper-middle class, value-seeking fliers that are less sensitive to price. Emirates targets successful people who like to stand out from the crowd. Their customers tend to be perceived as progressive and career-oriented people interested in a foreign culture, traveling, and enjoying new experiences and risks.

Acquisition of Targeted Companies:

Emirates Airlines does not have any stake in other airlines as the company believes that the strain from mergers and acquisitions is not worth it, as well as the low success rate from mergers deterring the airline. Instead, the airline focuses on results and does not get sidetracked by M&A activity. Airline President Sir Tim Clark believes that the time and money required to do the investment work out is not worth the returns and that any merger or acquisition may take the focus and attention of the management team away from Emirates.

Dnata:

Dnata (Dubai National Air Travel Agency), a subsidiary of Emirates Group, is an Emirati airport services provider which provides aircraft ground handling, cargo, travel, and flight catering services. Dnata and Emirates are independent entities and do not form a group by IFR standards but are under common management.

In 2008, when Emirates Group moved into its new headquarters in Dubai, Dnata acquired a majority 19.99% stake in its partner Hogg Robinson Group, a British corporate travel management company. American Express Global Business Travel acquired Hogg Robinson Group in July 2018.

In 2012, Dnata acquired a majority stake in En Route International LTD, a UK bakery and packaged food solutions supplier. At the time of the transaction, En Route International LTD has over 10 years of catering experience in the travel market and has operations in London, Dubai, and the USA.

Marketing to increase Brand Recognition

Emirates aims to create an emotional connection with its customers to ensure positive associations with the brand through loyalty programs and engaging and inspiring campaign videos that are short, dynamic, and interesting to watch. Emirates uses the ‘human face; of the brand to further connect with its customers emotionally. The new company slogan, “Fly Emirates, Fly Better,” was introduced in October 2018. The new short and simple slogan is easy to remember and evokes positive associations with the brand.

Emirates has done a very good job of associating luxury with its brand. They were the first airline to provide entertainment screens for all classes (ICE), in-flight showers, and private suites.

Challenges Faced

Though Emirates has had multiple successful advertising campaigns, it tends to overlook faults in its marketing strategies and is overconfident about its position in the aviation industry. Emirates needs to regularly portray its value purpose to customers, given the rapid expansion of its competitors such as Qatar Airways and Etihad Airways, as well as low-cost airlines such as Air Arabia, to ensure that Emirates retains its competitive edge in the industry. Emirates mainly targets the elite class, which may become a future threat as the elite class may choose to go to another airline that offers the same quality and level of service but for a much lower price.

SWOT Analysis

Strength:

• CUSTOMER SERVICE

Whether it’s entertainment lounges, in-flight entertainment, chauffeur drive, or cabin service, Emirates Airlines provides excellent customer service so that the customers would have the best experience onboard.

• MARKETING

Emirates Airlines utilizes multiple social media platforms for promotion and marketing, like Facebook, Google, Youtube, and other channels like TV and print media. The company has put a lot of focus on branding.

• DESTINATIONS

Emirates Airlines has a fleet of more than 300 aircraft. However, the company offers 157 destinations in 150 cities in over 80 countries across 6 continents. Before the COVID-19 pandemic, the airline had 3600 flights weekly at terminal 3 of Dubai International Airport.

• LOYAL CUSTOMERS

Emirates Airlines has established a very large database of loyal customers through customer satisfaction, in-flight entertainment, and various services. Satisfied customers would prefer to enjoy the same experience over and over again.

• OIL-RICH COUNTRY

Dubai is one of the world’s leading oil-rich countries, and Dubai’s royal family owns Emirates Airlines. It means that the company has excess to an unlimited supply of oil. In other words, the company doesn’t have to worry about fuel costs.

• STRONG BACKING

Dubai’s government has become a hub of the Asian market with many resources. When an airline has strong power backing, it could face many financial crises like covid-19.

• BRAND VALUE

According to an estimate by Statista, the brand value of Emirate Airlines in 2020 was 6.3 billion dollars, and it has slightly fallen from 6.8 billion. However, the airline ranked at the 4 positions in terms of the brand value of the world’s leading airlines. Delta, American, and United Airlines have the world’s highest brand value.

• SPONSORSHIP

Emirates Airlines has sponsored many projects like cables over the River Thames in London and sporting events like ICC Cricket World Cup, IPL, FIFA World Cup, Scottish Junior Football Association, Super League Rugby League, Australian Turf Club Autumn, and many others. The sponsorship of such international events has amplified the brand reputation of Emirates Airlines.

Weakness:

• HIGH COST

The airline industry has become very competitive in recent years. Therefore, Emirates Airlines has to invest many resources to maintain its market position.

• ONWARD MOVING TRAFFIC

Emirates Airlines has very limited home-based air travelers. Most of the passengers of Emirates Airlines are international tourists and foreigners who are either visiting UAE or doing jobs. When the COVID-19 pandemic started, they all postponed their traveling plans.

• NOT IN THE US

The United States is the world’s largest rich consumer market. However, Emirates Airlines doesn’t seem to ground its fleet in the US. The company’s limited presence in the US market is a major weakness.

Opportunity:

• ALLIANCE

Emirates Airlines should partner with other international airlines in different markets. It would help Emirates Airlines to expand its geographic market and attract a lot of new passengers.

• MORE DESTINATIONS

Emirates Airlines is currently offering 157 destinations in 80 countries across the globe. Now, the company should add more destinations to its route list. It would increase airlines’ market reach and influence in the international market.

• NEW FLEET

The current fleet of Emirates Airlines comprises Boeing 777 and Airbus 300. It’s no doubt Airbus and Boeing both are the world’s top airline manufacturing companies. Now, the company should buy aircraft from other airlines. It would diversify the risk and increase the trust of customers.

Threat:

• REGULATIONS

Since Emirates Airlines is a Middle Eastern company, it faces difficulty establishing its name in the Western and American markets. It’s not just limited to cultural phobia; Emirates Airlines must also face tough regulations.

• COMPETITION IN THE MIDDLE EAST

The airline industry in the Middle East has become very competitive. Many foreign and local aviation companies are providing air-travel services. Emirates Airlines is investing a lot of resources to maintain its market position. It has decreased the company’s profitability.

• PANDEMIC

UAE is a tourist and oil-based economy. The COVID-19 pandemic and eco-friendly movements have shut down both the industries. Emirates Airlines has been declining since then.

Brand Position

As the Director of Evaluation at Brand Finance said, the pandemic has brought many unexpected restrictions to the global travel industry, which has had a negative impact on airline brand values. According to him, although as the world looks to a post-Covid future, airline brands are beginning to taxi for take-off, and their brand values have grown this year. Yet, it still needs to take a long way to return to pre-pandemic levels.

With respect to this fact, according to Brand Finance, the world’s leading brand valuation consultancy., Dubai-based Emirates Airlines was ranked first regionally and fourth internationally in the top ten most valuable airline brands in 2022. The new classification showed that the value of the Emirates airline brand amounted to $4.98 billion (18.3 billion dirhams), an increase of 6.8% compared to the last year when the brand value of the airline reached $4.66 billion.

Mergers and Acquisitions

Emirates Airlines does not participate in any M&A activity. Instead, Dnata (Dubai National Air Travel Agency), a subsidiary of Emirates Group, partakes in these deals. Emirates Airlines and Dnata are under common management. Together, they are referred to as Emirates Group.

UAE carriers have never been fond of airline alliances. Emirates has opted not to join any of the three major alliances: Star Alliance, OneWorld, and SkyTeam. Instead, Emirates chose to focus on its growth as a hub.

Dnata Background

Dnata is an Emirati airport services provider which provides aircraft ground handling, cargo, travel, and flight catering services across five continents.

Recent Transactions

In April 2022, Dnata acquired the German company Wisskirchen Handling Services. Wisskirchen Handling Services is the exclusive operator of the Cologne Bonn Cargo Centre, a 12,000 sqm facility at Cologne/Bonn Airport, providing a full range of cargo services. Wisskirchen handles more than 85,000 tonnes of cargo annually, including general cargo, perishables, pharmaceuticals, dangerous goods, electronics, and fast-moving consumer goods.

Dnata has executed agreements with the owner of Wisskirchen, Oliver Hellwig, to acquire 100% of the shares in the company, but the parties agreed not to disclose details of the transaction. Dnata has made significant investments in advanced infrastructure to enhance its cargo offering. Dnata’s entry into the German market will further develop Emirates Group’s position as a leading global cargo service provider.

In 2019, Dnata purchased a 50% stake in Dubai Express, Freightworks LLC, and a 25.5% stake in Bolloré Logistics LLC, UAE. As a result of the transaction, Dnata is now the sole owner of Dubai Express, Freightworks LLC, and holds a majority stake of 51% in Bolloré Logistics LLC, UAE.

Freightworks operates under the license of Dubai Express L.L.C and is a Dubai-based international multimodal freight forwarder, logistics, and supply chain provider. Their service offerings include customs compliance, project cargo planning, aircraft parts, ship spare logistics, and full-service handling of events and exhibitions. Freightworks also provides commercial and private removal services to local and international origins and destinations, including a ‘white gloves’ fine art division, while linking customers’ supply chain requirements through its network of partners worldwide.

Bolloré Logistics LLC, UAE, is one of the United Arab Emirates’ largest logistics solutions providers specializing in international freight forwarding and transportation. The company operates in 106 countries. Although dnata has acquired a majority stake in Bolloré Logistics LLC, UAE, the company will continue to be operated as an integrated part of Bolloré Transport and Logistics.

Other Notable Transactions

In 2012, Dnata acquired En Route International LTD. En Route International LTD provides a range of premium quality products. Highly creative and innovative food solutions boast a growing client list that includes British Airways, Delta, and Emirates and operates key distribution centers at London Heathrow in the UK and Hartsfield-Jackson Atlanta International Airport in the USA.

In 2015, the company purchased a majority stake in RM Ground Services in Brazil, marking Dnata’s first step into the South American market. RM Ground Services was founded in 2004 and operated at more airports in Brazil than any other ground handling company. The company offers passenger and ramp handling and cargo service and provides services to international airlines and major cargo carriers. Under the deal, the company was rebranded to Dnata.

In 2016, Dnata acquired a 100% stake in US airport ground handling company Ground Services International (GSI). GSI provides ground handling services to international carriers and cargo operators in 14 different cities across the US. The acquisition came with further plans for Dnata to advance in the North American market.

In 2018, Dnata acquired bd4travel via a majority stake. The company’s sophisticated algorithms allow online travel agencies to engage with anonymous customers and personalize their shopping experience in real-time, recommending the most relevant products, services, and content. bd4travel runs more than 40 separate sites and serves leading travel organizations in 17 markets. Bd4travel uses artificial intelligence to determine intent and interests as users search and shop on travel websites. The system’s machine learning algorithms generate anonymous user profiles and instant recommendations for products, content, and services to personalize the digital experience for each customer. Before the acquisition, Dnata used to be a customer of bd4travel. The acquisition complements dnata’s suite of travel brands enabling enhanced customer website experiences.

In 2018, DUBZ was acquired via a majority stake by Dnata. Founded in 2016, DUBZ collects baggage from passengers’ homes or hotels, seals and weighs bags, securely transports them to Dubai International Airport, and hands them over to passengers for self-check-in, available 24 hours a day. After taking a majority stake in DUBZ, Dnata now offers passengers a home check-in service where they will not only have their baggage collected from them at home/hotel but also have baggage checked in on the spot and collect boarding passes from DUBZ. Passengers using this service can proceed straight to airport immigration and avoid queues at the airport check-in counter. This is a notable acquisition as Emirates continues to remain very competitive by offering exclusive and innovative services to its customers.

The trend is that Dnata acquires companies via vertical integration in undisclosed transactions. This helps Emirates Group control costs for Emirates Airlines and offer their services to other airlines.

Recent Acquisitions

2022: Wisskirchen Handling Services

• The exclusive operator of the Cologne Bonn Cargo Centre
• Handles more than 85,000 tonnes of cargo annually, including general cargo, perishables, pharmaceuticals, dangerous goods, electronics, and fast-moving consumer goods.

2019: Dubai Express, Freightworks LLC

2019: Bolloré Logistics LLC, UAE