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CNBC Transcript: Interview with Tim Clark, President of Emirates Airline

Following are excerpts from the transcript of a CNBC interview by Hadley Gamble and Tim Clark, President of Emirates Airline


Tim Clark, President of Emirates Airline, thank you very much for joining CNBC. Just two years ago you guys broke major records, here, what's on track for this time?

Well I think as far as the airline is concerned we're not going to buy large numbers of wide-bodied aircrafts, we will be signing a contract for the training school, where we will be buying 27 aircraft, a mixture of smaller turbo-prop engines, piston engines, and jets for our training school which opens in October of next year.

The other major one we're doing is basically a link to those, those contracts we signed in 2013, the Boeing 777x, you know we bought 150 of those with 50 options, so we just concluded the maintenance support and an arrangement with GE who are powering those aircrafts so with the spare engines and everything else it's about an 18 billion dollar contract over the life-time of those aeroplanes which is about 12-15 years. So in terms of value it will probably be one of the largest orders that will go down at this show, although I am not party to what others have done, but it is certainly very significant and good for the Americas market, good for the company, GE, we have a very good relationship with them.

So a major deal with GE, but what's behind the slow-down in orders in Passenger aircrafts?

Well, we're actually not slowing down. When you think that in November 2013 we ordered the 150, also signed for 50 A380s, taking this to a total book of 140. We have 68 of those, actually 67, but one is coming down the line as we speak – delivery in the next few days. And that's on top of a delivery stream of 777-300 ers, which will come to an end in April 18, so we have a large number of aircraft still to be delivered, in addition to the ones that we signed for in November 13, so the fleet is expanding all the time, so to have ordered more now would have seen them coming in 2020-22-23, so we probably thought we'd just hold for the time-being.

What's your biggest cost for doing business? Is it oil? How does what's happening in the oil market impact your profit?

Well it is a double edged sword. Obviously we're getting cheaper fuel, it now represents 28% of our costs whereas before it was 43% and that's working its way into the bottom line. The top line hasn't been as strong because of unit revenue pressures that we've had through our own network. On the other hand we've got oil and gas, the largest corporate account that the airline and the industry has.

Throughout the industry now. And for us the diminishing element of the oil and gas exploration business, which drives a lot of our premium business, has also gone south as they say. So that's affecting the volumes of yields we're getting in the premium cabins, and of course, you know, you live with these things, that's just just life.

And in terms of Geopolitics, what's happening in Syria, what's happened in Egypt a week or so ago, you had to divert flights. How does that impact the airline?

Look these are difficult times, the airline in its 30 year history has been through many times such as this, what happened in Egypt last week, is almost a little bit of a game-changer, I'm afraid to say because of the way the industry has to look at what's happened over the last 2-3 years , the Malaysian 370, Malaysian 17 and a number of incidents which suggest to us that security has got to be raised across our industry, this will be driven, not only by us, but by the States and, I don't mean the United States, the members who see this as a major problem. Geopolitics as I said, we're kind of toughened to it now. We've navigated the airline through 30 years of difficulties, particularly in this part of the region successfully and we've expanded our business profitably and I suppose we'll just continue to do that.

When the MH17 crashed, you said it is imperative that everyone get to the bottom of what really happened, do you feel like you've made any movement towards that?

In terms of MH17, the kind of jury is still out on who did it, but what caused it I don't think there is any doubts about that and the fact that we wanted to have a kind of assimilation of data, a collection of data throughout the industry, when people have information they can share with other members of the industry, even though they may be competitors of course, that it was good thing and we kind of, we've lifted that now, there is quite a lot of interactions with airlines when there are threats and risks, but not as good as it should be in my view.

So more room to grow and improve those relationships?

Yes, I think that we've got to help ourselves a little bit in this, because as you say, Geopolitics is another dimension which influences this kind of thing, so the air industry, the airline industry, aviation industry has got to equip itself better to deal with these type of things.

I want to ask you – US carriers, continuing to make a lot of noise, they accuse you of taking subsidies in terms of fuel, as much as $42 bn across the middle east carriers, they also say there should be an end to the open skies policy, what's your take?

Well I think we have almost exhausted ourselves in explaining why, we Emirates are not subsidized. I don't think we could have been more clear, more transparent, evidenced in any number of ways to show that this company is not subsidized in any way shape or form by the Dubai government. We've made that clear with evidence, we've shown it in multiple figures, submissions etc. Now for someone to keep banging on that particular drum is for me a complete waste of time. I I, as far as open skies are concerned, for me I am a multi-lateralist, I am a liberalist, I certainly believe that economies can only grow when you remove restrictions, not just in the aviation side, but in every other business element of a GDP.

To shut down, or selectively reduce open skies, what ever you think, or what ever you would like to do, it has unintended consequences. For instance, if in China today, the US and China decided that because the US carriers have the lions share of transpacific routes, the Chinese really don't' get much, if the Chinese now say well actually we are not going to limit the number of carriers that you can actually fly into the US, only two carriers may fly, because you are changing the rules about open skies, you're changing your whole approach to air access. That could mean one of the three American carriers loses its right to fly to China, now these are the unintended consequences, now if you go down this path do not expect it to be smooth and plain sailing, because it certainly won't be, there are too many risks there.

I have to ask you about A380s, 777, dreamliners, you've suggested to these airlines, or rather these air companies, you've suggested to make changes to the aircraft and they've been loath to do that. Is that something that is going to impact t orders going forward and would you look to other aircraft makers, like the Chinese for example.

No no, I, let me be quite clear on this. We are working with Airbus in regards to trying to improve the 380. And there is a template on the drawing board and they are ready to go, it's just got to get the commercial aspect of it done. Remember on the 777300 ER that Emirates had a very large part to play on what that aircraft has become today. Equally it was Emirates that pushed Boeing to consider seriously and finally push for the 777x as a proposition. And we are working with both Airbus and Boeing on the smaller three. The 777, the 787 range and also the 350 so I don't think there is any question about us trying to influence or sort of marginalise the sort of work they've been doing some great work both sides of the Atlantic they have some great aeroplanes now.

So even with this renewed competition, now from the Chinese, where not going to see an end to the airbus vs boeing duopoly?

You can never say never. It's all very well to say you are going to do that. It's taken both boeing, boeing mainly, it's been around for a long time. Airbus came into existence as a result of multiple aviation entities in Europe coming together to form the airbus consortium as it was called then and that has a lot of British, French, German, Spanish engineering, it's been going on for decades before that, if the Chinese are going to do that then it's a big catch up that's got to take place. I'm not saying that will not happen. They have the human resource, they have the physically resource, the wealth to do it. But it is a very very complex business to get into, the barriers for entry are very high, but anyway, never say never.

I have to ask you about potential acquisitions, you have a partnership with QANTAS, are we going to see any agreements with European carriers?

At the moment no, with one big exception, most of them are hostile to our existence, frankly. But I would never say, we would never rule it out in the future. I don't want to be quoted as saying that Emirates is now looking at acquiring a European carrier, because we are certainly not doing that. We have an organic growth business model, with the exception of Sri Lankan a few years ago and more recently the QANTAS deal, but it is not an equity acquisition it's a very strong brave bold commercial partnership which is working well.

In terms of the set up you guys have in Dubai. You have the catering in house, you're also servicing your own aircraft, it's an incredible facility, what's behind the move to bring everything in house?

Well again it goes back to our routes. Back in the mid-80s when we drew up our business model we didn't want to be beholden to anything – you notice we are not part of alliances. The way we go on our business is central control. At the time we were forming the airline in the 90s people were hiving off information technology. hiving off engineering, hiving off cabin crew training. They were talking about a virtual airline. That was an anthema to our way of thinking, we wanted to do it all ourselves, so part of this huge expansion of the airline, in terms of fleet numbers was also an infrastructural spend. Which gets below the radar, you mentioned cabin crew training, this enourmous engineering facility we have. Our own IT. Large numbers of the workforce are involved in that, so we have a control, we control our own destiny. So it's part of the DNA, the business model, of being able to move at the pace that you want to, you're not controlled in anyway by third parties.

And so you're latest round of adverts feature Jennifer Aniston and they seem to take a tongue in cheek approach, to say that quality control is the most important aspect of the airline, what's behind this new ad campaign?

Well I think it's it's it's timelness. Because obviously we are trying to persuade the American markets that of course that we are a full service, high-quality airline and yes there is an element of tongue in cheek in the whole thing

Finally, 30 years of Emirates, where is the airline going next?

Well I often say we are about half way through so I reckon we can the fleet to about 500 wide-bodied. Along the lines of what we have today. We may introduce some smaller twins, when we get this airfield. The Dubai World Central, or the Dubai South as it's now called, fully operational in the middle of the next decade the capacity of that airport will go from 120 at it's first induction then up to 250 then the airline will be ready to move into its next phase or third phase which ever way you like to look at it, so.

Tim Clarke, president of Emirates airline, thank you so much for joining CNBC

My pleasure.

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