Interview with the Emirates CEO Tim Clark

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They are having to lower prices to persuade customers to travel

“Although passenger numbers are growing, we’re having to introduce fare levels that are considerably lower than they were before, to induce people to travel. This is a result of all sorts of things going on in the last 18 months — whether it be socio-economic side of things or whether it be the terrorist activity, which has been prolific in the last two years, starting with Paris in November of ’15, then Brussels, then Nice. Then, the bombs in Istanbul airport.”

The low oil prices have not been as beneficial to the bottom line as hoped for

“In the old days, [fuel] used to represent 41 percent of our cost. It’s now well down, so you think that’s easy, they can make money. [But] what then happened is we had a race to the bottom. The euro started to fall. On top of that, the global economy lurched because the oil and gas sectors that drove so much of the economy — exploration, extraction, whatever it is — they tanked…The paradox is that as oil prices fell, so did profits…Had it been oil prices in isolation, without the global economy going into the situation that it is today, then maybe the story would’ve been different. But they’re very, very much linked.”

Other factors affecting them

“There are other forces which are agnostic to oil. Brexit. The state of the European Union. The way the Greeks, the Portuguese, and the Italians, and everything else are being dealt with, and how that’s affecting demand out of Europe. [Then,] the euro tanked, the pound went down [and] the [U.S.] dollar strengthened. We, of course, report in dollars because [the United Arab Emirates’] Dirham is linked to the dollar. The stronger the dollar is, all my markets outside of the dollar zone —which is most of them — went south. That bought the yield down.”

Exploring other areas other than price to extract revenue

“The trick is to match [price], and deliver more. That is becoming more difficult these days, because in the old days, we were the only kid on the block doing what we’re doing. Now, there are others who are emulating us…It’s becoming more competitive and let’s say, interesting. Because certain segments of our markets have become deeply discounted, we’re having to look and see whether we can extract more value through the the ancillary revenue stream. It’s somewhere we’ve never traditionally gone, but the digital world tells us that that’s the way people are thinking. Where the value is clear to them, and is delivered to them on a manner that they expect, they will pay for [extras].”

Charging for the extras to boost revenue growth

“You might go after a second bag, or a weight allowance supplement. You may go after seat selection. We have a lot of families and groups traveling, and they all want to sit together. They are basically prepared to pay more to get peace of mind so that, if you’re a family with two young children, you could sit in a quad with the two kids in between, and control [the experience.] You’ve got people hen parties, stag parties, golfers, footballers. They all go in groups. Strength in numbers, they like to do whatever it is they’re going to do. They really don’t want to be all over the aircraft. They want to be together. They’re willing to pay for it…If you want a better meal than we’re prepared to give you, you can pay for it. If you’d like a glass of champagne, a bottle of champagne, if you want this kind of thing…You could offer premium check-in. You can offer expedited [security] search. [We can offer] our chauffeur drive, on a pay basis. [Let’s say] you’re in the rural part of Germany, and you want to get to Frankfurt, and the choice is a taxi, or a train, and a bus. We’ll give you a Mercedes, but you pay for it. We’ll put a margin on the cost to us, [and] everybody’s happy. The trick, then, is to be able to deliver that, operationally and logistically, to make sure that you deliver what they paid for.”

Full transcript at https://skift.com/2016/09/19/interview-emirates-ceo-tim-clark-on-the-next-generation-of-fees/