Emirates defies rivals, aims for 120 A380s

Wednesday, 13 October 2010 23:28 -     - {{hitsCtrl.values.hits}}

DUBAI (Reuters) - Dubai’s Emirates heaped pressure on European carriers in an escalating airlines trade dispute on Tuesday, dismissing its rivals’ subsidy claims and voicing plans to expand its fleet to include 120 Airbus A380 superjumbos.

The comments to Reuters by airline president Tim Clark raise the stakes as global airlines scrap over market share, aircraft financing and landing rights while clambering out of recession.

Emirates, which surprised its peers by boosting its A380 orders to 90 planes in June, is only constrained by a shortage of space to park the world’s largest aircraft, Clark said in a challenge to the market power of older recession-hit carriers.

“We would like some more but we are going to run short of space,” Clark said in an interview in his glass-walled office overlooking rows of jets at the Middle East’s busiest airport.

“120 was the baseline figure that the planners worked to get where we needed to be, but we couldn’t order that amount because it was too many for here, so 90 was a compromise.”

The carrier will order more when it gets additional space at its home base in Dubai, he added, without giving a date.

Emirates has continued to grow exponentially despite a debt crisis that hit the Gulf Arab emirate and several of its government-related entities, leading to the restructuring of billions of dollars in debt.

Passenger traffic is growing 20 percent annually, said Clark, who expects to maintain this for the next five years.

The new fleet goal implies a future Emirates order for 30 more double-decker A380s, worth $10 billion at list prices.

If this happened, Emirates would have an A380 fleet worth over $40 billion and extend its dominance as Airbus’s largest customer, a move analysts say could also accelerate the Gulf region’s political and economic leverage in Europe.

Airbus is owned by EADS, which counts as its home governments France, Germany, Spain and the UK, and competes with the U.S. manufacturer Boeing.

In a potentially significant move in the lucrative market for large mid-sized jets, Clark said Emirates was also working with Boeing on the next generation of 777 mini-jumbos.

Emirates ordered 30 777-300ER wide-body 365-seaters in July in a deal potentially worth over $9 billion.

“We are working with Boeing on the next generation of 777. We are still very interested in a replacement,” he said.

Boeing has said it is looking at the future of the aircraft, which faces competition from the future Airbus A350-1000.

“I can confirm that we have and will continue to have discussions with Emirates about the next generation of 777s,” a Boeing spokeswoman said.

“We are targeting a decision before the end of 2011, but as always it is our customers and market forces that will be driving the timing.”

A new 777 plane would likely use some carbon-composite technology pioneered for Boeing’s 787 Dreamliner, which has been marred by delays, but Clark’s views on that jet were mixed.

“I am very glad we are not buying it and glad we weren’t the launch customer,” he said. “I think once they sort out the airplane, which they will do, it will be a good machine.”

The rapid expansion of Emirates — as well as Gulf majors Etihad of Abu Dhabi and Qatar Airways — has unnerved older airlines and fuelled mutual accusations of protectionism. Many carriers fear Gulf-based superjumbos will drain their own hubs.

U.S. and European airlines last week launched a campaign to change rules that allow airlines such as Emirates, but not themselves, to get export aid for jets from Airbus and Boeing. The dispute flared after other funding sources faded.

Clark said it was natural for Emirates to take advantage of export credits if they were provided.

Emirates has also repeatedly clashed with Western carriers over their claims that its fuel bills are subsidised.

“I have said ‘you prove a subsidy and I will resign the next day.’ It is completely wrong,” Clark said.

An association of European airlines is due to meet in London on Friday to discuss the export credits dispute. The Air Transport Association of America is also part of the campaign.

Clark said, “If they spend as much time running their business as they do trying to run us down they might make even more money.”

The export credit controversy overlaps with growing tensions about aircraft landing rights, which widened abruptly this week.

The United Arab Emirates barred Canadian forces from using a military camp near Dubai from which Canada had supported troops in Afghanistan, a UAE source said on Sunday.

The decision came after the UAE failed to convince Ottawa to allow its two major airlines to increase flights to Canada.