OUTLOOK: Emirates shows way in low-cost long haul

Here's a statistic to make you wake up and realise how much the world has changed. Emirates, the fast growing Dubai based airline which has sponsored the new Arsenal stadium, has more wide-bodied aircraft on order than the entire existing long-haul fleet of British Airways.

The Emirates order announced at the weekend for 42 Boeing 777s adds to an outstanding order for 45 Airbus superjumbos, which itself is the biggest of its kind for the 555 seater monster. Plainly this is an airline with ambition. Emirates aims to be the biggest long- haul carrier in the world by the end of the decade, and to the consternation and growing anger of established players, there is every chance it will succeed.

Qantas is leading from the front in alleging unfair competition. Yet the reality may be not so much unfair practice as natural advantage. Emirates is a young airline without the legacy cost base of established rivals which is also geographically incredibly well placed to reap the benefits of the big growth markets in airline travel to Asia and the Far East.

Research by Goldman Sachs shows that Emirates has some of the lowest costs per passenger mile of anyone in the industry, making it the first genuinely low cost, long-haul carrier around.

Low-cost operators such as Ryanair and easyJet have to date tended to be confined to short-haul routes with fast turnaround times and no inflight services. Yet Emirates seems to be managing the trick on long-haul routes too despite award-winning product and lounge facilities. This in turn allows the company to be significantly cheaper on price.

How does the airline do it? It plainly helps to have your capital and borrowings underwritten by the royal family of the United Arab Emirates. It's not paid anything for its capital so far, nor despite hints of an eventual IPO, is it likely to so long as Sheikh Ahmed bin Saeed al-Maktoum remains chairman and controlling shareholder.

The suspicion, quite widely held in the industry, that the company also pays virtually nothing for its jet fuel is almost certainly wide of the mark. Even so, the airline's home base of Dubai has plainly been a boon. The landing charges are low to non- existent, the turnaround times much swifter than at almost any other hub airport, and the labour costs are but a fraction of mature, European counterparts.

By using the hub as a stop-off point for long-haul flights between Europe and Asia, the company manages further to lower its costs without significantly adding to journey times. Emirates is also not averse to using other low- cost airports such as Manchester to fly from. And Dubai is in itself becoming an attractive tourist destination. BA and others with still burgeoning pension costs and cripplingly expensive cost bases will need to sprint to keep up. With all that excess baggage on board, it is not at all clear how they can.

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