Earlier this month, Dubai headquartered Emirates declared its best ever half year profit before tax of AED 11.4 billion (US$ 3.1 billion), up 17% compared to the same period last year. This came within days of IndiGo reporting its half yearly loss on the back of a forgettable Q2, with the blame pinned to foreign exchange issues as the rupee slides against the dollar.
Often referred to as the de facto “national carrier” of India, every time there is a demand for more seats to Dubai, there is a clamour of protecting Indian carriers versus allocating seats to Emirates. For the record, the India–Dubai bilateral is fully utilised on both sides, leaving carriers such as Akasa Air unable to launch Dubai flights due to the lack of available quota.
Top leaders of Emirates and Indian carriers continue to make occasional public statements on the contentious issue of expanding bilateral flying rights to Dubai.
The India – Dubai bilateral was last revised in February 2014, taking the weekly seats from each side to 66,000 per week. For the last as many years, Emirates has been trying to get additional seats into India, along with more Points of Call, but has not seen success. Instead, whenever the issue enters the public domain, the discussion repeatedly shifts to the volume of traffic Emirates carries to Dubai and beyond.
Regular travelers point out how Emirates has repositioned itself as a premium carrier on the other side of the pandemic and ensured that its premium image gets premium fares. While route specific profitability is not declared or disclosed, but prima facie listing of fares show that Emirates has been pushing its pricing up across all classes.
Data declared by the regulator Directorate General of Civil Aviation (DGCA), corroborated with seats on offer shows a very healthy load factor upwards of 90% for Emirates in India, though load factor is one of the many parameters to check and not a true indicator of the money the airline would make on a specific route. In the more than ten years since Emirates last received an incremental allocation for India, two key developments have taken place.
Emirates is smaller part of India’s international story
Data shared by Cirium, an aviation analytics company, shows that Emirates commanded 10.6% of all international seats and 7.9% of capacity by ASM (Available Seat miles) from India in April 2015. The share now stands at 6.3% in terms of seats and 4.5% in terms of ASMs.
This comes on the back of Emirates remaining stuck at their seat quota while more airlines have added flights to India and Indian carriers have expanded services. Seats from India have grown 65% while capacity by ASM has grown 73%.
Emirates has cautiously grown during this period and not exponentially, as it battles delay in delivery of aircraft and operationalising planes post pandemic. However, its routes to India were 2.5% of its total ASMs in April 2015, which is now down by 0.4% to 2.1%. Its departures from India are now 4.7% of its total weekly departures, which was 5.3% in April 2015. In terms of seats on offer, the drop is 0.3% with 4.3% of all seats on offer per week being from India, while in April 2015, it was 4.6%.
Premiumisation the way forward
In the middle of the pandemic, the airline decided to introduce the Premium Economy class, with the commercial operations starting in 2021 and retrofit which started in 2022. Progressively all aircraft will start featuring the new class of service. The mix in India is now different than what it was ten years ago.
Emirates offers 1148 First class seats per week out of India, a growth of 19% over April 2015, nearly as many Business class seats and 1422 premium economy seats, a new addition. All of this has come at the cost of economy class seats which are down nearly 5% to Indian markets. This would have taken up the average yield on routes to India and continued focus as more planes join with Premium Economy and a revamped product would mean building up from here.
Tail Note
Emirates, prima facie, seems to have been able to create an element of premium positioning for its services and transfers. Additional seats may or may not come within the bilateral, and thus premiumisation is a strategy which will help Emirates push up the fares without incremental costs in true sense. This will also build loyalty making it difficult for Air India to take away passengers on the cost angle unless Air India offers similar or better products, which couple well with the non-stop flights. It wont be long before passengers complain of high fares on Emirates!
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