Bloomberg Businessweek May 4, 202011PHOTO: ROLF SCHILTEN/BLOOMBERG. *REVENUE PASSENGER KILOMETERS IS THE NUMBER OF PAYING PASSENGERS TIMES THE NUMBER OF KILOMETERS
THEYTRAVELED.DATA:COMPILEDBYBLOOMBERGthematter.Oneconsequence:TheInternationalAir
TransportAssociationestimatesthatairlinesstand
tolose$314billioninrevenuethisyear.
Emiratesisespeciallyvulnerablebecauseits
businessmodelis skewedtowardattractinghigh-
farepassengersinthefrontofitsplanestocon-
nectthroughitsdeserthub.Thatcanbelucrative
whenbusinessis flush.Althoughpremiumcabin
travelersaccountfor just10%of passengers
industrywide,theyrepresent30%ofrevenue,says
BrianPearce,IATA’schiefeconomist.“Fillingup
theaircraftatthebackwithpassengersonecon-
omyseatscoversthecostoftheoperation,”he
says,“butit’sreallythepremiumpassengersthat
arethekeytoprofitability.”
For U.S.domestic and Europeanregional
travel,a business-classflyerisatleastone-third
moreprofitablethananeconomypassenger,esti-
matesHenryHarteveldt,a travelindustryanalyst
atAtmosphereResearchGroupinSanFrancisco.
Onlong-haulflights,business-classcustomersare
approximatelyfivetimesmoreprofitablethan
standardeconomypassengers,hesays.
Emirateshadbeenhugelysuccessfulatluring
those premium passengers through its use of
such amenities as free chauffeur-driven car ser-
vice before and after flights—and access to cigarlounges—while easily charging three to five times
the coach fare for a business-class seat and as
much as double that for travel in first class.
Losing that lucrative line of business comes at an
already challenging time. Emirates announced
last year that President Tim Clark, the architect
of its rise from regional outfit to globe-spanning
behemoth, would retire in June. No successor
hasbeennamed.Andthecrashinthepriceof
oilhasdepresseda bigportionoftraveltiedto
commodities—an important piece of business for
any Middle East carrier. The airline declined to
comment on its response to the challenging busi-
ness environment.
Like every major airline around the world,
Emirates has been forced by the coronavirus chaos
to make deep cuts, idling as much as 90% of its air-
craft, including its entire A380 fleet. It’s also slashed
salaries and postponed the delivery of its final
batch of A380 aircraft. The future composition of
the airline’s fleet looks unclear now that Airbus SE
isendingproductionoftheA380nextyear,and
productionproblemsatBoeingCo.coulddelaythe
introductionofthe777X,thenewlong-rangejet-
linerofwhichEmirateshasordered126.
AnEmirates double-decker A380 typically
accommodates 14 closed suites, 76 flat beds, and
399 standardseats,andtheupperdeckis dedicated
exclusivelytopremiumtravel.Oneoptionmaybe
tofast-trackintroductionofthepremium-economy-
class product that Emirates had scheduled for the
end of 2020, which requires reconfiguring the cab-
ins. That could be the easiest course, given that the
A380s are already sitting on the ground.
Other carriers, including Deutsche
Lufthansa AG and Cathay Pacific Airways Ltd.,
have typically priced premium-economy cab-
ins—which have wider seats and more amenities
than coach—at about half the price of business
class. So the less expensive premium service on
Emirates might appeal to price-conscious busi-
nesses that otherwise would consider canceling
some employee travel altogether. “If they have the
manpower and hangar capacity to do retrofitting,
they could use the time to make a more modest
product,” says John Strickland, an independent
aviation consultant at JLS Consulting in London.
Indeed,MAPScience’sMakhzoumi,oncea
loyalEmirates customer,sayshe’sshiftedhis
flyingtopremium-economy service—on Emirates
rival British Airways, which already offers the less
expensivecabin.�LayanOdehTHE BOTTOM LINE On long-haul flights, business class is about
five times more profitable than economy. If the recovery is slow,
carriers such as Emirates may have to offer more modest service.300b200 b100 b0 b
2005 2018▼ Emirates’ annual
traffic, in revenue
passenger kilometers*