Will the Dubai crises lead to a mega Emirates + Etihad airline brand?

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Every single time I’ve been to Dubai, I’ve heard that Emirates is bankrupt and the state of Abu Dhabi has bought the airline. But I always dismissed them as baseless rumors. Then, the Dubai World crises happened around Thanksgiving/Eid. And that made me think again. That the Abu Dhabi government could ask for Emirates, the airline, as collateral in bailing out Dubai, the state.

So, let’s imagine that if this does happen, that Abu Dhabi takes over Emirates and by default it merges with Etihad. What will that mean for the airline brands?

  1. Emirates and Etihad merge to form a mega-airline with over 250 planes connecting almost any major city in the world with any other – one-stop.
  2. Emirates and Etihad move operations to the Jebel Ali Airport – DWC from their respctive hubs to centralize operations
  3. Ultimately, effectively managing the scale of the new airline’s operations can determine its chances of success

However, I feel that this is unlikely to happen, because:

  1. Emirates is much larger than Etihad, and much more profitable too (Etihad is yet to turn a profit)
  2. Emirates is a much better known brand than Etihad
  3. They have very different fleet compositions – Emirates all-widebodies, Etihad a mix
  4. Chances of integrating two hubs that close to each other (Dubai-Abu Dhabi is a 2hr drive) is not practical
  5. Abu Dhabi Airport has already invested huge amounts in developing the airport as a future hub and Jebel Ali airport is far from being completed – so a hub merger is not on the cards
  6. Especially because a Jebel Ali airport which is 1.5 hours from either Dubai or Abu Dhabi, connected by trains, is impractical

Hence, the my conclusion is that no, the crises will not lead to an Emirates and Etihad merger. What may very well happen is this:

  1. Etihad takes a large stake in Emirates, just like Lufthansa has a stake in Austrian or Swiss
  2. Both brands should be kept intact
  3. Etihad and Emirates optimize their route networks such that they complement each other and don’t bleed each other on major route. For example, instead of offering flight from Sydney to London 20 mins apart from each other, they can be more even spread out throughout the day. And I don’t think an Aussie is concerned whether he would transit in Abu Dhabi or Dubai on his way to London
  4. Both Emirates and Etihad should optimize capacity on certain routes. For example, an Etihad A320 can be sent to Cochin or Peshawar, instead of an Emirates B777.
  5. They save money through join procurement and technology implementation

And I think we’ll have a strong pair of airlines, just like AirFrance-KLM, which have the might to take on any other major carriers.

So, what do you think about the prospects of Emirates after the Dubai crises? Is mine a fair analysis? I’d love to hear your thoughts here and on Twitter.

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Shashank Nigam

Shashank Nigam

Shashank Nigam is a globally sought-after consultant, speaker and thought leader on airline branding and customer engagement strategy. He is the Founder and CEO of SimpliFlying, one of the world’s largest aviation marketing firms working with over 85 aviation clients in the last ten years. Nigam is also the youngest winner of the Global Brand Leadership Award and has addressed senior executives globally, from Chile to China. Nigam’s impassioned and honest perspectives on airline marketing have found their way to over 100 leading media outlets, including the BBC, CNBC, Reuters and Bloomberg, and into leading publications such as The Wall Street Journal and the New York Times. He writes a dedicated monthly column in Flight’s Airline Business, challenging the typical assumptions about airline marketing. His new book on airline marketing, SOAR, is an Amazon bestseller that’s shaking up the industry and inspiring other industries to learn from the best airlines. Born in India, raised in Singapore, he now lives with his wife and two young daughters in Toronto.
Shashank Nigam
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Showing 20 comments
  • rascott3888
    Reply

    Couple of points.

    Why build Jebel Ali unless you plan to move both airlines there as a merged unit – although this was unlikely to happen until sometime after 2015? I would have then kept the stronger Emirates brand for the merged airline.

    JBX incidentally is no distance at all from the new Dubai – 30 mins from Business bay and 15 from Marina. And it is 45 mins from the newer parts of Abu Dhabi and with the new eastern highway – one hour to downtown. Very different from 90 minutes.

    Now the UAE has changed. The issue is whether JBX will even be built beyond the single runway now open. Maybe it could operate like Mirabel soley as a freight business linked to the Jebel Ali Port and Free Zone.

    The decision is almost certainly now Abu Dhabi's to make rather than Dubai's.

    Both AUH and DXB are growing – and probably will now have enough capacity for another 5 years of growth. DXB will run out of space; AUH has more room to grow. But like many other big Dubai projects – the World, the Arabian Canal – it may be that Abu Dhabi decides that Jebel Ali is not a necessary investment. Then you will have two separate airlines – with a common owner – and the KLM/Air France comparison is then valid.

    Bests.

    • simpliflying
      Reply

      Good points Robert. There's potential for a merged airline, if Jebel Ali
      gets built up to 7-12 runways they once had planned for it. And even then,
      you need a merged airline, or an AirFrance-KLM model for it to be working.
      But then again, I think it's all a little pre-mature given that Jebel Ali
      has only one functioning runway….

  • oussama
    Reply

    If one has to listen and believe the rumor mill Abu Dhabi already own 40% of Emirates, Dubai Ports and Dubal as a result of the first 10 Billion USD bailout. Jebel Ali Airport (part of Dubai World) already has one runway and an LCC terminal and a Cargo terminal. Already several logistics companies have set up their facilities there. I don't see it going past 2 more runways in the near future and anything more than a Cargo Operation.

    Knowing the rivalary between Abu Dhab and Dubai I would think both will want to keep their own respective airline. Each airline has become the representatve and brand associated with its respective owner. I don't even see a merger similar to Air France/KLM happening or even schedule coordination.

    • simpliflying
      Reply

      I guess this is probably the most authentic opinion we can get – since
      you're already in the region. I'm now really curious to see how this
      pans out…

  • usmanzk
    Reply

    I think it would be Abu Dhabi's dream to buy Emirates, its the jewel in the crown for Dubai. Yeah it is true that Dubai World has its own financial problems but that definitely does not mean another entity, Emirates will be given in collateral to Govt of Abu Dhabi.
    In fact Emirates has done incredibly during this current recession, and they are aiming towards a $1 billion profit for financial year 2009 as they have already earned “Dh752m profit” during the first 6 months of operation.
    So the talk about Emirates going bankrupt is all baseless rumors, and I think UAE as a nation will learn from the current downturn.
    I written 3 papers on Emirates and currently I am writing another one.
    You can follow me on my websites (still working on the technical part)
    http://www.arabiabrands.com, where I will be posting more about Emirates soon, as Emirates is my lovemark.

  • usmanzk
    Reply

    I think it would be Abu Dhabi's dream to buy Emirates, its the jewel in the crown for Dubai. Yeah it is true that Dubai World has its own financial problems but that definitely does not mean another entity, Emirates will be given in collateral to Govt of Abu Dhabi.
    In fact Emirates has done incredibly during this current recession, and they are aiming towards a $1 billion profit for financial year 2009 as they have already earned “Dh752m profit” during the first 6 months of operation.
    So the talk about Emirates going bankrupt is all baseless rumors, and I think UAE as a nation will learn from the current downturn.
    You can read the latest about Emirates $1 billion profit : http://uk.finance.yahoo.com/news/emirates-eyes-

    Emirates earns Dh752m profit : http://gulfnews.com/business/aviation/emirates-

    I written 3 papers on Emirates and currently I am writing another one.
    You can follow me on my websites (still working on the technical part)
    http://www.arabiabrands.com, where I will be posting more about Emirates soon, as Emirates is my lovemark.

  • Ijaz Rana
    Reply

    Shashank, you said it yourself….it seems unlikely; nay It sure is not possible. I don’t think it is even on the cards anywhere.
    Personally I would not like that either, as at present they both are doing excellent from revenue point of view. they both are well respected & rated high.

  • Qaiser Anwar
    Reply

    Both have big orders in place and both have seperate financing schemes. Both are under different organizations / management. Shares/IPO could be bought but no time soon will they be merging. Abudhabi is starting a low cost carrier, both have different brand new airports setup. If they had to merge none of this massive expansion work would begin. Emirates Concourse 3 is also on the way.

  • Azhar Lakdawala
    Reply

    Has anyone heard of a term called window dressing in Finance, Accounting and particularly Audit?

  • Ron Chow
    Reply

    Heard of this merger as well, quite a while back and thought it was just rumors. Well it’s not entirely far-fetched, the crown jewel of Dubai is Emirates (Read ‘only bargaining chip’) for a full cash bail-out from her lesser known richer sister abu dhabi. Time will tell, after 2008 – nothing is too far-fetched.

  • Matt Radack
    Reply

    The old Gulf Air fell apart because it didn’t make logistical sense to operate a single regional airline with so many neighboring hubs (Bahrain, Abu Dhabi, Doha and Muscat), combined with an equal number of local actors with both pride and ambition on their side. More importantly, they were no match for Emirates.

    Gulf’s spinoffs such as Etihad and Qatar have succeeded because they are more like Emirates, with single hubs, single leadership, single organization and single focus.

    As tempting as it may be due to current economic pressure, any merger between Emirates and Etihad (with hub airports just over 120km apart) would wind up looking more like the old Gulf.

  • Rrajesh Ahuja
    Reply

    Emirates and Etihad Airlines have their respective networks almost similar to each other. Etihad seems to be slowly following suit and philosophizing long term policy similar to Emirates. As a professional from the aviation industry, having worked for a major European Airlines in a senior position, my hunch is Etihad is mobilizing its resources to increase pace and compete for its own global market share by strengthening its network more so on potential sectors in Europe and Asia which looking on a wider spectrum would be less in competition with Emirates but more so a compliment. Emirates has its revenues increasing on the growth graph will do utmost to block off any such thought!

  • Mike Miguel
    Reply

    Very possible from a financial perspective, however both cities compete at every single level, same country but a big rivality exist between both of them.

    Very known that Abu Dhabi is very much financially stable compared to bubble Dubai

    If it comes to national interest, it could be happening.
    Mike

  • Claude Fortin, ame
    Reply

    I am with Mike on this. Abu Dhabi and Dubai are like two different sovereign territory (although in the UAE) and in that sense, are indeed competing to the highest of degree. That being said, i read more than once that part of Dubai Bail-out by Abu Dhabi would be garanteed by stakes in Emirates Airlines, if it came to that. We’ll wait and see.
    See you in Singapore Shashank!!

  • Alan Peaford
    Reply

    Interesting – but my money would be on them both retaining separate brands even if there is (or has been already) a financial investment.
    Although there is a great rivalry there is also a great deal of respect between the two emirates at the highest level.

  • andrew drysdale
    Reply

    Won’t happen. The cultural and political pressures are too great. And it is difficult to see the strategic advantages.Two strong and well funded carriers in competition will do more for the region’s economy than one large airline with no local competitive pressures.
    Andrew

  • Azhar1
    Reply

    What does the renaming of World's Tallest Structure in Dubai from Burj Dubai to Burj Khalifa indciate.

  • Matt
    Reply

    The old Gulf Air fell apart because it didn't make logistical sense to operate a single regional airline with so many neighboring hubs (Bahrain, Abu Dhabi, Doha and Muscat), combined with an equal number of local actors with both pride and ambition on their side. More importantly, they were no match for Emirates.

    Gulf's spinoffs such as Etihad and Qatar have succeeded because they are more like Emirates, with single hubs, single leadership, single organization and single focus.

    As tempting as it may be due to current economic pressure, any merger between Emirates and Etihad (with hub airports just over 120km apart) would wind up looking more like the old Gulf.

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