Emirates 'managing' higher costs as it refurbishes aircraft to handle Boeing jet delays

Airline unlikely to receive its first deliveries of Boeing 787 jets on schedule by 2023 due to production issues

Visitors gather at the Emirates stand at the Arabian Travel Market in Dubai.  EPA

Emirates said it is “managing” the impact of higher inflation and soaring oil prices on its business while forging ahead with a refurbishment of its existing fleet amid delays on the first deliveries of new Boeing jets.

The Dubai airline has placed a fuel surcharge on ticket prices in response to higher fuel costs while monitoring demand elasticity, Adel Al Redha, Emirates' chief operating officer, said at the Arabian Travel Market in Dubai on Wednesday.

“We are managing the situation and I think many airlines have been able to manage the situation, but [these are] not … prices that airlines can really sustain,” he told reporters.

“There is a level of how much you can put on [fuel] surcharge and how much the airline can absorb … we have done some kind of adaptation in the last few months to cope with fuel surcharges because we were not expecting two months back to be hit with this level of fuel prices.”

Fuel hedging has been “part of our practices”, Mr Al Redha said, without elaborating.

Oil prices, driven higher by the impact of the Russia-Ukraine war, are posing a major challenge to the global aviation industry that is striving to recover from a pandemic-triggered collapse in air travel demand over the past two years. Fuel bills typically make up about 25 per cent of an airline's total costs.

The airline will also trial the use of 100 per cent sustainable aviation fuel (SAF) on Boeing 777 and Airbus A380 flight tests in the third quarter of this year, the chief operating officer said.

“We are in discussion with local fuel suppliers on how to ensure the availability of SAF at the Dubai airport because we need to make sure the fuel is stored and delivered to the airport in the quantity we want,” Mr Al Redha said.

“Once we do these trials successfully with these manufacturers, we will roll into more aircraft, subject to how much we can put into storage at the Dubai airport.”

Quote
We are managing the situation and I think many airlines have been able to manage the situation, but [these are] not ... prices that airlines can really sustain
Adel Al Redha, Emirates' chief operating officer

Emirates also expects the first deliveries of its Boeing 787 Dreamliners, which it was initially due to receive in 2023, to be delayed by at least one year due to the US plane maker suspending deliveries over production issues.

“The 787 was supposed to be delivered in 2023, now we know for sure it's not going to happen in 2023, it may not happen even in 2024 because Boeing still haven't recommenced that production,” Mr Al Redha said.

“We are in discussion with Boeing about this aircraft and their plan on what's going to happen to these aircraft.”

When asked for a comment on the delays, a Boeing spokeswoman said: “We are completing comprehensive inspections across 787 production and within the supply chain, while holding detailed, transparent discussions with the [US Federal Aviation Administration], suppliers and our customers.

“We are taking the time necessary to ensure conformance to our exacting specifications, and while these efforts will continue to impact deliveries, we’re confident this is the right approach to drive stability and first-time quality across our operations and to position the programme for the long term as market demand recovers.”

Emirates ordered 30 Boeing 787 jets at the Dubai Airshow in 2019. At the time, the Dubai airline said it exercised its right to substitute the larger 777X widebody with 787s.

The airline is also in “advanced discussions” with Boeing over the delays on the 777X deliveries.

Boeing has postponed the delivery of these jets by four years from 2021 to 2025.

“We are in advanced discussions on how to deal with this. We want the aircraft obviously, it is a good aircraft, it is the closest aircraft that comes to our A380 in terms of capacity,” Mr Al Redha said. “That aircraft size is required for Emirates to continue its growth.”

Emirates is the largest operator of the A380 superjumbo, which it planned to replace with the smaller 777X after Airbus cancelled the A380 programme more than three years ago.

The airline is undertaking a refurbishment of its existing 777s and A380s and phasing them out later than planned to cope with the delayed deliveries of its new aircraft.

Emirates said it will take delivery of the first of its Airbus A350s, which it ordered in 2019, in August 2024. This is a delay from the planned delivery date of May 2023.

The airline had placed a firm order for 50 A350-900 XWB aircraft worth $16 billion at list price at the Dubai Airshow 2019.

Mr Al Redha reiterated that Emirates will reach 100 per cent of its pre-Covid capacity by the end of 2022.

Recruiting staff quickly enough to meet the rebound in travel demand remains an issue for the airline, he said.

This remains the “biggest challenge” for the global aviation industry, but Emirates is in a better position than others as it has access to resources, he said.

The executive added that the use of digital currencies such as Bitcoin by the airline industry is “inevitable” and that such technology is a “game-changer” for the business.

“In the next couple of years, we will see a revolution in technology and how business is being conducted,” he said. “Those unwilling to do so will be left behind.”

Updated: May 11, 2022, 4:41 PM
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