US airlines have done an excellent job of holding back on capacity lately, and that has left them with at least somewhat decent results considering the state of the economy. But not everyone has been so disciplined. Emirates recently announced that it would grow 14% in 2009 despite some seriously worrying signs from its hometown of Dubai. Is this smart? Probably not, but who cares? It will likely lead to some great deals for travelers.
You would think the management team at Emirates would be getting nervous right now. Dubai’s economy is really getting hit hard. The Dubai stock market has plunged more than 75%, real estate prices have tanked, and jobs are disappearing. Just this week, the United Arab Emirates said it would buy $10 billion worth of bonds from Dubai in order to prop it up.
Considering that backdrop, Emirates seems like it’s from a different world. The airline still expects to take on 58 A380s, more than a quarter of all A380s ordered worldwide, and it placed an additional order for 60 smaller Airbus widebodies less than a year ago. During the airline’s fiscal year (which runs April 1, 2009 to March 31, 2010), Emirates will take on a new passenger widebody every 20 days, including 7 A380s. Surrounded by a collapsing economy, where will they put these planes?
Many of those A380s were expected to be outfitted with massive numbers of Economy seats to shuttle workers between labor-rich India and Dubai, but now there will be fewer people going back and forth. And with fewer visitors coming to Dubai in general, demand will be dropping dramatically from that angle as well. They will apparently focus the new aircraft on “on routes where there is a greater demand from our customers. All of our new capacity will be deployed in markets where we see growth potential, particularly Africa and the Middle East,” though from what I can see, there will be increases to just about every region of the globe, including North America which will see increased frequencies in San Francisco and LA.
So what does this really mean? There is going to be tremendous price pressure on Emirates in the near future until the economy is able to catch up. Keep an eye out to see if any massive discounting happens. It’s likely only a matter of time, and it could make for some great deals.