Wall Street Journal last week wrote a long piece about how Emirates is investing to business and first class products while slightly cutting corners in the economy by introducing ala carte pricing for seats and bags.
The airline believes that providing excellent service on its premium cabins allow its to charge basically more than its competitors and passengers are more likely to prefer them. High profit margin first and business class tickets help the airline to weather through the discount wars in back of the plane.
Here’s an excerpt from the WSJ article (access their piece here):
Last year, Emirates spent $56 million on its collection of fine French wines alone. It has splashed out $780 million on the stuff since 2006 and owns its own wine cellars in France. On a recent flight, cabin crew poured a $566 bottle of 1998 Chateau Margaux for its first-class passengers.
The airline is betting that the high profit margins of its luxury tickets will allow it to avoid chasing masses of travelers riding in discounted coach seats. The idea threatens to overturn one of the tenets of how to thrive as a large network carrier.
Emirates’ focus on its top-paying customers—who aren’t as inclined to make purchases based on price—insulates it somewhat from the industry’s boom-and-bust cycle. It has a higher proportion of business and first-class seats than its peers, and it puts less emphasis on filling every seat in the plane.
Between 2010 and 2015, Emirates’ profit margin averaged 5.5%, more than double the 2.3% average margin for the industry as a whole, according to data from the International Air Transport Association.
This WSJ piece is worth a read if you have access to WSJ or can get around the paywall (sometimes difficult to access their articles).
You have to give Emirates credit that they are trying to be innovative in the premium field when many of their competitors are years behind if they ever even plan catching on.
The price of the oil has climbed back to $75 per barrel that probably helps filling the premium cabins with gulf passengers but affects the airline’s fuel bill. Some could call this a natural hedge for the airline.
I have flown on Emirates many times in all classes of service. The transfer experience in Dubai leaves lot to be desired. Very little if any consideration for premium passengers. I have not yet tried the new suites.
If only they were part of one of the alliances or Skywards program would be more worthwhile!