Chicago

Los AngelesSan Francisco

Seattle

Houston

Dallas/Fort WorthBoston

Annual economic impact of Emirates

operations

Airport ($m)

$132m$227m$257m$623m$200m$166m$445m

Total impact:

$2.1bn

OpenSkyThe international and

government affairs journal

of Emirates

Issue 19 | June 2014

2 Larger aircraft ease burden on congested skies and runways

Emirates to launch A380 services to Mumbai

3 A380 – reaching critical mass

An employer of choice

4 Going further: Emirates posts 26th consecutive year of profits

5 New Silk Road: Brazilian exports to Africa, the Middle East and Asia

77 flights in 7 days for Nu Skin China

6 60 seconds with the Brazilian Association of Airlines

7 Air services and the new “trade in tasks”

8 New York, Paris … Dubai

US airports measure the value of Emirates services

9 Look who’s flying 5th Freedoms

10 Sector Insight … from an Indian perspective

11 They said it best...

12 A Greener Tomorrow

Fast Facts

DL - Delta Air Lines

One US airline’s5th Freedom routes

Not shown on this mapNew York-Amsterdam-MumbaiNew York-Accra-Monrovia

Los Angeles New YorkDetroit

Minneapolis/St Paul

Atlanta

Seattle

TaipeiShanghai

Tokyo

Singapore

ManilaBangkok

Hong Kong

DLDL

DLDL

DL

DL

DL

Nagoya

Mumbai

Auckland

Papeete

New York

Houston

Singapore

Dubai

NZ

Air New ZealandAir Tahiti NuiEmiratesJet AirwaysKuwait AirwaysPakistan International AirlinesSingapore AirlinesUzbekistan Airways

Trans-Atlantic 5ths

Delhi

9WEK

KU

SQ

SQ

9WHY

PK

Paris

TN

Los Angeles

Moscow

Toronto

Lahore

BrusselsLondon

Milan

Frankfurt

ManchesterRiga

Tashkent

São Paulo

New York

Tokyo

Seoul

Singapore

CX

CI

CI

KE

KE

SQSQ

TG

SQ

Cathay Pacific AirwaysChina AirlinesKorean AirSingapore AirlinesThai Airways International

Trans-Pacific 5ths

Kuala Lumpur

Bangkok

Vancouver

Los Angeles

San Francisco

Honolulu

Osaka

TaipeiHong Kong

In this issue … The A380 delivers up to

42 %more capacity per slot than a Boeing 777-300ER

21 Julydate of Emirates’ launch of A380 services to Mumbai

362 tonnesEmirates weekly cargo capacity out of Brazil

11,300

Emirates staff with more than 10 years’ service

2

Authorities around the world are increasingly becoming aware of the value of the Airbus A380.

India, China, Hong Kong and the UK have recently made decisions and public comments in support of higher gauge aircraft such as the A380 to overcome bottlenecks with slot constraints and congested airspace.

Nowhere is the change in attitude more distinct than in India, where the Ministry of Civil Aviation has approved scheduled Airbus A380 services after years of restrictions. January’s announcement to approve access for the A380 to India’s four busiest airports of Bengaluru, Delhi, Hyderabad and Mumbai is a significant step forward.

Higher capacity aircraft like the A380 are a critical part in achieving India’s goal of becoming the world’s third largest international aviation market with 85 million passengers per year by 2020, particularly with emerging infrastructure constraints at India’s major gateways. With a larger wingspan and weight than any other aircraft in scheduled service, there are challenges for some airports and authorities, of course, primarily in upgrading airside infrastructure. In some cases however, the A380 has smaller dimensions than other aircraft, such as fuselage length and gear dimensions versus the A340-600 and Boeing 777-300. In China, after a pause in approving new A380 services, there have been some positive developments regarding the aircraft over the past 12 months. Emirates recently received the go-ahead to operate an additional two A380 flights per week to Shanghai-PVG, bringing the route up to a daily A380 operation. The response from the market to the additional 652 seats per week has been immediate, with average seat factors rising year-on-year. Elsewhere, in February the Civil Aviation Department of Hong Kong urged carriers to use larger aircraft due to concerns the airport could run out of landing slots next year. Similarly, Colin Matthews, the chief executive of Heathrow Airport, in September last year indicated the value that aircraft such as the A380 are playing in boosting traffic volumes at an airport with 99% runway utilisation: “Larger, fuller aircraft continue to contribute to rising passenger numbers at Heathrow,” he said.

Following February’s bilateral talks awarding an increase in capacity between India and Dubai, Emirates announced it will launch its first daily A380 service to India on the Dubai-Mumbai route from 21 July.

EK500/501, currently operated by a 364-seat Boeing 777-300, will be upgraded to the A380. The launch of A380 services on India’s busiest international route will deliver up to an additional 42% passenger capacity per flight, demonstrating the importance of the aircraft in growing India’s aviation market. These additional 1,000 seats per week will help deliver more business people and tourists to India to contribute to the national economy.

Larger aircraft ease burden on congested skies and runways

Emirates to launch A380 services to Mumbai

The A380 delivers up to

42%

more capacity per slotthan a Boeing 777-300ER

A380-approved airports in India

Mumbai

Delhi

Bengaluru

Hyderabad

Photo credit: Scott Arfin

3

The A380 is reaching critical mass at global airports with 11 airlines from 10 different countries in the Middle East, Australasia, Asia and Europe now operating the super-jumbo on routes across the world.

The world’s largest commercial airplane still has a novelty factor and is a favourite among passengers, many of whom are willing to pay a premium to fly on the aircraft. But as more airlines add the A380 into their fleets, airports and civil aviation regulators are increasingly gaining familiarity in integrating this aircraft into their operations and planning.

There are now 132 A380s in operation worldwide with approximately 25 additional A380s that have been rolled off the assembly line and are expected to be delivered to airline customers this year after final fit out.

Emirates currently operates 48 A380s and, with more deliveries scheduled for this year, is due to pass the 50th A380 milestone this summer. The high capacity, low operating cost (per seat) of the aircraft has allowed Emirates to be flexible in its route utilisation, with the A380 being used on short and medium-haul stops from Dubai such as Jeddah, Kuwait and Mauritius – and soon, Mumbai – as well as longer haul flights such as Los Angeles, Sydney and Beijing.

A380 – reaching critical mass

The spill-over effects of up-gauging to an A380India’s National Council of Applied Economic Research (NCAER) modelled the impact of Emirates up-gauging daily services to Mumbai and Delhi respectively from Boeing 777s to an Airbus A380.

The incremental economic benefit from up-gauging a daily service to an A380 is $8.3 million in additional GDP per year, and the creation and support of 2,165 jobs.

As staff conditions are cited by some as a political issue in global aviation, Emirates’ status as an employer of choice is worth detailing, with more than 430,000 people from around the world applying to work at the airline in 2013-14.

Emirates caters to an international market and employs staff from more than 150 nations with competitive salaries and benefits in order to attract top talent.

The attractive working conditions and remuneration are reflected in our ability to recruit skilled staff such as pilots, aircraft technicians, ground dispatchers and airport services and ticketing staff from many countries – including the more than 11,000 staff hailing from Europe.

Currently more than 11,300 staff have worked at Emirates for more than a decade, and 2,700 staff have worked for the company for more than 20 years.

Emirates employment fast facts• Emiratesregularlyadjustssalariesabovetherateof inflationto

continue attracting top talent. Over the past six years, Emirates has increased salaries every year except for one by between 3%-11%

• Independentsurveysthatlookedattheremunerationpackagesof flight crew, cabin crew and engineers from more than 25 airlines confirmed that Emirates benefits are very competitively placed

• Emiratesincurscostsonbenefitsthatmanyotherairlinesdonot provide. It pays the cost for many of its expatriate staff on employee benefits such as accommodation, contributes towards children’s education and dedicated company healthcare schemes for management, pilots, engineers and all other staff

• Emiratesoffersaprofitsharingplantoallstaff –notjusttosenior managers compared with many other airlines

An employer of choice

11,300 Emirates staff with more than 10 years’ service

2,700

Emirates staff with more than 20 years’ service

Emirates’ A380 destinations - 29 cities and counting

MAN

ICN

SIN

PVG

BNE

LGWLHR

CDG

JED

ZRH

AMS

LAX

FCO

SYD

DFW

AKL

PEK

FRA

MUC

BCN

YYZ

KWI

MEL

HKG

KUL

MRU

DME

BKK

JFK

BOM

4

Last month Emirates released its 2013-14 annual results audited by PwC, reporting net profits of $887 million despite fierce competitive pressures and a global economic environment that is only slowly recovering.

Passenger numbers grew by 13% to 44.5 million with seat factors remaining stable at 79.4%, even amid significant capacity growth.

This profitability came as a result of strong demand, a continued focus on network optimisation and efficiency improvements across the business.

Revenue per employee grew 3.7%, to $528,000, while the airline also saw an improvement in unit costs by 3%, down to 45 US cents per available tonne kilometre.

Over the past year, the Emirates strategy of launching services to underserved routes yielded dividends with new additions to our international network such as Taipei, Boston and Warsaw receiving strong responses from customers.

Emirates also added capacity to high-demand routes to feed additional traffic onto our global network, and also reaped the rewards from expanded partnerships, including the first full year of the Qantas partnership, and our partnership with JetBlue expanding into a two-way codeshare.

As it did in 2012-2013, currency issues weighed heavily on Emirates since the UAE dirham is pegged to the US dollar. Nevertheless, the profits, up 43% from the year earlier, were strong enough to post a profit dividend to Emirates’ parent company, the Investment Corporation of Dubai (ICD), amounting to $280m.

Underscoring sound financials and investor confidence, Emirates in 2013-14 raised a total of $3.3bn, mainly to secure its ongoing fleet expansion, through a variety of financing structures such as an enhanced equipment trust certificate (EETC), a conventional bond and an Islamic bond, or sukuk.

The audited annual report highlights that the airline operates as an independent commercial entity free of subsidy or state aid, and Emirates is proud to have a 20-year track record of transparent, audited financial accounting, freely available via our website.

Going further: Emirates posts 26th consecutive year of profits

Key quote from the report:

“Costs grew at a slower pace than the expansion in revenue. Lower unit costs and a stable yield on an expanded capacity were the main drivers for the growth in profitability.”

Revenues:

$22.5bn ( 15%)

Profits:

$887m ( 43%)

Profit margin:

3.9% ( 0.8 percentage points)

Costs:Unit costs:

162 fils/ATKM( 3%)

Jet fuel:

$8.4bn(now 39% of operating costs)

Handling, in-flight catering, overflying, landing, parking and aircraft maintenance:

$3.9bn

$3.3bnCommercial market borrowings in 2013-14

5

As its large land mass might suggest, Brazil is a powerhouse in the global economy. It ranks seventh worldwide in terms of nominal GDP and is a key member of the BRICS group of developing nations. Rich in natural resources, Brazil is the world’s largest producer and exporter of coffee and sugar.

In 2013 the UAE was the second biggest importer of Brazilian products among Arab countries, worth $2.5 billion. Dubai in particular is an active trader with Brazil, with two-way trade reaching $1.9bn last year. Food produce and products formed a major part of the exports, boosting Brazil’s export revenues, with strong demand for ‘Halal’ certified beef and poultry being exported to Arab countries.

Emirates commenced passenger services to Brazil in October 2007 with flights to São Paulo, followed by Rio de Janeiro in January 2012. Freighter operations to Viracopos were introduced in October 2010. Cargo carried on Emirates flights from Brazil range from hatching eggs to Dubai, automobile parts to Jeddah, machinery and aircraft spare parts to Shanghai, fresh fruit and vegetables to Frankfurt and vaccines to Manila. In the past year, Emirates has also operated nine charter flights with food products from Viracopos to Benin and Accra.

New Silk Road: Brazilian exports to Africa, the Middle East and Asia

Shanghai

Manila

São Paulo & Viracopos

Accra

Jeddah Dubai

New Silk Road

Car parts toJeddah

Mangoes toAccra

Machinery/aircraftparts to Shanghai

Vaccines toManila

Hatching eggsto Dubai

362 tonnes Emirates weekly cargo capacity out of Brazil

12,000 tonnes cargo carried on Emirates flights from Brazil in 2013/14

Emirates’ Brazil operations

Daily passenger services Dubai to São Paulo and Rio de Janeiro

Four freighter flights per week Dubai-Viracopos

Nu Skin China knows all about “Destination Dubai”. In April the healthcare company organised one of the largest corporate trips ever, flying 14,500 staff to visit Dubai to enjoy the emirate’s desert safaris, sight-seeing, dhow dinner cruises and shopping. Nu Skin China’s employees travelled on 77 flights over seven days to and from China, and paid for 40,000 hotel room nights across 40 hotels in Dubai and Abu Dhabi.

77 flights in 7 days for Nu Skin China

6

On the enduring legacy of the World Cup for Brazilian aviation:

The legacy will be the attention authorities have given regarding the modernisation and expansion of airport infrastructure and air navigation services, which is being done with greater private sector participation. Continuity of such investment is important. The greatest legacy will be Brazil’s increased exposure in the international media and its attractiveness in the eyes of foreign visitors.

60 seconds with the Brazilian Association of Airlines

Eduardo Sanovicz

President of the

Brazilian Association of

Airlines (ABEAR)

Can you help us enhance our International and Government Affairs?

emirates.com/careers

Tomorrow, you could be joining our International, Government and Environment Affairs team and working with one of the fastest growing airlines in the world. Based in Dubai, you will enjoy a competitive, tax-free salary, global travel concessions and other attractive benefits. This is an incredible opportunity to develop, implement and manage our international and government affairs activities and positions on a global level, as they relate to the operations of the Emirates Group. You will support all stakeholder engagement and messaging as well as global regulatory affairs challenges. Additionally, you will help prepare comprehensive analysis, case studies, speeches, reports, campaign proposals, policy documents and official responses. Skills required include strong technical and industry knowledge, solid experience in research and statistical analysis, and an ability to communicate this efficiently and openly. Teamwork, effective influence and a focus on outcomes are essential. If you have the mentioned skills and are interested in this position, apply online using the reference 140004HR.

Where could you be tomorrow?

On the biggest challenges facing Brazilian airlines:

The top challenges include decreasing growth rate of the national economy and the sharp rise in operating costs. Approximately 60% of airline costs on items including fuel and spare parts are quoted in dollars. With the unstable behaviour of the Brazilian currency and heavy taxation, this has become a major strain on airlines. More than 80% of the jet fuel consumed by Brazilian airlines is produced domestically, but is sold and priced using an outdated formula. This makes it at least 20% more expensive than the international average. Jet fuel for domestic flights is even more expensive due to federal taxes (approximately 7%) and state taxes (between 12% to 25%). There are good prospects for improvement and expansion of the national airport infrastructure such as private sector management of major airports and building/renovating smaller airports. There is dialogue with authorities to reduce the tax burden and make them aware of the importance of aviation to Brazil. Today, airlines are the main means of mass transportation. Airlines are increasing the tax base, so fairer taxation would make more sense.

On the top regulatory objectives of his organisation:

The main objectives are the revision and modernisation of labour legislation dating from 30 years ago, increasing foreign investment in Brazilian airlines and establishing Open Skies agreements with other nations.

On the current state of Brazilian aviation:

We have witnessed a long period of remarkable growth beginning in 2002 with the deregulation of tariffs in the domestic market. The market has since tripled, reaching more than 100 million passengers in 2012. After this period of growth, and a democratisation of commercial aviation in Brazil that included passengers from different social classes and different regions of the country travelling together, we now live in a time of stability.

On what Brazilian air travel will look like in 10 years:

The goals we set ourselves are: double the number of passengers carried to reach more than 210 million, to go from the current 96 to 170 served airports, and to increase by more than 60% the number of domestic routes to more than 790. We also hope to employ nearly two million workers directly and indirectly, and to expand the existing aircraft fleet from about 450 to more than 970.

7

A new study from Canada’s Ministry of International Trade has shed light on how international air services boost an increasingly important segment of the global economy – the new “trade in tasks”.

In its report, “The link between air services liberalisation and Canadian trade,” the Ministry found that air service agreements (ASAs) contributed to a significant and measurable effect on stimulating bilateral trade between nations, both in terms of goods trade and services trade. Services trade is what it termed the new “trade in tasks”, a growing slice of world economic activity facilitated by globalisation and increasing connectivity brought about by airline services.

The authors suggest an increase in Canada’s air liberalisation index by about five points would correspond to an increase in Canada’s bilateral services trade with a particular partner by roughly 20%. An air agreement was almost as important as sharing a common language in contributing to trade growth between nations, they said.

Over the period of study (1998-2008), Canada had 53% greater merchandise trade, 169% greater services trade and 269% higher commercial services trade with those countries with which Canada had an ASA, compared against those it did not.

As regular readers of Open Sky will know, Emirates believes Canada’s air services policy has been essentially protectionist in nature, favouring the specific interests of Air Canada above wider trade and connectivity considerations. Emirates, however, is hopeful that Canadian policymakers will take the recommendations from the Ministry of International Trade to heart and facilitate further trade growth through air services liberalisation.

Air services and the new “trade in tasks”

How do air services impact economic growth?

Direct (within the industry)

Indirect (industry supply chain)

Induced (spending of direct and indirect employees - “the multiplier effect”)

Catalytic(impacts on other industries)

Airports ANSPs Fuel Manufacturers

Catering Business Services Advertising Travel trade

Transport Clothing Household Goods Food & beverages Recreation & Leisure

Tourism Goods trade Services trade Productivity/Market Efficiency

Key extracts from the report:

“Both the signing of ASAs and increasing their liberality have significant positive effects on services trade, especially in the case of commercial services. Thus under the new paradigm of trade in tasks, in which the movement of people and services is a crucial component, Canada would benefit not only from signing new ASAs, but also from liberalising its existing ones.”

“Allowing faster and easier travel of people between international destinations can be an important requirement for service trade, which may require the service provider to visit the customer in their destination country in order to provide a service (for example, engineering or construction services).”

“In the air services market, economists generally expect liberalisation to lead to lower airfares and higher volumes of passenger (and cargo) traffic, followed by systemic increases in efficiency, possible technological spillovers and improved business practices that may lead to further improvement over time.”

“Our results show a strong link between air service agreements and Canadian trade. Strong benefits accrue to both merchandise and services trade from the signing of an air service agreement, particularly for services. Over the period of study, Canada had 53% greater merchandise trade, 169% greater services trade and 269% higher commercial services trade with those countries with which Canada had an ASA than those it did not.”

“There may be a link between air service agreements, the degree of ALI (the degree of air liberalisation) and investment flows, which could be another spur to the recent air service liberalisation, and could be explored in a separate study.”

8

Dubai has joined the rarefied company of New York, Singapore and Paris among the top overnight destinations worldwide, a study by MasterCard revealed.

Dubai ranks #1 in the Middle East and Africa region with visitors expected to pump $10.4 billion into the local economy from visitor spending last year, MasterCard said in its “Global Destination Cities Index 2013” report. Dubai also ranks 7th worldwide and 1st in the Middle East for overnight visitors, with 9.9million per year. MasterCard based its study on projections for 2013 overnight arrivals and visitor spending. The rankings illustrate the transformation that Dubai, the host city of the Expo 2020, hasundergone in recent years. Dubai International recently overtook London Heathrow as theworld’s busiest international airport, and MasterCard’s findings show that Dubai is muchmore than a global transit hub. It is a destination in its own right, after developing a service-based economy with tourism at the forefront – with air connectivity from Emirates and the130 other airlines serving Dubai playing a major catalytic role.

As CNN once put it, “Dubai is a story of survival - how one small city running out of oil saved itself with a mixture of tourism, commercialism, and pizzazz.” Last year, visitors from Australia were up 39% according to the Dubai Department of Tourism and Commerce Marketing. Over 90,000 Canadians visited Dubai, up 24% from the previous year. Visitors from two of the most populous nations on the globe, China and India, posted gains of 11% and 16%, respectively. While the MasterCard study does not mention the contribution from Saudi Arabian tourists into Dubai, another source ranks the Kingdom as the top market for inbound travellers. According to Dubai Airports, 1.4 million Saudi travellers passed through Dubai International Airport in 2013, a 20% gain from 2012.

New York, Paris … DubaiDubai…

Ranks

7th worldwide in international overnight visitors

Is one of the New York Times’ “52 places to visit in 2014”

Top origin/feeder cities for Dubai tourism: 2013 visitors1. London 841,0002. Kuwait 399,0003. Paris 361,0004. Frankfurt 335,0005. Doha 295,000Source: MasterCard Global Destination Cities Index 2013

Emirates’ services to its US gateways are contributing more than $2 billion per year to the US in economic activity.

Airports and local economic agencies from seven of the nine US cities served by Emirates (including Chicago, starting in August) have quantified the value of a direct non-stop from Dubai or an equivalent long-haul service.

All suggest multi-million dollar gains to the local economy arising from this connectivity and the associated direct, indirect and induced benefits. Similar economic impact studies from New York JFK and Washington Dulles airports were not available.

US airports measure the value of Emirates services

Chicago

Los AngelesSan Francisco

Seattle

Houston

Dallas/Fort WorthBoston

Annual economic impact of Emirates

operations

Airport ($m)

$132m$227m$257m$623m$200m$166m$445m

Total impact:

$2.1bn

Key extracts from the report:

“One striking feature is how far ahead Dubai is from the rest.”

“Cross-border spending by international visitors in Dubai is estimated to be over three times higher than second-ranked Riyadh, 3.7 times higher than the third-ranked Beirut, almost four times higher than the fourth-ranked Johannesburg, and is over six times higher than the sixth-ranked Abu Dhabi.”

Sources: Local airport and economic agency estimates

9

Encouraged by the Milan authorities in their bid to boost connectivity and spur economic activity, Emirates last year began operating flights between Milan Malpensa and New York JFK airports.

Since then there have been legal challenges by Alitalia and Delta regarding the operation and the Italian Government’s approval of such flights.

After one recent ruling in April, Delta said the Emirates 5th Freedom MXP-JFK route “provides no additional benefit for travellers.” In truth, Emirates’ service is receiving strong demand from passengers in all classes, with the route receiving between 6,000 to 8,000 new bookings every month, and average seat factors for this summer are projected to reach 90%.

5th Freedom services have existed for decades and provides consumers, airports, and communities with an important competitive alternative. Where 5th Freedom services are authorised – as they are, without restriction, as part of every US Open Skies agreement – airlines are and should be free to decide whether they make commercial sense and address unmet consumer demand.

And as the bottom chart demonstrates, Delta, despite its seemingly principled position against 5th Freedom flights, has more than a few 5th Freedom flights of its own, which it conveniently forgets to mention in its frequent and ongoing commentary about Emirates.

Look who’s flying 5th Freedoms

“Singapore Airlines already operates fifth-freedom U.S. routes between Houston and Moscow; New York and Frankfurt; Los Angeles and Tokyo; San Francisco and Seoul; and San Francisco and Hong Kong, and nobody seems to mind.” – Airline Weekly

5th Freedom flightsThe right to fly between two foreign countries on a flight originating or ending in one’s own country.

DL - Delta Air Lines

One US airline’s5th Freedom routes

Not shown on this mapNew York-Amsterdam-MumbaiNew York-Accra-Monrovia

Los Angeles New YorkDetroit

Minneapolis/St Paul

Atlanta

Seattle

TaipeiShanghai

Tokyo

Singapore

ManilaBangkok

Hong Kong

DLDL

DLDL

DL

DL

DL

Nagoya

Mumbai

Auckland

Papeete

New York

Houston

Singapore

Dubai

NZ

Air New ZealandAir Tahiti NuiEmiratesJet AirwaysKuwait AirwaysPakistan International AirlinesSingapore AirlinesUzbekistan Airways

Trans-Atlantic 5ths

Delhi

9WEK

KU

SQ

SQ

9WHY

PK

Paris

TN

Los Angeles

Moscow

Toronto

Lahore

BrusselsLondon

Milan

Frankfurt

ManchesterRiga

Tashkent

São Paulo

New York

Tokyo

Seoul

Singapore

CX

CI

CI

KE

KE

SQSQ

TG

SQ

Cathay Pacific AirwaysChina AirlinesKorean AirSingapore AirlinesThai Airways International

Trans-Pacific 5ths

Kuala Lumpur

Bangkok

Vancouver

Los Angeles

San Francisco

Honolulu

Osaka

TaipeiHong Kong

Source: OAG Analyser, Summer 2014 schedule

Amber Dubey

Partner and India Head

of Aerospace and

Defense, KPMG

Amber Dubey is a well-respected and influential analyst and commentator on Indian aviation. We asked him his views on how the government can spur growth in the industry.

It appears the pace of Indian air services growth has slowed. What has been the impact of this?

India is the ninth largest aviation market in the world, is blessed with a great location, a growing economy, a large upwardly-mobile middle-class and immense tourism opportunities. Yet last year air traffic in India declined (by 2%), the second time in 10 years. Air travel has still not percolated to the masses, and less than 1% of Indians have flown on an aircraft. The industry is currently facing critical challenges in terms of an unfavourable policy environment, high taxation, excessive government interference and inadequate infrastructure growth. As a result all Indian carriers, but one, are making hefty losses. This has hampered economic growth, investments, tourism and job creation. We need significant corrections in policies, procedures, infrastructure, taxation regimes and skills development. These are man-made problems and hence, surmountable. On the positive side, India is getting increasingly aligned to global aviation best practices and is also becoming a better place to do business. In the last two years, the Ministry of Civil Aviation (MoCA) has implemented a series of reforms: 49% foreign direct investment (FDI) in airlines, opening foreign routes and external commercial borrowing for Indian carriers, the removal of import duties on aircraft parts, the privatisation of Indian airports, providing visas on arrival, facilitating 24x7 customs operations at leading cargo terminals and the recent decision allowing Airbus A380 flights into India. More reforms are expected once the new government takes over. You project India will become the third largest aviation market by 2020 and the largest by 2030. How can this be achieved?

This is an ambitious target which would require a bold vision and disruptive strategies. Simple growing at an 8-10% per annum will not help. Waiting for Indian carriers to expand their fleet, especially wide-bodies, and serve over 150 global destinations could take decades. Time is a luxury we don’t have.

We need an ‘open skies policy’, say for five years, and then assess if it has helped or hurt India. The fears that Gulf and ASEAN carriers will swamp India are unfounded. We have had open skies with the US since 2005, and we also have open skies for all cargo carriers. This has only helped India.

Creation of a high level inter-ministerial group on aviation is critical, because many different ministries, such as Home, Defense, External Affairs, Tourism, Trade and Commerce, Environment etc. impact the growth of this sector.

Jet fuel in India is the costliest in the world, roughly 60% more expensive than in the Gulf and ASEAN regions. A reduction in the excessive taxes on aviation fuel and maintenance is an immediate priority.

Other key initiatives include abolition of the discriminatory “5/20” rule, fast-tracking of stalled airport projects, the promotion of no-frills airports in tier three and four cities, the creation of an independent air traffic control organisation, flexible use of defense airspace, privatisation of Air India, and greater focus on aviation training, cargo and general aviation.

What is the cost of inaction?

The “do-nothing” option does not exist for India. The impact would be disastrous. The new government is expected to be bullish on growth, foreign investments and employment creation. They might be open to radical ideas.

Frankly, over six decades of protecting Indian carriers has not brought any glory to India. Today many in India question the efficacy of the bilateral quotas. Unhindered arrival of global airlines in India will improve global connectivity and service quality; bring down airfares, increase tourist inflows, expand the abysmally narrow flyer base and create several thousand incremental jobs.

Indian carriers will retain the competitive advantage of having non-stop flights from India to the rest of the world. This is something that global carriers cannot provide, under 6th Freedom operations.

Sector Insight

10

11

They said it best...

... from an Indian perspective

What can we expect next in Indian aviation?

If India gets a stable government, bold reforms can be expected soon. The government-appointed Mayaram Committee in June 2013 advocated 100% FDI for airlines, but was shot down. Telecom, incidentally, where 100% FDI has been allowed, has greater national security risks than airlines!

The new government should consider doubling bilateral seat quotas on routes where foreign carriers have exhausted nearly 80% of their quota. Global carriers should be allowed unhindered access to any airport in India. Which airline a passenger chooses is best left to him or her.

The global carriers may snatch some traffic from their Indian competitors, but will also bring incremental global traffic to India. Many foreign tourists skip India in favour of destinations in the ASEAN region due to India’s poor air connectivity with the rest of the world.

In sector after sector that has been deregulated, we have seen Indian brands competing well with global brands. So the fears that global airlines will wipe out Indian carriers is unfounded. It’s time for India to open up big-time. For India’s sake!

Open Sky brings you the best quotes on liberalisation, alliances, aeropolitical protection, free and fair trade, economic policy and global business.

“History is clear. When the Romans built roads, the trade around the empire improved.” – Andrew Charlton, managing director, founder and CEO of Aviation Advocacy (stating that new routes and liberalisation spurs trade)

“Gulliver (The Economist’s business-travel blog) supports more

international competition between airlines. It is the best way of improving service and offering value for money.” – The Economist

“FedEx believes that open markets will inevitably produce a variety of business models, of employment models and of corporate models. Those are not grounds for rejection under this liberalised agreement and to hold otherwise would be to turn back the clock on US market openings.” – FedEx filing commenting to the US Department of Transportation on Norwegian Air Shuttle’s application for a foreign air carrier permit

“The liberalisation in Europe in the early 1990’s has demonstrated the economic potential of a liberal economic system. In the decision-making process of awarding traffic rights not only the interests of individuals, but also the interests of businesses, consumers and airports have to be considered. Basically all new airlines and new connections must be welcomed.” – Dr Michael Kerkloh, president and CEO of Munich Airport and president of the German Airports Association

“Dubai’s rise to prominence has been meteoric. In the past decade its gross domestic product more than quintupled to around $82 billion, according to official figures. Its rise – without the direct benefit of oil – once led US president George W. Bush to describe the emirate as ‘a model’ for the entire Middle East. With little of its own oil or gas, Dubai’s rulers have historically placed investments, commerce and rapid urban development at the centre of an economic strategy based on the philosophy of ‘build and they will come.’” – The Telegraph

“In a survey of 625 businesses in five countries, respondents considered the absence of good air transport links to be one of the major determining factors in not making an investment.” – ATAG Aviation Benefits Beyond Borders 2014

Siim Kallas, European Commissioner for Transport

“European passengers – and I like to take their viewpoint first, since they are the most numerous – are happy with the Gulf carriers because they offer a good service. Airports and ground handlers are happy because they bring traffic, and the air navigation service providers are happy because the more routes and frequencies they fly into Europe, the more fees they collect. Last but not least, our OEMs are extremely happy with them because they buy a lot of Airbus aircraft and Rolls-Royce engines.”

12

Please visit our website for more information on our international and government affairs and environment activities

www.emirates.com or write to us igea@emirates.com

Zaragoza

Gothenburg

Liege

Chicago

Mexico

Lilongwe

Quito

Viracopos

Taipei

HanoiChittagong

Eldoret

Djibouti

Atlanta

Venice

Newcastle

Toronto

Casablanca

Paris

Nice

Athens

Rome

Moscow

St. Petersburg

Kiev

Copenhagen

Seoul

Beijing

OsakaTokyo

Glasgow

ManchesterBirmingham

London

Geneva MunichVienna

Milan

Larnaca

Tripoli

Tunis

Zurich

HamburgAmsterdam

Istanbul

DusseldorfWarsaw

Frankfurt

Shanghai

SingaporeKuala Lumpur

ManilaBangkok

Jakarta

Addis Ababa

Entebbe

Dar es Salaam

Johannesburg

Cape Town

Nairobi

Lagos

Abuja

AccraAbidjan

Conakry

Dakar Khartoum

Cairo

Kolkata Hong KongDhaka

Melbourne

Adelaide Sydney

Brisbane

Perth

Auckland

Christchurch

Thiruvananthapuram

ChennaiBengaluruKozhikode

Lahore

IslamabadSialkot

Peshawar

HyderabadMumbai

DelhiKarachi

Ahmedabad

Malé

KochiColombo

Mauritius

Seychelles

LusakaHarare

São PauloRio de Janeiro

Buenos Aires

New YorkWashington, DC

Los Angeles

San Francisco

Seattle

Houston

Dallas/Fort Worth

Luanda

Durban

Madrid

Prague

Dublin

Brussels

Ho Chi Minh City

Phuket

Lyon

Guangzhou

StockholmOslo

LisbonMalta

Barcelona

AlgiersKabul

Boston

Kano

Dubai

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Passenger Routes Freighter Routes Passenger & Freighter Routes

Route MapJune 2014Muscat

DammamBahrain

Riyadh Doha

Sana’a

Jeddah

Medina

BasraKuwait

Tehran

Amman DamascusBeirut Baghdad

Erbil

Dubai

Middle East Network

Fast FactsAircraft in fleet 220No. of destinations 143Passengers* 44.5 millionCargo* 2.3 million tonnesPassenger Seat Factor* 79.4%Employees - Airline* 52,000Emirates flights daily 420 Financial Auditor PwCFinancials (Airline)* Revenue $22.5bn,

profit $887mFuel Costs (Airline)* $8.4bnFirst flight 25 October 1985New passenger routes(2014-15)

Abuja, Brussels, Chicago, Kano and Oslo

A380 fleet 48 (on order 92)Boeing fleet 138 (on order 209)

* 2013-14

Emirates recently announced the winners of its “A Greener Tomorrow” initiative, with not-for profit organisations in Malawi, the Philippines and Pakistan receiving up to $150,000 in funding to continue their environmental and conservation work.

Funds to support “A Greener Tomorrow” were raised through employee recycling programmes across the Emirates Group, including initiatives for office paper, clothes and aircraft seat components.

The winners:

Ripple Africa (Malawi): Focuses on environmental conservation, education and healthcare. The organisation has developed a low-cost stove with a low tech sustainable structure that is sourced 100% from local materials. This stove reduces deforestation in the local area, as well as reducing the direct inhalation of smoke.

Institute for Climate and Sustainable Cities (Philippines): Runs a programme to turn diesel-powered Jeepneys (converted Jeeps used for public

transportation) into electric vehicles to reduce urban air pollution.

Heritage Foundation (Pakistan): Runs an “eco-village” called Moak Sharif which promotes environmentally-friendly farming practices, smokeless cook stoves, and education for women and children in these sustainable practices.

A Greener Tomorrow