Airline Leader Interview Emirates President Sir Tim Clark

Transcript

Richard Quest:Our guest is— we are very, very privileged and grateful to have with us Sir Tim Clark, who joins me from Dubai. Tim, first of all, let's check you can hear me and I can hear you. Can you hear me, Tim?

Sir Tim Clark:I can certainly hear you, Richard. I don't know if you can hear me.

Richard Quest:Loud and clear. Um, I'll set out, because of the situation, both, uh, geopolitical, militarily, uh, and aviation-wise, I'm going to set out where I'm going to take this over the next half hour because I don't want it to be a discussion just about what's happening at the moment, because obviously there are a lot of other issues as well. So I will guide us across the whole range of subjects. But let us begin with the current position for Emirates, how, how the network is looking, what you're flying and where. What would you— what percentage of the full schedule have you got?

Sir Tim Clark:Well, at the moment we're operating 65% of our production. We're actually— that translates into about between 150 and 160 flights a day, with up to 87% of the countries we served originally and just about all the airports are about 13% are not in the flying program at the moment, but they will probably be there within the next 2 to 3 weeks.

Richard Quest:How difficult has it been to rebuild the schedule?

Sir Tim Clark:Well, look, the people who are familiar with the— this part of the world, I think a lot of, a lot of passengers are, and I think most of the world is aware of what goes on in the Middle East, particularly in the UAE and Dubai in particular. This trauma, which by the way is still ongoing, there is not a clear resolution at the moment, but there is a history of our ability to restore operations fairly rapidly. And we've honed our skills probably more than any other airline in the world now because we've been subjected to all sorts of things over the last 20 or 30 years, whether it be the first Gulf War in 1990, the second in 2003, various disruptors in the global economy, you know, we know that. And as a result of that, we are fairly adept now getting the fleet flying again. I don't think this was any exception except that we were militarily under a degree of threat. But of course, that didn't really stop the staff stepping up and getting this airline up and running is critical to Dubai, in tandem with the belief in Dubai at the governmental levels that this can be dealt with, that it is not going to stop what is going on in Dubai. And there is clear indication that a lot of things are continuing to happen in Dubai in terms of infrastructure spend, private investments are still going on, etc., etc. We're hoping that this will resolve itself fairly soon and we'll get back to where we were in February of this year. So, you know, it's going well. Our planes are pretty full, surprisingly. Your audience may be surprised to hear that. And importantly, the flows across the hub continue to grow by the day.

Richard Quest:So without dwelling on what it was like, just give me an overview. In those early days of how it was as it started?

Sir Tim Clark:Well, look, it was something that we hadn't been subjected to before. Of course, there was a degree of concern, anxiety, of course, because there were things going on here that we hadn't been used to in the past. And of course, we had to deal with those. But as I said, we've got a group of people here who are fairly steeled in the art of dealing with disruptions of the scale that we've had to face. When we had 270 aircraft, all widebodies, flying up until the thing and then see it come to a grinding halt, but 4 days later we were up and flying again irrespective of what was going on. That esprit de corps and the systems and technology we have in place now to support the operation and keep it going, working with the various entities, you know, we're very vertically integrated in Dubai in the aviation sector. Latterly, the military has come into play and they are part of the vertical.

Richard Quest:Was that a huge benefit, do you think, that vertical integration across the entire spectrum from airport, government, airline, everybody? It's been one of the great strengths in the past. Is that the strength that really helped as well this time?

Sir Tim Clark:I would think it is the defining issue here. At the top of this sits the government, who were absolutely determined that things should be kept going as quickly and get going as quickly as possible. The vertical integration of all the entities in the aviation sector, as I said, including the military, bringing this all so we could all talk as we did regularly, 2 or 3 times a day, discussing the airspace issue, discussing the military threat, discussing all the things that needed to be done, whether it be in the airports and the navigation. And I'll say all are integrated. So when we spoke, messages were very short in their communication line and very quickly we're able to get where the fleet going.

Richard Quest:As you look forward now, the issue is fuel. The issue is, I mean, we, you know, IEA says that Europe's got 6 weeks left. We've got 5 weeks since they gave that. warning of aviation fuel left. How worried are you you will run out of fuel?

Sir Tim Clark:Frankly, we're not that concerned. We have adequate supplies over here. You see, we produce and refine our own Jet A-1. We know with the effect of the closure of the strait that 40% Well, actually, 40% of European Jet A-1 is imported, but only 50% of that, say 20 percentage points, comes through the straits. So I think this is more a question of in the long term, if this continues, there could be an issue more about the price of, of the interplane price of fuel, and that will then militate against possible demand growth in the future. We'll see. What we have found is that whenever we've been through these traumas before, The strength of demand is so strong. The yields that we're currently getting are still about 30, 40%, would you believe, because we've got a class mix issue, lower than they were this time last year. We know that the demand will take price increases surprisingly. Others in other segments, particularly in the budget carrier area, are more price sensitive, and they're probably getting a little bit concerned about what it may do if the fuel goes to $140 or something like that.

Richard Quest:Where do you see it going, Tim? I mean, I know it's how long is a piece of string, but where do you see the—

Sir Tim Clark:If this gets resolved and the straits open, you will have to deal with a month or 2 supply disruption. But I honestly believe that this will be dealt with. The global economy is enormously adaptable, and it has been through multiple traumas before. It's always come through. Very easily. So you will get production supply increases. You will get OPEC adjusting what they were doing. The refineries are more of a problem because the crack spreads are quite high at the moment. But it's a question of whether the refineries can get themselves into a position where they start to produce these kinds of fuel elements— kerosene, Jet A-1, et cetera— at the lower end of the spread of the crack process. But in the end, I believe that we will get things going again. If this happens, if this goes away in the next couple of weeks, let's just say, then I'm very optimistic about one, you have a bow wave of demand just as we had in COVID, which has to be dealt with. And then you've got the normal demand out of the primary markets over the summer period in the Northern Hemisphere and winter down in the Southern Hemisphere. So if this is not prolonged, then I remain optimistic that we can deal with this over the next 2 to 4 weeks without too many problems.

Richard Quest:I mean, it's a moot point if it's not resolved, because if it's not resolved, we'll all have much bigger issues that we'll be dealing with for a lot longer, and we can't really speculate which way they would go. But how has this How has the current environment now, how has it changed your thinking for immediate to midterm planning? And I'm thinking about the large sums that you're planning refurbishing the fleet, you are— the new aircraft purchases, all of these issues. Are you going back to redo any numbers because of what's happened?

Sir Tim Clark:Absolutely not. We will continue to do what we have been doing. It's given us a little bit of a break because some of the fleets are now grounded. That means we can get our engineers on board and get the refurbish program done. We've just had our first 380 fixed with Starlink in the UK at the moment. A whole raft of aircraft by the end of this year will be obviously up to 200 will be Starlink equipped. The refurbish program is is going at pace, and I really don't think. That things are going to change the way we operate this airline or its model as a result of this. In fact, you know, I'm one of these people who believes there is always opportunity out of adversity. And that's been the case in the past. I don't want to blow our own trumpet or tempt providence, but I believe that we can get this back. We will get this back. The brand of Emirates is particularly strong and people like us and they like traveling on us. So I hope that'll be the case.

Richard Quest:Now, your competitors have not missed an opportunity here. I was at a conference, at an Airlines for Europe conference earlier this year, and you've heard— you may have already heard these criticisms— not criticisms, but policy issues. And it goes like this: what this crisis has done, not just because of Emirates, but because of the Gulf 3, it has shown the weakness of European carriers who have ceded too much Through policy to the Gulf. So, for instance, you can't fly from Frankfurt to Manila anymore direct because those routes don't exist because too much was given by way of policy advantage to yourselves and other Gulf carriers. And the European carriers are saying to their governments, "Oi, a lot of what you've given to the to the Gulf three." We are now seeing a geopolitical weakness, a strategic weakness in our countries because of that. We can't connect the world anymore.

Sir Tim Clark:So what am I meant to do, Richard? Come out with the most enormous box of tissues that the world could produce as a result of this? Listen, we started this operation 41 years ago. And in the first 15 to 20 years, the absence of the European carriers in the primary markets that we are now serving was legion. They were not in Australia, they were not in Africa, they were not in Asia to the points that they could have been. They had equal opportunity as they saw the global economy take a major shift in the mid-'90s because of digitalization, as they saw the Asian economies go into afterburner mode, particularly the Chinese, the Vietnamese, the Thais, etc. The opportunities were clear and present to them. Their concentration tended to be on 3rd and 4th freedom traffic in and out of their hubs, uh, basically focused on North America where they saw the profit margins. And all the time Emirates was building its hub serving multiple points in 1st, 2nd, or 3rd level markets in the very countries that they failed to recognize that there was opportunity. And as we grew to the scale that we now have. And I have to say, taken with the other Gulf carriers, we are fairly dominant. It is because they did not take the opportunity that they could have done. The people running those businesses, both present and the past, lost the plot as far as what the opportunity was. They concentrated on trying to cobble together a load of very strange airlines, most of whom which were loss-making, and try to harness the power, the marketing power of these, only to find that their strikes and industrial action was so great that they couldn't even get the main carrier running properly. So let's not be too critical of the Gulf carriers as they saw the opportunity, exercised their market power.

Richard Quest:But they may take this opportunity, having seen how they have lost ground, to fight back in Brussels with regulators saying you've got to claw back some of the advantage we gave.

Sir Tim Clark:To which I would say, and what are they going to do with— how are they going to do that, Richard? I mean, we learned today that our friends in Germany are retiring 340-300s. After all, they are 36 years old. Or 340-600 gas guzzlers. They have no aircraft to be able to do or even come anywhere near the production capability of 270 wide-bodied aircraft in Emirates alone flying 15 hours a day. Uh, it's pointless trying to go in and protect their own position or try and claw back when they have no capability of operating these particular flights. And let's be quite clear, if they were airlines that were efficiently run and had a very efficient cost base, there is no reason why you couldn't go from Paris to Manila or Frankfurt to Manila and carry whatever you think— you think that the Gulf carriers are depriving you. Uh, uh, their carriers off. So I'm, I'm, I'm not, as you can hear, particularly sympathetic to that. And also, the countries that they would go to, maybe where the European Union Commission or the various capitals of Europe— I don't think it's lost on them the value that the, uh, the Gulf carriers, and we're of course by far and away the biggest, have brought to those countries. After all, Many of the countries in France, many of the, the, the points that we serve were certainly not served by the French, the Italians, the Germans, the Swiss, the Austrians, etc. So all we've done is add value to their countries outside the geopolitical argument. The wealth creation that the Gulf carriers has created both in these countries, and of course we've taken a, a fair slice of that as well because we are, I believe, a well-run operation. Is will not be lost on the— and after all, if you look at our order book in the United States or in France and what we have done to European aviation, particularly in Airbus, in the propulsion companies as well, they will tell you quite clearly that one of the biggest leaders in all of this and the entity that redefined the way airlines and airplanes should be built and produce at scale was Emirates. And frankly, the value we have added to the aerospace workforce in the, in the European theater is unbelievably high. And you, we can measure that very easily over the 40 years we've been operating.

Richard Quest:I'm going to come back to the subject in just a second. I want to go into a completely different direction since I have you with me. You said to me some years ago that you were going to look again at economy because there was plenty that could be done with economy and it had been the Cinderella to a certain extent. Well, Air New Zealand has beaten you with bunk beds on their plane, the Skynest. Are you going to do something similar?

Sir Tim Clark:No, good luck to them. I hope it works for them. I hope the numbers work out for them as well. Everybody would like to have a flatbed in the economy if they could. After all, that is the holy grail that everybody, you know, I want more.

Richard Quest:It's a revenue raiser. Yeah, they're going to charge $400 for it.

Sir Tim Clark:Well, that's fine. I wonder what the business class Delta would be or the premium economy. Anyway, that's for Air New Zealand. Good luck to them because I'm one of these guys that really like to see airlines pushing the boat out on product. But as far as we are concerned, yes, We have a major review going on our economy cabin. That'll be probably coming out probably in the next year or so. We have a few issues with the supply production of these things, but you will see something fairly interesting, let's say, in the next year or 2.

Richard Quest:Is there much more that you can shovel into business and first? I mean, What more can you offer?

Sir Tim Clark:Well, I'm working on en suite bathrooms in first class suites. I want everybody to hear that so everybody rushes out the door to find out how they can get bathrooms into the first class suites. Look, we've got a lot of things going on, Richard. We we it's it's it's like every every good product. If you leave it, it'll get stale, and this cycle will will bite you in the backside at one point or the other. So we're constantly on product. Refinement. The way we go about that is very high priority in terms of how we— what things we can offer. We talk about the technology, AI. We talk about personalization. We talk about all the bits and pieces, modern airline retailing. At the end of the day, when I've got 110 different nationalities flying on the airline carrying 200,000 a day, trying to deal with all of them. The one common factor is the human, and the human is never going to go away in terms of that. So the product you design for those humans has got to be one that is— well, it's not one size fits all, but you've got to be able to create shock and stun for, for, for a long time to come.

Richard Quest:Back to this idea of the vertical integration. The one thing that people talk about quietly is whether— is how Dubai— and I realize you can only speak for Dubai— how Dubai reasserts the idea the place is safe. Now, we've all seen the various videos, we've all seen the various influencer stuff, but this idea that both visiting the place And flying over the hub is safe. Has it a perception of that taken a knock? If it has, what's it going to take to convince people that it that Dubai is what it was?

Sir Tim Clark:You know, Richard. Again, I go back to what I said in the early days. We've had a lot of issues in this part of the world over the last forty years. I've mentioned a few of them, but certainly not all. After each of these events, the draw of Dubai, which is now— and the UAE— has produced an economic operating model which is the envy of the planet, frankly. I say that not because I live here and I'm part of it, because if you look around and see what these people have done, the power of this is not half an inch deep. It really is some very strong. And I believe that once this is over, it will not take much— certainly won't take much for Emirates to get back into the saddle. It certainly won't take much for us to project the brand quality and the strength of that brand, which is basically a good one, that Dubai is a great place for business, for hospitality, etc. And they're dealing with this in a manner which is very upbeat. So there is a great belief that Dubai will continue to excel, and the UAE come to that, that the aviation entities— don't forget we have FlyDubai as well, which is a very big player in this part of the world— will go back to their normal and expand as we have always. There is no way.

Richard Quest:Right. But does there have to be a moment of reflection that within that idea— I suppose humility is one word of putting it— that this did happen, that people were worried, and that there's a recognition of that and that the place moves forward?

Sir Tim Clark:You know, Richard, I, uh, again, people have short memories, okay? Um, if your product and your brand is as strong as ours is and will continue to be, and as long as Dubai remains a city of enormous attraction for all sorts of people, then people will forget, providing that we get a resolution to the crisis, right? That there is a degree of stability and quiescence. And once that happens— Right. Things will be back to normal. I do not believe that people are going to say, I'm never going to go back to this place again, because in the end, if you do want to travel across the planet from the African subcontinent or West Asia to the point that I said about the European carriers back together for so long, this is the one way to do it. It is really an elegant and enjoyable way of doing things. That's not going to be lost on the traveling public, and I can assure you That if this goes away in the next 2 weeks, 3 or 4 weeks, then by the end of the summer, we won't have even remembered what had happened and we will continue to move at pace according to our plans.

Richard Quest:Final thoughts, Tim.

Sir Tim Clark:Emirates—

Richard Quest:this is a— I've known you a long time. Emirates was extremely fortunate that you are still at the helm in such a crisis. Being a yes, you got a great team. I can I can hear all of that. But at the end of the day, your vast experience of the industry crises and and solid direction is to the airline's advantage. You must see that.

Sir Tim Clark:Look, I of course I do. In times like this, you need leadership. You've got to you know we've got a you know 100,000 employees in the group, and the leaders have got to be seen to to making the right decisions, being there for the. For the staff and not showing any signs of concern. Frankly, I've been through— personally, I've been through worse than this. I'm absolutely determined to make sure that we get through this and that we're— after 41 years of building this airline, that we're not going to allow it to falter or slow down. And that is the ethos that I try and convey to my team. And I don't really have to convey it because they're all on the same page as I am. There's not a— so I've got to— you talk about the team. It is all about teamwork. It all, as I said, that vertical, whether my boss, who's a member of the ruling family, Sheikh Mohammed bin Zayed Al Maktoum, his bosses from the ruler downwards are 100% behind what we do. And it gives the workforce an enormous belief in what they are doing. This isn't all for nothing. We are here to do a job. We're going to excel at it. What this job is and going forward in the future. And, you know, this year, despite March being wiped out for us, we'll still have improved our financial metrics by some— by a country mile. We'll still be the most profitable airline in the world, as you will soon hear. And that's because we are dealing with these situations. So it's not just about me. Let me Let me say this: I, I'm here because I do not wish the business to falter or slow or be worried about what's happening. I'm here with my team to make sure everybody knows that we are going forward. We are not going backwards. We're not even going sideways. We're not taking a breath, Richard. We're just getting on with the job, and we'll get that job done well.

Richard Quest:Frankly, I'm exhausted just listening to you. Sir Tim, Tim to me, thank you for joining us, sir. It is good to see you and see you in such robust good health. Thank you, sir.

Sir Tim Clark:Thank you, Richard.

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