Emirates will cut airfare to boost occupancy

Dubai-based Emirates airline will improve occupancy level by cutting airfare as high oil prices put pressure on its profitability, a senior official said.

Emirates President Tim Clark told Bloomberg that the carrier has no plan to cut routes and flights and instead aims to lift occupancy with cheaper tickets. He, however, didn’t reveal that when and how much the airline will cut airfares.

Clark said industry is comfortable with oil priced between $60 to $80 per barrel. Brent slipped in Asia more than $1 to below $112 a barrel on Friday.

The biggest international airline will also cut airfares on its 500-seat Airbus A380 aircraft.

Clark said cutting fares on A380 will push up occupancy level needed to break even because the impact of government spending cuts by European and Asian countries means that this strategy is more likely to succeed than raising fares and curbing capacity.

The airline’s president revealed that there is no plan to revise down aircraft orders and will tap demand spurred by globalisation and growth in emerging markets. He believes reining in order orders would have impact on manufacturers and a “horrendous domino effect” on smaller international carriers.

The biggest customer for the A380 superjumbo, Emirates surprised its peers by boosting its orders to 90 planes last June and said they were looking at ordering more.

Dubai’s airline will stick with its rapid growth model based on making Dubai into a high-volume, inter-continental travel hub using 90 A380s with 45,000 seats, Clark told Bloomberg.

“We have no intention of cutting back our growth. But that doesn’t stop us from redeploying assets if we think we can get a better return on a certain route,” he added.

Emirates last month signed a letter of intent with General Electric to oversee design and construction of an estimated $120 million engine repair facility in Dubai. The facility will be constructed over a 90,000 square meter land and will complement an existing engine overhaul facility in Dubai, the airline said in a statement that was released from the Paris Air Show on Tuesday.

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