Even as it keeps asking for more seats, Emirates has gone premium in India

Earlier this month, Dubai-based Emirates announced its best-ever half-year pre-tax profit of AED11.4 billion (US$3.1 billion), up 17% on the same period last year. This comes just days after IndiGo reported a half-year loss due to a forgettable second quarter attributed to foreign exchange problems as the rupee depreciated against the dollar.

When there is demand for more seats to Dubai, often referred to as India’s de facto “national carrier”, there is a clamor to allocate seats to Emirates rather than retaining Indian carriers. For the record, the India-Dubai bilateral agreement is fully utilized on both sides, leaving airlines like Akasa Air unable to start flights to Dubai due to lack of available quota.

Senior leaders of Emirates and Indian airlines continue to make occasional public statements on the controversial issue of expanding bilateral flying rights to Dubai.

The India-Dubai bilateral agreement was last revised in February 2014, increasing the number of weekly seats for each side to 66,000 per week. In recent years, Emirates has been trying to get additional seats along with more Call Points in India but without success. Instead, when the issue becomes public the discussion constantly shifts to the volume of traffic Emirates carries to Dubai and beyond.

Regular travelers are pointing out how Emirates has repositioned itself as a premium carrier on the other side of the pandemic and how its premium image has enabled it to buy premium tickets. Although route-specific profitability is not declared or disclosed, at first glance the fare list suggests that Emirates has increased its pricing across all classes.

Data released by the regulator, Directorate General of Civil Aviation (DGCA), backed by seats available, shows that Emirates has a very healthy load factor of over 90% in India; But load factor is one of many parameters that need to be controlled and is not a true indicator of the money the airline will make on a particular route. In the more than a decade since Emirates last received an increased allocation for India, there have been two significant developments.

Emirates is a smaller part of India’s international story

Data shared by aviation analytics firm Cirium shows that in April 2015, Emirates had 10.6% of all international seats in India and 7.9% of capacity on an ASM (Available Seat miles) basis. This share currently stands at 6.3% on a seat basis and 4.5% on an ASM basis.

This comes as Emirates is stuck with its seat quota, more airlines add flights to India and Indian carriers expand their services. While seats from India increased by 65%, ASM’s capacity increased by 73%.

Emirates grew cautiously, rather than exponentially, during this period as it struggled with delays in aircraft deliveries and operationalization following the pandemic. However, in April 2015, routes to India accounted for 2.5% of total ASMs, which is now down 0.4% to 2.1%. Departures from India accounted for 4.7% of total weekly departures, down from 5.3% in April 2015. The decline in terms of seats offered is 0.3%, with 4.3% of all seats offered for the week being from India; In April 2015, this rate was 4.6%.

Forward premiumization

Amid the pandemic, the airline decided to introduce Premium Economy class, with commercial operations to begin in 2021 and retrofitting in 2022. Gradually, all aircraft will begin offering the new service class. The mix in India is different now compared to a decade ago.

Emirates offers 1,148 First class seats per week from India; This is a 19% growth from April 2015, with almost the same number of Business class seats and 1,422 premium economy seats, a new addition. All this has come at the cost of economy class seats, which have fallen by almost 5% in Indian markets. This would look at the average return on routes to India and continue to focus as more aircraft join the Premium Economy and a refreshed product means development from there.

Tail Note

At first glance, Emirates seems to have managed to create a premium positioning element for its services and transfers. Additional seats may or may not come within the scope of a bilateral agreement, and so premiumization is a strategy that will help Emirates increase fares without truly increasing costs. This will also increase loyalty and make it harder for Air India to get passengers cost-wise unless Air India offers similar or better products that align well with non-stop flights. It won’t be long before passengers are complaining about high fares at Emirates!