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Emirates President, Sir Tim Clark and Peter Harbison, CAPA, discuss the future of aviation and more

October 22, 2020 Headline News No Comments Email Email

I was extremely fortunate last week to be able to attend the amazing online CAPA Live “conference”, arguably THE global, premier meeting of serious decision makers and leaders in aviation, with my congratulations to Peter Harbison Chairman Emeritus at CAPA and his amazing team for taking on such a massive task and executing it so perfectly.

The list of speakers and interviewees was massive and I am afraid it would be a rather too onerous a task to transcribe everything they said, with the videos of the discussions only available to those that attended, but one interviewee, I know you will be keen to hear from is Sir Tim Clark, President Emirates.

I have therefore created a set of bullet points below [errors and omissions excepted!] of the interview between Peter Harbison and Sir Tim Clark for you, with the discussion between Peter Harbison and Sir Tim Clark very enlightening and clarifying regarding where he sees aviation going.

Please enjoy!

Recognised as having refreshingly clear views, which he has always communicated in his frank and straightforward manner, Sir Tim is recognised as one of the pre-eminent global leaders in aviation if not the global leader, who is not afraid to tell it the way he sees it.

  • Peter Harbison Topic: Reintroduction of bars and shower on Emirates A380s and will they comply with in flight protocols and social distancing.

Sir Tim Clark: These will not compromise distancing and there will be very strict controls.  We actually have not done much flying with the A380s recently but the markets put pressure on us to get back to the product we were offerings, so under the conditions of social distancing we’re going to give it a go.  I don’t want people to think that we are back to the days of people packed in the lounge bar at the back of the A380s. so we are going to be sensible about what they do and get some kind of product going again under the rules as they stand today.

  • Peter Harbison Topic: Is this an indication of something of the need to recreate your image in the front-end market and is this part of the early stages perhaps of moving in that direction

Sir Tim Clark: It’s very important you continue to believe that you’re going to be in the business despite this pandemic and that you’re going to be in business to continue what you once did.

I am not one of these people that believes in the new norm, as I think the model we know will return in a particularly robust manner, but it will be suppressed for six to nine months.

Those of us that are left in the business need to ensure that we are a known entity either through the physical manifestation of bars and showers or the continued use of our marketing tools, so the product remains in the forefront of people’s minds .

These are tactical moves that we are going to have the belief that we are going to make it through.

We don’t want people to think that we’re out of the game and out of the play because that’s not the case.

  • Peter Harbison Topic: The biggest constraints on international growth leaving aside the customers willingness to fly is unilateralism by governments in terms of the response they are making to the pandemic, not just unilaterally closing doors but not talking to each other.

Sir Tim Clark: I’m not optimistic about this laissez-faire approach survival of the fittest that seems to be driving governments and the actions they are taking.

Europeans have recently introduced a policy with a metrics that seems to be unachievable which suggests that governments will do their own thing and they’ll continue to do that.

In the United Kingdom we see opening and closing of corridors with countries in and countries out, with countries more concerned with public health than the need to contain the pandemic, with the biggest casualties likely to be aviation, tourism and so on I don’t see that change and I see that this will get worse before it gets better and even worse as the pandemic appears to be returning in the northern hemisphere winter as it is with the governments adopting fairly draconian measures with lockdowns in the earlier parts of the year and lockdowns again, so I’m not optimistic.

It’s going to get worse before it gets better with restrictions coming in Governments will continue to put public health first and they will try and balance if they can.

We saw some green shoots but the green shoots have not happened as the pandemic has come back with a vengeance and these draconian measures will kick in and unfortunately that’s the way it is wherever you are whether you’re in Oceania in Australia and New Zealand or North America or Europe wherever.  There are all sorts of differences going on with some opening up but others going the other way, so for us to try and manage the business in that sort of environment is hugely difficult I’m afraid.

  • Peter Harbison Topic: You more than any other airline touch more countries than any other airline, so therefore that means you must have feelers out to a vast number of governments in these different countries, so where are the brightest spots that you’re seeing in government responses.

Sir Tim Clark: It changes by the day. In the Oceania markets of Australia and New Zealand which are hugely important to Emirates in the course of the last few months it became so bad that they stopped Australian travel within the states.

So, you can see that where we had expectations that things would improve and the viruses started to decline did not happen as they wanted to protect their position and in the case of Victoria it got worse and that caused them to close.

We are not overly optimistic about opening in markets but we are optimistic about cargo. Demand is huge because of absence of belly hold space so many of our aircraft on the routes that are open driven by primarily cargo and then we can slip a few passengers on board who prepared to go through the various restrictions that the States and governments put on them for entries.

That’s the way it is at the moment but in terms of countries being magnanimous and hugely welcoming and taking the risks beyond that many of those without restrictions, you can come but you’re restricted to PCR testing quarantine isolation etc which is very difficult for our business to cope with

  • Peter Harbison Topic: What sort of green shoots do you see in governments testing and tracing and becoming more effective in terms of on departure arrival and so on what sorts of willingness is there to accept that

Sir Tim Clark: I’m not I’m not particularly optimistic about that in July we introduced a requirement for all passengers to have a PCR negative before they flew and that had to be 96 before hours before they flew.

It was a bit of a shot in the dark but I believed at the time that it was a meaningful way forward as if we could demonstrate that when people arrived in these countries that they had a PCR test 96 hours before that it mitigated risk.

It also presented prevented people entering our fleet and contaminating our crew as well, but we were unable to persuade the UK governments or the European governments that this was a smart way of going about it, given that the numbers of people travelling into these countries was pretty low in any case.  In any case it didn’t work. 

  • Peter Harbison Topic: Is the revenue from cargo substantial or is it just enough to cover your operation.

Sir Tim Clark: The cargo rates have increased and the revenue we’re getting from cargo is substantial, so it not only allows us to cover our operating costs it allows us to make profits and equally when we introduce passengers to those cargo aircraft, many of the seats are stripped out particular on the 777 so we can both load cargo on the cabin floor and still carry passengers, so they are making very substantial contributions, but we have a very high fixed cost with the fleet so it makes a difference.

Our cargo team have done a great job although we thought the cargo would disappear by September October but it hasn’t and it continues to be very strong and that’s allowed us to open 70 to 80 destinations primarily driven by cargo. 

  • Peter Harbison Topic: Is the network model the right model?

Sir Tim Clark: I know that what we did in the building of Emirates was right and we know what the markets have the market responded on the network basis will come back.

I don’t see the network model changing and we will recapture the growth curve that took place prior to the pandemic.

The pandemic was a disruption but it doesn’t mean to say that go to the lowest common denominator. I think they’ll be a bounce back in demand.

There will be a bounce-back and demand will come back sooner rather than later.

I’m not one of these people who believe it will be 2025/26 when that happens.

The pandemic is a glitch.

Whether the industry is in good enough shape to respond to that bounce back is another question.

I think will be smarter and better about how we go about our business and we’ve had many glitches in the past, not as significant and severe for our industry but nevertheless it’s a glitch and will come through it and pick up again . 

  • Peter Harbison Topic: Debt and subsidies

Sir Tim Clark: The industry whenever it does come back is going to be heavily indebted but a substantial amount of that is going to be government whether this equity or whatever and equally I anticipate that the long haul industry will be smaller and that suggests an industry which will be much more protectionist driven and probably weighted towards those romantic days of arguing about subsidies.

  • Peter Harbison Topic: Debt and subsidies

So do you see that protectionism threat looming is a large one or not?

Sir Tim Clark: I am not one of those people that thinks the world is going to be smaller or demand for travel will be less.

It is clear that as of now given that what is happening to the countries that have so many of those carriers that we’re talking about that are subsidised the governments may very well start thinking we need to restrict what’s going on but what I can see is there will be different schools of thought and it’s not surprising governments are starting to think and act as they are but as we move forward towards a vaccine and the places that recognise the importance of aviation to their locations will win the argument.

At the moment we have multiple effects of this glitch and while there have been balance sheet impairments different countries will deal with this in different ways with some airlines wanting to get back to being a fully privatised operation rather than government funded whereas others may take a longer term view.

In the end the position today is not the position that we must assume we will be in in a year 18 months’ time.

If we’re going to get the global economy back to where it was and if we’re going to get a vaccine that works I can see that when that happens things will change fairly rapidly and those carriers that have taken up a lot of deaths will respond to the markets quickly and generate a lot of a lot of cash to lay off the debt in what I believe is a temporary subsidy .

This is a question of keeping one of the most vital industries on the planet in place today whichever part of our industry you are in it’s critical that this industry is kept in place and how we deal with it after the events in my view is going to be easier than the current thinking.

Yes, they’ll be some predetermined views coming back into government thinking and think tanks regarding access to their countries, but at the end of the day they’ve all benefited from what Civil Aviation is done in the last 30 or 40 years. 

  • Peter Harbison Topic: Environment

Sir Tim Clark: Regarding the environment, a fossil fuel basis is the only way planes can fly you can’t have electric aircraft, but never say never.

  • Peter Harbison Topic: Retirement

Sir Tim Clark: I’m still here and while I’m still here I’ll do the best I can to help the company through this.

We have a wonderful team of people managing this business frankly without me, the chief officers, the commercial, the operations teams all doing a really great good job so we are where we are because we have a good team of people, so if I step out sooner rather than later, we are in good hands

A transcribed report by John Alwyn-Jones

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