High Flyer Interview with Emirates VP Sales, Matthias Schmid Part II: What’s Next for The Gulf Powerhouse?
MIAMI — As Emirates Vice President Sales for North America, Matthias oversees the commercial activities of Emirates here, one of Emirates strategic growth markets.
Before moving into this role in September 2012, Matthias was Vice President Network Passenger Sales Development based at Emirates Headquarters in Dubai, where he was responsible for Global Commercial Strategies and Commercial Systems.
Matthias airline career spans over more than 20 years as he has held numerous managerial and executive positions for different airlines such as Swissair, KLM Royal Dutch Airlines and Emirates Airline.
A Swiss National, born and raised in Zurich, Switzerland, Mr. Schmid holds a Masters Degree in Business Administration and an MBA from Vienna University of Economics and Business Administration. He has worked and lived in six different counties on three continents, and currently resides with his wife in New York.
Last week, Emirates launched its first Dubai – Fort Lauderdale flight, and we sat to talk with Schmid about the newest route in Emirates network, the role of JetBlue as a feeder of the route, and the rationale behind the new service.
In this second part of the interview, Schmid talks about the possible future destinations in the United States, the current market dynamics in the Gulf region and the competition with Chinese carriers.
Airways (AW): Are there are possible dots left on the map for expansion in North America?
Matthias Schmid (MS): Definitely. We see a lot of growth economic and passenger growth over the next 5, 10, and 15 years. If you look at core capacity numbers, out of China and India they are very strong. As we stand today, the US market is still the world’s largest consumer market. People have tangible disposable incomes and therefore we see the US market has significant potential for us for further expansion.
AW: Can you speak to how Emirates is positioned in light of the pressures of every increasing competition in the Gulf Region whose airlines operate out of very small countries population wise?
MS: The UAE is a small country. So our business is really based on connectivity via hopping over Dubai. But that is not something that is not entirely new. If you look at KLM and Singapore for example, they successfully executed this business model years before we did it right. If you look at the size of KLM and the population and the country size of the Netherlands, KLM is far too big for that tiny country.
And therefore, we believe there is enough room for all the ME3 carriers. I think right now and there is always a lot of focus on ME3 carriers, a lot of capacity is that is it sustainable. Can Qatar sit next to Emirates? Can Emirates sit next to Etihad? So especially we are watching what our competitors do, but we actually also have a very strong focus on what’s happening particularly in China.
If you look at some of the Chinese carriers how they deploy capacity into the US, into Europe this is really something that we need to keep on our radar. Again Qatar is not new, Etihad is not new, but what’s currently happening in China has a huge impact on my side on potential traffic loads.
AW: Right. They certainly have to nail the passenger experience, network optimization, and branding down a little bit better to become more competitive.
MS: Yes but if you look at their operating cost and if you look at their aggressiveness on commercial side, especially if I look at San Francisco, Los Angeles and what’s happening on the west coast, huge capacity increases by Chinese carriers. They are actually starting to look at India. So we see that they’re growing share on certain routes competitive to us.
AW: What’s your and the Gulf carrier’s advantage over the Chinese carriers and other players we’ve mentioned whose business is built on connectivity?
MS: To a certain extent we still believe and it is kind of proven if you look at the map. We have the weather, geographical location, and Dubai has a better geographical location if you look at global flows. If you look at Singapore, Hong Kong, they are a little bit too east and then Europe a little bit to West and we are in the middle between Asia, Europe, Africa that is really one of our absolute key factors.
AW: As you look forward, obviously the competition is getting bolder, and more innovative, and has woken up to the reality that a 31 year old airline has become the world’s largest international airline in RPK’s and regarded as the pace-setter in passenger experience. What are the plans to stay ahead of a much more competitive field? And you’re having to do this against the backdrop of a regional local economy due to declining energy prices.
MS: It is about constant innovation. To give you a couple of examples, we are launching our new business class product on the 777. It is a complete overhaul of business class and business class seats. We just opened a completely new lounge at Dubai Airport with a new concept. So, there is a lot of focus on health. For example, there is a huge health corner where we try to cater for some changing behavior and changing requirements of our travelers.
But it is true the competition is keeping up they are also becoming better. From that point of view we initiated an evolution evolution again because everybody listed out all the products that were able to offer and now I think airlines are realizing that passengers are willing to pay a little bit more if you offer good products and service. But I think the key is not only the hardware. It is really the entire experience, especially the service delivery and cabin crew that actually make a huge difference. There we still believe we have a significant competitive edge over some of our legacy carriers.
AW: I believe you are the first airline to hire an executive in the position of Chief Innovation Officer, Christoph Mueller from Malaysia. What exactly is the purview of that position?
MS: He is the chief innovation officer. Yes, what we see is yes there is a lot of innovation of course in the on board products. I think it is significant and you mentioned the cost about the Asian or Chinese carriers that are changing the landscape. By the way I think there is also another development, that is changing the landscape because if you look what the American carriers currently do on Asian route and also some of the Europe carriers and some of the also long routes. I think the A350 and 787 by the way are game changers, and allow airlines to operate certain rules that they never looked at in the past.
But going back to Christoph Mueller and the chief innovation officer, we believe that we will be a digital revolution. We know that there is a digital revolution and we think we can actually do much better in the airline industry using the latest technologies to provide our passengers a much better experience already pre-flight and post flight in terms of communication, offering them better tailor made products as well. So there is a huge focus on digital transformation really has really vast clients in revolutionizing the way how airlines distribution actually is.
AW: Let’s look at your operating margins and your competitors in the Gulf have been impacted. Do you see a bubble popping in the region?
MS: Yes, I mean we have seen over the years some of the Gulf markets are under enormous pressure. All the Gulf markets and all the ones that are very reliant on the energy sector are all under mean significant financial pressure. From that point of view that impacts us.
But these are not really I mean the United Arab Emirates as a whole market, it is a huge source market but then we have other markets that are much larger than some of the Gulf countries. We have huge exposure in Australia, in the UK and that is actually much more significant for us and has much more impact on our bottom line results. The biggest challenge that we have is currency devaluation.
UK is huge for us. Brexit resulted in an 18% revenue decrease simply due to devaluation of the British pound. These are significant challenges that we have to manage. Again I think it is not the only Emirates that is there for our entire industry. If you look at latest financial results of all airlines, nobody is reporting the same figures as they used to report in 2015.
AW: We talked a lot about Dubai connectivity, but are there additional opportunities for Emirates’ in fifth freedom flights like New York – Milan?
MS: There were some talks in the media couple of months ago in various parts of the world about potential routes but as we stand today I cannot confirm any of these rumors. I am not aware of any immediate plans of additional fifth reason.
AW: The Qantas code-share has been a huge success for both parties. Do you have anything to add to why this is?
MS: Just a couple of comments regarding our partnership with Qantas. Yes, the successful partnership is not that relevant for us in US. We don’t co share on the routes to the U.S. but it is very successful for Qantas and for Emirates especially on the side between Australia and Europe and Australia and Africa.
I think it is now a very established partnership and the focus is on keep growing volumes because we also added a significant capacity to Australia and especially to New Zealand. We started a daily direct flight through Auckland and added an A380.
AW: And what of the Panama City flight that was pulled before it ever launched?
MS: It’s kind of in pending status. We talked about it just recently but there is no decision of when we would actually start Panama.