This article from NYTimes.com has been sent to you by psa188@juno.com. Flying With Panache, and at a Profit, Too January 5, 2003 By JOSEPH B. TREASTER DUBAI, United Arab Emirates WHEN Paul Austin, a British executive of a big construction company here on the Persian Gulf, travels by air, he no longer drives to the airport. His favorite airline, Emirates Airlines, sends a car to pick him up, as it does for all its business and first-class passengers in London, Paris, Hong Kong and 12 other cities. In business class, he has a choice of 48 movie cassettes he can load when he wants, and a couple of dozen music and talk programs. Even in economy, passengers may choose from 17 movies and 18 video games available on personal screens. Mr. Austin dines on meals set on pink linen and sips fine wines. In economy, settings are less plush, but the meals range from stir-fries and curries to lamb stew and Nile perch. Cocktails and wine are free - except for Champagne. When a passenger hesitates over the $5.50 charge for Champagne, flight attendants smile warmly and propose a mixed drink at no charge, easing gracefully out of an awkward situation. "We want to make the customer feel comfortable," said Gary Chapman, who is in charge of personnel and training for the airline. Since its start 18 years ago with two Boeing 727's in one of the world's most politically explosive regions, Emirates Airlines has been trying to make flying enjoyable for its passengers and profitable for itself. It has been succeeding nicely, increasing passenger capacity about 20 percent annually, taking trade group awards away from distinguished carriers like Singapore Airlines and Cathay Pacific and winning the loyalty of business travelers like Mr. Austin. "They make your entire journey stress-free," he said. Dubai's location in the Middle East would be enough to stress out some people. To the northwest is Iraq; to the south is Yemen, the ancestral homeland of Osama bin Laden. Only 60 miles across the Strait of Hormuz is Iran. Just offshore in the Persian Gulf, American warships send fighter jets over Iraq every day; in a war, they would probably fire Tomahawk missiles as well. Yet Dubai successfully promotes itself as a neutral haven, where business flourishes with little interference from government, and tourists from Europe and nearby Arab countries flock to resorts along bone-white beaches. With about one million people and acres of glittering office and hotel towers rising from the desert, Dubai is the commercial and tourism center of the United Arab Emirates, a group of seven city-states set on a crescent of sand at the mouth of the Persian Gulf. Though Dubai is an Islamic country, it permits drinking and dancing in hotels, creating a party atmosphere for Arabs from stricter regimes and making Dubai reminiscent of Beirut before the Lebanese and their neighbors reduced it to rubble in the 1970's and 80's. The city is also becoming something of a modern Casablanca, a place of international intrigue, spies and smugglers. Unlike many Middle East airlines, Emirates makes alcoholic drinks an integral part of its service. But, following Islamic dietary practices, it keeps pork off the menu. With many people still afraid of flying after the Sept. 11, 2001, attacks, and the likelihood of war rising in the Middle East, this is not a good time for airlines. But the little team of managers - from Britain, New Zealand, Ireland and other places - that runs the airline under the direction of Sheik Ahmed bin Saeed al-Maktoum, its chairman and a member of Dubai's ruling family, is pushing to make Emirates one of the world's major airlines. (It is already one of the most profitable, according to Airline Business magazine in England.) The airline has sidestepped most of the ill effects of the industry's depression. Its plan to inaugurate service to the United States is in limbo because of tensions between Washington and the Arab world. Though it had an alliance with United Airlines, it faces no losses as a result of United's filing for bankruptcy. "We actually owe them money," said Dermot Mannion, the chief financial officer of Emirates, because Emirates carried more of United's passengers. Fuel costs have risen for many airlines, but Mr. Mannion said "an aggressive hedging strategy" had kept fuel expenses for Emirates at about the same level as last year. While other airlines have been cutting back on routes, Emirates, which already flies to 64 cities in Europe, Asia, Africa and the Middle East, continues to expand. It is graduating two classes of a dozen or so flight attendants, including some Americans, every six weeks, and plans to put a new wide-body, long-haul jet into service nearly every month this year. Last fall, it opened a route to Osaka, its first destination in Japan. In the summer, it plans to begin flying to Moscow and Shanghai. Plans to inaugurate service to the United States in June with a 13 1/2-hour nonstop flight from Dubai to New York had to be scrapped when delivery of a new-model Airbus for the route was delayed until next fall. Now Emirates executives say they are not sure when the New York flights will begin. "One has to be reasonable," Mr. Chapman said. "Is the climate right? The timing has to be right." In the past, Emirates executives have turned trouble to their advantage. During the Persian Gulf war in 1991, when most airlines grounded flights to the region, Emirates kept going. Its jets burned extra fuel skirting the combat zone, but the airline more than made up the difference in extra passengers and cargo. When some airlines refused to serve Pakistan and Afghanistan last year as American forces were hunting down members of Al Qaeda, Emirates again picked up the slack. "We know our markets very well," Mr. Mannion said. "We won't go anywhere that is unsafe." Sometimes, the airline seems to be going for shock effect. Two months after the World Trade Center attack, for example, when the entire airline industry was reeling, Emirates announced that it was buying $15 billion worth of long-haul, wide-body jets from Boeing and Airbus. The purchase, of about 50 jetliners, some at substantial discounts, was one of the biggest in aviation history. The airline, said Mike Simon, the company's spokesman, wanted to send a message. "People would continue traveling," he said, "and we would continue expanding." N an era of penny-pinching, no-frills flying, the experience in the Emirates' passenger cabins is stunning. Its female flight attendants wear elegantly cut jackets and skirts in the crisp tones of the desert, and crimson hats with trailing white gossamer scarves. The men wear double-breasted blazers. On a mid-December flight from London to Dubai, one attendant paused at an economy passenger's armrest. "Good evening, sir," she said. "How are you feeling tonight? Sir, tonight we are offering a choice of chicken in tandoori paste or rack of lamb. Which would you prefer? Certainly, sir. Can I bring you another glass of wine?" Compare that with the ambience on a Delta Air Lines flight a week later from Rome to New York, as a sullen flight attendant in a navy skirt and light blue blouse shuffled behind a food cart, barking, "Chicken or pasta? Chicken or pasta?" Emirates Airlines was created to drive the economy of Dubai. As recently as 1971, when the British withdrew from the area and brokered the formation of the United Arab Emirates among the often warring families that ruled the city-states, Dubai was a dusty village of traders, pearl divers and fishermen. Huge amounts of oil had been discovered down the coast in Abu Dhabi, and as the wealthiest of the emirates, it became the capital of the new country. In 1973, Abu Dhabi and three neighboring gulf states bought control of an airline, which became Gulf Air, but it offered limited service to Dubai. The rulers of Dubai, in control of much less oil, were determined to attract tourists and business, so they started Emirates Airlines. Emirates is now running circles around Gulf Air, which has been losing money for several years. The Dubai government invites airlines from all over the world to fly to the emirate without restriction. As a result, more than 100 airlines now serve it, but Emirates dominates. In 2001, the last year for which full statistics are available, it carried more than half the 13.5 million passengers who moved through the Dubai airport terminal. The government said about 3.6 million people stayed over as tourists in 2001, and about 4 million in 2002. By 2015, Dubai is hoping for airport traffic of 51 million passengers, including 15 million tourists. In the first half of 2002, the airline's profit more than doubled over the period a year earlier, rising to $110 million on revenue of $1.17 billion. For all of 2001, profit rose 11 percent over those in 2000, to $127 million on revenue of $1.98 billion. The airline's executives bristle at competitors' assertions that Emirates is heavily subsidized. But they acknowledge thatit does not operate under the same rules as some rivals. Dubai has no income tax, unions or laws that ban age or sex discrimination. Emirates is free to recruit around the world for young, single and attractive flight attendants and to decide at the end of a three-year contract whether to keep them. The airline is more efficient than many. Chris Tarry, an independent analyst in London, said that the major United States airlines, on average, were flying their planes about 74 percent full but that "they need to sell 90 percent of their seats to break even." Emirates, however, breaks even when its planes are 65 percent full. During the first half of 2002, Mr. Mannion said, Emirates' planes operated at 78 percent of capacity. Analysts say Emirates also benefits from a small, nimble group of top managers. "What it takes other airlines six months to do, they do in 24 hours," said Anne-Marie Siffroy-Pytlak, an aviation expert at the French bank Crédit Agricole Indosuez, which has financed many of Emirates' aircraft deals. Some executives in Dubai are skeptical about the airline's profitability, saying its financial reports do not have to be as detailed as those required of publicly traded companies. But Ms. Siffroy-Pytlak, who has analyzed the airline's finances, said, "The cash is there." The decline of service on many airlines has played to Emirates' strengths. In business class on an Emirates flight from Dubai to Rome, François Berthier, a perfume maker from Grasse, France, said he preferred Air France's food, but "on this airline they really treat you like a human being, not just a number." http://www.nytimes.com/2003/01/05/business/yourmoney/05WORL.html?ex=1042948806&ei=1&en=7bdcfa854c0812e1 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company