Interview: Sales VP Matthias Schmid On Creating Space For Emirates In U.S. Corporate Biz

Despite protests from the Big Three U.S. carriers, Emirates plans to add flights to established U.S. routes and open a new one to Orlando later this year. In an interview with BTN transportation editor Michael B. Baker, Emirates vice president of U.S. sales Matthias Schmid said the United States remains the carrier's “key strategic growth market” and that added capacity enables Emirates to make a stronger play for American corporate business large and small. An edited transcript of the interview follows. 

What is the growth plan for Emirates’ U.S. network?

We upgraded last year a number of our existing gateways from [Boeing] 777. We started to fly Oct. 1 an [Airbus] A380 operation out of Dallas, Dec. 1 out of San Francisco and Dec. 3 out of Houston. In March, we added a flight between New York and Dubai, so we fly three times a day nonstop between New York and Dubai, all with A380s. This May, we upgraded the capacity on our Chicago route, which we only started in August last year, from a 777-200 to a 777-300. The next upgrade will happen on July 7, when we put a second daily flight on our Seattle-Dubai route, followed by the opening of our 10th gateway, Orlando, Sept. 1. That will be followed by a double-daily operation on our Boston-Dubai route, which will start on Oct. 1.

Will demand be able to match this growth?

There is a lot of new capacity in the U.S. market. Also, some of our competitors are increasing capacity. But if we didn’t believe the market could absorb this capacity, we wouldn’t invest in it. It’s also a chicken-and-egg question. International airlift is required to develop business. Typically, the international airlift comes first and fuels the economic development.

Have you seen an increase in corporate contracts with U.S. clients?

Yes. Almost 50 percent of our global corporate accounts are U.S.-based companies that have international activities. We see the biggest growth in the [small and medium enterprise] segment because the big ones—whether it’s Coke, Shell, Chevron, Microsoft or Amazon—are the first ones you’re going to contract. The real work and the hard work is then on the SME side. Emirates might be a little behind, but that is simply because we didn’t have a product that was attractive enough for the corporate markets before. Now we cover 10 gateways, and with our partnerships with JetBlue, Alaska and Virgin, we offer a solid corporate product for the corporate segment.

The full focus is on developing that segment. That takes time and research. You have to qualify leads and get into the door to position the product. These days, it’s no longer that you sign a deal and everybody is happy and after 12 months you go into a renewal. The market is so dynamic that you have to maintain the deal during the deal period and make constant pricing adjustments to get the maximum out of it. On our international routes, the market became significantly more competitive. It’s always [been] a competitive market and the price competition was significantly stronger in economy class and especially on the leisure side, but now we see a lot of fares change on a weekly basis, even in business class, so it’s much more dynamic on the corporate side, as well.

What is your distribution strategy in the United States?

[With growth like we have in the United States] we have to use all the distribution channels. We try to accelerate the growth on some. Our online direct distribution channel is of highest interest, and we grow that channel at much faster speeds than we grow our revenue in the U.S. market. We try to focus on the large [travel management companies], on the corporate revenue, because that gives us higher average yields. We work with all the [global distribution systems], and there are some GDSs that offer a little more favorable terms than others. But we’re in a different mode than a lot of our competitors that grow 1 percent to 2 percent in capacity, where you can only slash costs and try to optimize your distribution to find cents and dollars to improve your bottom line. For us, it’s ensuring all distribution channels are open and that we achieve the growth to fill the additional capacity. It’s not that we go blindly. We have a distribution strategy, but it’s more difficult to really grow certain channels faster than others if you have an overall double-digit growth.

What do you highlight when trying to win corporate business?

We have the best product, not only the onboard experience but also value-adds. For first- and business-class passengers, we offer complimentary chauffeured drives to and from the airport. For the passenger, that’s really a convenience, and for the procurement manager, it’s savings. The hub in Dubai is very efficient. We’re one of the few airlines that offer Wi-Fi in the international airspace. All our A380s offer Wi-Fi, and onboard Emirates, it’s free. Obviously, connectivity: We fly three times a day between Dubai and New York, and we offer connections beyond Dubai. You have threes-times-daily connection to [Mumbai], to Hyderabad, to Bangalore, to Bangkok and some key routes. More and more, companies are doing business in the Middle East and in India, so it allows you to combine two business trips.

Have premium-class policies with your corporate clients shifted?

It depends on the industry. If you talk about oil and gas, the budgets are shrinking. People think twice and three times before they actually travel. We don’t see a shift from premium class to economy class. IT is more economy class, but sometimes people on the long-haul flights are in business class because it’s a staff-retention issue. If, as a company, you compete for the best people, you have to offer your staff a decent corporate travel policy.

You mentioned partnerships with U.S. carriers. Would you like to broaden those?

Yes. We’ve tried to work closely with JetBlue, Alaska and Virgin. We fly three times a day between Dubai and JFK, and the second daily flight to Boston was to strengthen our relationship with JetBlue. We have a reciprocal codesharing agreement with JetBlue, so the JetBlue flights are also operating with an Emirates code and all the U.S.-to-Dubai flights will carry a JetBlue code. JetBlue started last year Detroit to Boston, which was absolutely aligned with our arrival and departure times coming to Boston, and we’re working with them on further optimization. I also mentioned the second daily flight to Seattle, which was to strengthen our relationship with Alaska because we get significant feed via Alaska out of Canada and certain U.S. routes.

Once the Open Skies dispute is settled, could you ally with one of the legacy carriers?

I can’t really comment on that. Never say never. This discussion is much bigger because then you can question how will the alliance structure look in 10 to 15 years. This is my personal view and has nothing to do with Emirates, but I believe we will see a significant shift because the traditional alliances are working for some carriers but definitely don’t work for others. Alitalia just announced it will leave the joint venture with KLM/Air France. Who would have thought that two years ago? For the corporate traveler, with the alliances, if you’re in a contracting situation, you get less and less opportunities. We are an alternative. We are definitely not one of the dominant players in the U.S. market, but we are a good alternative.