The aviation industry is known for its slim profit margins, where the profit from carrying a single passenger might not even cover the cost of a cup of coffee. However, with three key business strategies, Emirates has managed to outpace the combined profits of many major airlines. Who are the most profitable airlines in the world? Emirates, often referred to as the "luxury airline," certainly ranks among them. In the fiscal year 2023-24, Emirates' net profit reached a new record of 17.2 billion dirhams (approximately 34 billion RMB), marking a 63% increase—equivalent to earning a hundred million a day. While Emirates ranks second globally in net profit, its total revenue surpasses that of the leading Turkish Airlines by more than double. Emirates' profitability exceeds the combined total of many major airlines: Qatar Airways, also known as one of the "Middle East's three major airlines," reported a net profit of 2.394 billion Qatari riyals (approximately 4.767 billion RMB) during the same period, which is one-seventh of Emirates' profit; Singapore Airlines, known as the "world's best airline," made a profit of 1.997 billion USD (approximately 14.477 billion RMB) in the fiscal year 2023. The aviation industry is actually quite challenging to make money in, as Willie Walsh, the Director General of the International Air Transport Association (IATA), puts it, the profit from transporting a passenger is so meager that "in many parts of the world, it's not even enough to buy a cup of coffee." Due to the industry's characteristics of high investment and uncertain high returns, according to IATA statistics, the net profit margin of the aviation industry in 2024 is 3.1%, which is not considered a good business from a financial investment perspective, with a return on investment capital of 5.7% far below the capital cost of over 9%. Especially considering that the global aviation industry has not yet fully emerged from the shadow of the COVID-19 pandemic, Emirates' profit level of "earning a hundred million a day" is quite rare.

Dubai is a global hub, with more than half of its passengers being transfer passengers. In the fiscal year 2023, Emirates achieved its best performance in history: net profit reached a new record of 17.2 billion dirhams (approximately 34 billion RMB), increasing by 63%; revenue grew by 13% to 121.2 billion dirhams (approximately 240 billion RMB); and capacity increased by 20%, reaching 57.7 billion available ton kilometers (ATKM). How did they achieve this? Let's first look at the official statement from His Highness Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Airline and Group. "We have seen a surge in demand for air transport and travel-related services worldwide, and we have achieved fruitful results because we were able to take quick action to meet customer needs." "For many years, we have continuously invested in products and services, building strong partnerships, and our talent pool, and have benefited from this." "To a large extent, this is due to the visionary leadership of the United Arab Emirates, thanks to their leadership and the country's progressive policies. With the unique advantages of Dubai, both Emirates Airlines and dnata have built successful business models." The first two points are easy to understand, but what does "relying on Dubai's unique advantages" mean? The core lies in the "hub"—the Middle East connects Asia, Europe, and Africa, making it a suitable stopover for intercontinental routes. Statistics show that nearly 2 billion people live within a 4-hour flight distance from the Middle East, and 4 billion people live within a 7-hour flight distance from the Gulf region. Especially under the cold air of geopolitical tensions, the difficulty of direct flights between some countries makes the hub role of the Middle East more prominent. Willie Walsh, the Director General of IATA, said in an interview with us last year: "Direct flights between China and the US are still at a low level, which in turn brings more opportunities for Middle Eastern airlines. Routes between Asia and the US will pass through the Middle East for transfers. In fact, the recovery of routes between the Middle East and Asia has been very fast." Emirates is headquartered in Dubai, based at Dubai International Airport, and is owned by the government of the Emirate of Dubai. Historically, Dubai International Airport has almost an equal number of direct and transfer passengers, with transfer passengers even accounting for 60% at one point. Passenger traffic mainly comes from the airport's standard travel destinations—India, Saudi Arabia, the UK, and Pakistan. Russia is also a major market because Dubai is one of the few places that remained open to Russians during the Russia-Ukraine conflict. To build the "hub" feature, Emirates not only fully utilizes its geographical advantages but also benefits from the UAE's more inclusive "open skies" policy compared to other countries. "Open skies" is an air transport concept that means countries mutually grant each other the right to freely enter each other's air transport markets while respecting national sovereignty. This means that Emirates is not strictly limited when operating international routes. The UAE government's official website shows that the UAE is the country with the most open skies agreements, having signed more than 187 air transport agreements and notifications with countries around the world (such as the US, dozens of European countries, etc.). Most of these agreements are open skies agreements, allowing signatory countries to operate an unlimited number of flights between any points with any capacity and frequency. Financial reports show that Emirates has also signed code-sharing and interline agreements with 11 airlines, further expanding the coverage of its route network, covering 151 destinations across six continents as of March 31, 2024. To carry more international passengers, Emirates is a loyal user of wide-body aircraft, with its fleet consisting entirely of the "air giant" wide-body aircraft Airbus A380 and Boeing 777, making it the largest operator of these two models globally. As of the end of March 2024, Emirates' fleet had a total of 260 aircraft, with an average age of 10.1 years.

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Low oil prices and good cost control are key

The hub status is the core advantage of Dubai and Emirates, but there are many air hubs in the world, so why is Emirates the most profitable? A competitive cost structure is another major advantage of Emirates. A study in the Journal of Air Transport Management compared the cost structure of Emirates with that of British Airways and Singapore Airlines, which also heavily rely on hub airports. Fuel cost is the largest expense in airline operations. Due to its proximity to oil production and refining facilities, the UAE has lower supply chain costs, making aviation fuel in the region relatively cheaper. According to data from globalpetrolprices, fuel prices in the UAE are cheaper than in 117 countries worldwide, especially lower than in major developed countries that impose heavy taxes on oil, including Japan, the US, Switzerland, Canada, the UK, Germany, Singapore, etc. Emirates' financial report for 2023-24 shows that fuel accounts for 34% of operating costs, a 2% decrease from last year's proportion, with an average fuel price decrease of 18%, including hedging gains. Labor costs are another major expense. A study by Cranfield University in the UK found that Emirates' labor costs are on average 26% lower than those of British Airways and Singapore Airlines. The study mentioned that Emirates implements a two-tier tax-free wage system. Employees in labor-intensive jobs such as ground services, maintenance, catering, and call centers all come from cheap labor markets in India, Pakistan, Sri Lanka, Bangladesh, and Nepal. At the same time, most of Emirates' accounting and information technology personnel needs are outsourced to India. In the fiscal year 2023, the total number of employees in the Emirates Group increased by 10%, exceeding 110,000 people, setting a historical record. Airport fees and navigation fees are another major cost factor. The study found that British Airways' costs in this area are 50% more expensive than in the Middle East. In the UK, British Airways, the Civil Aviation Authority, and the Airports Authority are all independent organizations, while in the UAE, the partnership between Emirates and Dubai Airport is very close, with the Chairman of Emirates and the Chairman of the Dubai Civil Aviation Authority being the same person. For example, in ground services, all of Emirates' business is conducted through the group-owned monopoly enterprise Dnata, creating opportunities for cost and potential cost advantages. Financial reports show that Dnata achieved a net profit increase of 330% in the fiscal year 2023-24, reaching 1.4 billion dirhams (approximately 2.77 billion RMB), with all business units achieving robust performance. Emirates has precise cost control capabilities, which also allow its net profit to surpass many larger airlines. "Emirates' lean operation is very good. But this does not mean that it deliberately reduces costs in areas such as cabin, in-flight meals, and in-flight entertainment (IFE). It means that while achieving high-quality service, it still has precise control over the costs needed to be invested, with very precise design and procurement in related details, achieving the best cost-performance ratio under high standards. This involves strong supply chain organization and procurement strength, which is more challenging than simply reducing costs/simplifying services." Yu Zhanfu, a senior management consultant in the civil aviation industry, told us.Emphasizing Passenger Experience while Valuing Marketing

"Once you accompanied me to plead with the landlord, now flying with Emirates Airlines..." goes a song. As one of the three major "luxurious" airlines in the Middle East, Emirates Airlines has always been seen by consumers as a symbol of high-end luxury. On Emirates' A380 aircraft, first-class cabins are equipped with private suites and spa showers; business class offers lie-flat seats, and both first and business class passengers can enjoy the executive lounge and Bulgari travel kits; although economy class is not as luxurious, it also provides extra space and adjustable lighting, as well as comprehensive Wi-Fi coverage. In terms of in-flight entertainment, the in-flight entertainment system offers 6,500 on-demand channels in multiple languages, each channel includes a rich selection of TV shows, movies, music, podcasts, and audiobooks, serving passengers in all classes. This is made possible by substantial financial support. In the fiscal year of 2023-24, the Emirates Group invested a total of 8.8 billion dirhams (approximately 17.5 billion yuan) in new aircraft, facilities, equipment, company operations, and new technologies. These heavily funded in-flight services have earned Emirates numerous awards. In the APEX Official Airline Ratings Awards, Emirates was named a "World-Class Airline"; in the Skytrax World Airline Awards, which are based on passenger feedback, it has received "Best Economy Class Worldwide" and "Best Economy Class Catering Worldwide," and has won the title of "Best In-flight Entertainment Airline Worldwide" for several years. Of course, the luxurious in-flight experience comes with a price. According to ticket prices provided by Ctrip, if you want to fly directly from Beijing to Dubai on June 24th, the economy class ticket for Emirates starts at 3,982 yuan; business class starts at 15,843 yuan; and first class starts at 50,779 yuan, which is about twice the price of Air China flights. Additionally, Emirates is one of the airlines that values brand promotion and marketing the most globally. Research statistics show that Emirates' annual spending on marketing accounts for about 3%-4% of its revenue, surpassing many airlines, with sports sponsorship and advertising expenses each accounting for half. Emirates is one of the most active airlines in sports sponsorship worldwide, especially in football, one of the world's most popular sports, with sponsorships covering well-known football clubs and events such as Arsenal, Lyon, Real Madrid, AC Milan, Benfica, the Emirates FA Cup, and the Asian Football Confederation. According to American media reports, Arsenal has renewed its contract with Emirates until 2028, starting from the 2024/25 season, with a sponsorship value of over 60 million pounds (approximately 550 million yuan) per year, a 50% increase from the previous contract. Mark Tom believes that sponsorship is an essential part of an airline's marketing strategy: "Sponsorship is one of the best ways to connect with passengers." "Emirates' comprehensive qualifications and capabilities can be described as a hexagonal warrior: geographical location, aircraft selection, cabin configuration, marketing promotion, brand effect, and passengers' long-term desire to purchase are all high. Supply chain and procurement are precisely configured to reduce ineffective investments. Every aspect is closely linked, with almost no obvious weaknesses. In the short term, it is difficult for competitors to threaten its leading position in its controlled network." said Yu Zhanfu. To enhance the passenger experience, Emirates is also increasing its investment: a multi-billion-dollar fleet and cabin renovation plan; enhancing catering, cargo, and ground handling capabilities; supporting advanced technologies for group operations; expanding training and personnel development programs; and promoting the group's sustainable development initiatives. Once these investments are deeply adapted to Emirates' continuously expanding hub-and-spoke network, they may lead to more impressive financial reports in the coming years. However, the risk lies here too, as Yu Zhanfu believes: Emirates' large investment in software and hardware means that the operating costs per aircraft are not low. If the global economic environment fluctuates, the occupancy rate, ticket level, and total revenue may be significantly impacted, affecting the profit margin. Especially for the impact on the two classes (business and first class). It is important to note that Emirates has long used very attractive affordable ticket prices to attract economy class passengers, mainly to ensure as many passengers as possible to offset the operating costs per aircraft, and the main profit comes from the two classes. Fluctuations in the economic environment, as well as the impact of direct routes from other airlines on the transfer hub, can affect Emirates. To become a "money-making saint," Emirates has both talent and strategy. However, in the ever-changing environment, crises often lurk beneath the splendid surface, and everyone still needs to stay vigilant.