Emirates is positioning itself as the low cost, long-haul global airline. It accounts for almost one-third of the firm orders for the A380, and is set to match Lufthansa's long-haul capacity by 2010. As the chart opposite indicates, Emirates' unit operating cost is about 40% lower than the lowest cost European major, KLM. It derives its cost advantage from: 1. Its business model is focused purely on long-haul aircraft, which eventually will be able to connect any two points around the globe through its 24-hour hub at Dubai; the average unit costs of its rivals are pushed up by their short-haul operations. 2. The zero tax rate in Dubai is a major advantage both in terms of corporate taxes and personnel costs. 3. It has not acquired legacy costs. Emirates is less than 20 years old, so it does not have the long-standing working practices and pension arrangements that burden many airlines. Also, unions have little rele- vance and strikes are extremely unusual in the UAE. 4. It is a dollar-based carrier. The UAE dirham is pegged to the US dollar, whose recent dollar weakness has accentuated the carrier's cost advantage.
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