The Emirates Business Model
After Emirates rapidly turned Dubai into one of the world’s largest flight connection hubs, airlines around the world sought to replicate their success. Their business model — operating large-capacity aircraft on hub-and-spoke routes with Dubai at the center — enabled mass expansion at hyper-efficient levels. In this article I will examine Emirates’ path to world domination, as well as take a closer look at some of the other airlines attempting similar strategies. In a rapidly globalizing world with thousands of new entrants to the transportation industry, business plans and routing can be make or break for airlines.
Hub and Spoke
The rapid growth of Emirates has put hub and spoke strategy into the aviation limelight, as they were able to utilize it to build one of the largest route networks in the world. The strategy is actually quite simple: an airline chooses its main “hub” city, and then runs all flights to or from that city, like spokes on a bicycle wheel. Instead of launching flights between endless amounts of city pairs, airlines like Emirates are able to direct passengers through their hub and conveniently connect them to their final destination. The strategy is most effective when airlines operate large capacity aircraft on popular routes, such as Emirates’ high-frequency London-Dubai flight.
Example: Let’s say a passenger wants to fly from Copenhagen, Denmark to Lahore, Pakistan. The demand for this route is not high enough to warrant a nonstop flight, so the passenger might consider purchasing a connecting flight on Emirates. Because Emirates operates a flight from Dubai to Lahore, passengers can fly to Lahore via Dubai from any other city on the airline’s network.
Emirates’ route map sticks to the hub and spoke strategy like it’s scripture; all flights begin or end at Dubai International Airport, with very few exceptions (direct flights with fuel stops, such as Newark to Dubai via Milan).
If you look closely at the graphic above, you will notice that Orlando residents can travel from their home city to Ho Chi Minh City, Vietnam, with only one stop. This model is even more efficient than the transportation methods used by the US Military during the Vietnam War, when deploying troops often meant multiple stops, particularly in Hawaii and Guam.
Emirates is Not Alone
Airlines around the world are seeking to recreate this business model, and some have even been doing it longer than Emirates. Icelandair, for example, has been operating a hub-and-spoke route strategy out of their hub at Keflavik International Airport since the late 90’s, and has undergone large expansion recently. The airline now connects dozens of North American cities with dozens of European cities, and it is able to offer discounted fares because of their unique position in the middle of the Atlantic Ocean.
WowAir, a budget airline founded in 2011, competes directly with Icelandair on many of the same routes, operating a similar hub-and-spoke network. Because of Iceland’s geographical position in the middle of the Atlantic, these airlines are able to use smaller, more efficient planes. Furthermore, by offering cheaper fares and ease of connectivity, Icelandair and WowAir fly with very few empty seats.
On the African continent, Ethiopian Airlines is working to establish a very similar route network through their hub in Addis Ababa. I wrote extensively about Ethiopian’s business model and their utilization of hub-and-spoke. As the airline grows and African infrastructure improves, this system could be very lucrative for the company, positioning them to connect the entire planet to Africa.
Although Emirates is the clear example of a successful hub-and-spoke model, many other airlines are successfully scaling with the method. Time will tell, however, whether this remains the most logical solution, as increasingly efficient jets allow for niche routes to be economically viable. Until then, hub-and-spoke will remain dominant.