A New High Flyer

Dreams are sweet on Emirates Airlines, with beds that fold out flat.

Chris Hondros / Getty

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Nonetheless, planes are running at an impressive 73% capacity, say Emirates' executives. "We have a very good product, and there is no shame in seeking to retain pricing at the highest possible level," says Mannion. Hermann Michel, an Austrian who was recently hired away from Singapore Airlines as a catering manager, jokes about why Emirates takes service so seriously: "What do you talk about when you get off a long flight--how good the fuel was?"

High prices--along with some serious attention to expenses--also help drive profitability. Thanks in part to low labor expenses and the efficiencies of flying a relatively new fleet of planes, it costs Emirates only 8.5¢ to carry one passenger one mile (the cost per available seat mile, or CASM, a common industry measurement), which is better than most of its competitors' rates and rivals that of legendary cost king Southwest Airlines (which has a CASM of 6.5¢, excluding fuel). Emirates' operating margins--13% in 2004-- not only are much better than those of comparable airlines Singapore, at 7%, and Cathay Pacific, at 8%, but also outshine Southwest's, at 8.5%.

But Emirates faces some obstacles on its way to achieving its world-class ambitions. Fifty-dollars-a-barrel oil has hit the airline hard: it has instituted a wide-scale hiring freeze and delayed starting service to San Francisco and other U.S. cities. The neighborhood is getting crowded as well: the government of Abu Dhabi--next door to Dubai--has just launched not one but two carriers: Etihad Airlines and low-fare Gulf Traveller. The emirate of Sharjah last year started Air Arabia. Doha-based Qatar Airlines, meanwhile, is improving and expanding. Then there is the reality that Dubai is in the middle of a volatile region--and is still apparently connected to terrorism, as shown by the arrest there of an al-Qaeda operative in September 2003.

Still, Emirates executives point out that Dubai--and the airline itself--is a tolerant, multicultural bastion, with English as the common language. "With more than 100 nationalities working here, and an open, self-critical way of doing business, we're not even an Arab airline," says executive vice president Gaith Al Gaith. And it's not as if Emirates shies away from its associations with the U.S.: it slapped a 20-story picture of the Statue of Liberty on a Dubai skyscraper last summer to advertise its New York flights.

For Dubai, the airline and its base at the airport--which is undergoing a $4 billion expansion--are just part of a bigger plan. They fit into the "superlative" strategy of the ruling Maktoum family. The tiny emirate on the coast of the Persian Gulf--once a significant trading hub--is now spending billions of dollars to become the world's high-end playground. And getting Emirates' brand known worldwide is part of that plan: last year the airline spent $150 million to buy the naming rights for a new 60,000-seat stadium for the popular London soccer team Arsenal. It was the biggest sponsorship of its kind in British history.