Tim Clark President, Emirates Airline Speech to the Royal Aeronautical Society May 15, 2013

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Intro Thank you for that introduction; it is a great honour to be here tonight and I appreciate the opportunity to address the Society in London, or as your mayor likes to call it, the “eighth emirate” of the United Arab Emirates. Yes, it was only a month ago that Boris Johnson visited Dubai and bestowed London as an honorary and apparently seasonal member of the federation, on the grounds that there are many UAE Nationals spending summer holidays in Knightsbridge and Mayfair. They no doubt give much to the London economy and in the same spirit, if any of you want free tickets for the Emirates Air Line cable car crossing the Thames between Greenwich and the Victoria Docks, see me after the speech – and no, this is not a shameless ploy to boost passenger numbers. Leaving aside Mr Johnson’s knack for a catchy headline for a moment, his visit to the country where I have been living for many years, is central to what I plan to talk about tonight. In Dubai the London Mayor spoke of a vision for the future that would keep London competitive with other world capitals and the need for investment in business, infrastructure and property As you know Mr Johnson took a leading, non-athletic role in the Olympics, which was watched by 4 billion residents of this planet. Lord Coe was right when he said, “When our time came – Britain, we did it right” And taken together with the Paralympics and the Queen’s Golden Jubilee, in many ways last year was an annus mirabilis for the UK. However, now that we have had time to wake up from the reverie, the reality is that we haven’t got everything right I won't say it just yet but you will guess it if I say these hints - Maplin Sands, White Paper on the 2003 Future of Air Transport, the 2006 Eddington Report, Heathwick and finally the giveaway the Estuary project or Boris Island. 2|Page

Yes, that little problem. For it seems that all of us in this room have been trapped, to varying degrees, in what has become the longest running, realworld episode of Yes Minister - "The airports dilemma", 40 years and counting. As you all know there is yet another Airports Commission due to report in 2015 and I am reminded of the immortal words of Sir Humphrey Appleby, who survived by living inside the margins of bureaucratic double speak, that the translation for any announcement of a commission is basically: "This problem is a bloody nuisance, but we hope that by the time the Royal Commission reports, everyone will have forgotten about it or we can find someone else to blame” I am not a Sir Humphrey character and I have never fancied myself in the image of Jim Hacker. But I, and I am sure many of us, have become most like poor suffering Bernard Woolley, utterly befuddled by a policy process that, so far, prefers to go around in circles like a toy car with a broken front wheel rather than going forward. Why did I mention Maplin Sands? Why that was the name of yet another royal commission on airport capacity for London – in 1974. The new royal commission isn’t due to release its finding until 2015 – the same year London Heathrow is expected to cede its crown as the world’s largest international airport - to Dubai, as it happens So it seems the prognosis for the UK is “round and round we go”, but don’t be fooled Britain is a great country, and in modern history it was often aviation that led the way, from the Gloster Meteor to the Harrier Jump Jet And lest anyone think that only the Germans or the Japanese can master large-scale infrastructure projects, let me remind you that the only thing scurrying down the new runways of the bizarrely delayed Berlin Brandenburg Airport these days are rabbits, and the German authorities have even stopped offering an opening date after the third delay

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So at least we can enjoy some good-natured schadenfreude that we are not the only ones who have had a few infrastructure issues Despite the vexing nature of the airport issues facing the UK, what I’d like to suggest this evening is that aviation will once again lead the way, and infrastructure is the key I am a Brit. I began my career in 1972 with British Caledonian But I live in Dubai, a tiny emirate that has done very well for itself despite having no wealth, no oil, and no real advantages to speak of, except for being geographically close to other rich and prosperous nations and critically, the government throwing its policy support towards growth and development So from the outside looking in, and from the admittedly privileged vantage point of managing a global airline that helped to put the tiny city state of Dubai on the map, I have a perspective to share on how Britain should act to ensure it continues to swim in the fast lane of the global economy The broad brush strokes are obvious to all. The world is always changing and what is happening right now is truly momentous We have new relationships being forged between the developed and developing worlds; no longer is the US the first and only trading partner on a country's wish list of export promotion Everyone wants to create a hub because a hub creates wealth and prosperity. Hubs are also about brand. And in London, and the Southeast of England more generally, you've most certainly got it. London and the southeast account for the lion's share of UK GDP and both have a massive pull effect for the rest of the world. Everyone wants to come here, BRICS nations want more connections to London, so do countries in Eastern Europe, Latin America, Asia. Their people want to vacation and work here and English is the primary international language. What is the first route any new long haul airline wants to fly? London 4|Page

Britain is a leader in its liberal approach to aviation and airline competition, and these policies have strongly benefitted Emirates Emirates is the largest full-service foreign airline flying to the UK. It would be easy to think that a large airline’s main business concern in Britain, would be the two hub airports found in London. These are of course key markets for us, but Emirates’ investment in the UK is also a story about the great service, jobs and strategic sponsorships that we support in the country’s regions and the people who live and do business there. You will have noticed that the UK is increasingly looking to its regions for business and creative inspiration and the same can be said for Emirates from our regional hubs of Birmingham, Glasgow, Manchester and Newcastle. But notwithstanding our own strategies with regard to the UK, the Davies Commission, whether it likes or not, will inevitably focus its attention on London and the Southeast. And rightly so as this is where the real capacity pressures lie both now and in the future. The fact remains, ladies and gentlemen that all other UK airports operate well below their current capacities. It is a fact that the interplay between the UK, primarily London, and the emerging markets of the world produces a virtuous circle of trade, tourism and investment. Consider these facts: 

Tourism is a major part of the UK economy. It contributes £115 billion to UK GDP, and provides employment for 2.6 million people – around 9% on both measures.

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The UK enjoyed a record level of spend in 2012 - £18.6 billion was injected into the economy from overseas visitors.

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Every £40,000 spent by overseas visitors to Britain can create a job.

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One in twelve jobs in the UK is currently either directly or indirectly supported by tourism. 44% of people employed in tourism are under 30, compared with an average for the wider economy of 24%. One third of new jobs created between 2009 and 2011 were in tourism.

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The World Economic Forum now considers Britain to be the 5 th most competitive visitor economy in the world, up from 7th in 2011.

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UK businesses trade 20 times as much with emerging market countries that have a direct flight to the UK, than with those that don’t, according to the Confederation of British Industry. They also believe the UK could generate as much as £1 billion in trade every year from just one daily flight to the eight fastest growing world destinations, and I think they are right. Increasingly, travel, trade and tourism is being funnelled between mega hubs. This is why Airbus produces the A380, its wings built in Broughton, and why Emirates has purchased 90 of these doubled-decker aircraft, with 12 scheduled for delivery this year alone. The flow of people, finance and indeed ideas between mega hubs is like a weather front, with pressure racing from high to low. This is in essence a flight to quality and we are seeing mega hubs develop in each and every region of the globe The Prime Minister described it aptly last year when he said “we are in a global race today - sink or swim, do or decline” London, Dubai, Singapore, Hong Kong – these are today’s hubs. Other hubs will grow in Africa and Asia and what will the picture look like in 10, 20, 30 years hence? The question is an important one. For just as the super tanker needs to start turning several miles early to avoid an iceberg, the UK needs to take action now to avoid the dangers ahead of us. I know that times are tough. There is great uncertainty in the Eurozone We may have felt a boost from the Olympics, tourism, but the overall trend is flat-lining There has been considerable dodgy dealings amongst our banker friends in the UK and Europe over the past 20 years and finally, this has caught up with them But the International Financial Services system, controls and corporate taxation regimes will be sorted out and the good times will return.

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The global economy will grow and demand for travel will accelerate, of that I have no doubt. But when the taps turn back on again, will London miss out? And should the UK start developing other sectors besides financial services, infrastructure will be vital – especially if this includes new and tertiary industries. What I can tell you from managing the world’s largest airline by international capacity is that traffic patterns are evolving quickly. New trading partners are emerging; some countries that have barricaded themselves from global trade are now embracing it. Look at what is happening in Turkey today. Countries with an expansionist and engaged view will reap the rewards of the new global economy. Those that don’t, will suffer. So, what are the consequences of the current in-action about UK’s aviation infrastructure? We might start by looking at the unrealised potential of London Heathrow If Heathrow was allowed to grow unconstrained by runway usage limits, or night curfews, the annual throughput would be closer to 130 million passengers per annum, not to today’s 70 million. A lack of infrastructure investment has meant that in 20 years London Heathrow has fallen from first in Europe to fifth in terms of international destinations served. What is the true cost of this? I couldn't say exactly – it is hard to measure something that hasn’t come, but we know it is helping other European airports to grow their business. What is Europe's leading airport for emerging market destinations such as China? The answer is Schipol - the same airport that likes to call itself Heathrow’s third runway. Schipol actually has six runways. Will they soon also claim to be Heathrow’s fourth runway? A long lasting solution must be found – otherwise international airlines will be forced to make strategic long-term solutions on the basis that there may not 7|Page

be any additional capacity in London for at least the next 10-15 years. As an example Britain’s national carrier, British Airways now sees its future expansion not at Heathrow but in the Iberian Peninsula. Capacity is a must. Would Singapore be a major magnet for travel in Southeast Asia if it had a curfewed runway. Where would Dubai be for that matter, with just one curfewed runway? A pro-growth, expansionist view towards the future is critical. That means action on infrastructure and a check on policies that limit growth, such as the Air Passenger Duty. The Government obviously understands the power of a favourable tax regime. It continues to cut corporation tax in order to create the most competitive tax regime in the G8 in order to encourage growth and investment. Yet when we turn to aviation the script appears to have got lost. With the latest rise in air passenger duty announced in the Budget, Britain is now on par with Chad as being the world’s most expensive place to be an airline passenger Meanwhile, other countries have scrapped or reduced their taxes on aviation In France, airport departure taxes are now ten times lower than in Britain – and this all accessible for Britons with a single ride through the Eurotunnel So clearly, something needs to be done, and hinges on building the right infrastructure, and the right pro-growth policies that take the long view towards British prosperity What, then, does London Heathrow have going for it? Heathrow has the synergy and energy of being in such close proximity to London. It is a legacy cluster and one can’t underestimate the importance of this It enjoys a strong and diverse mix of travel connections, from point to point travel to onward transits to North America and elsewhere in the UK, Ireland and Europe

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Gatwick has been trying to share the spoils with Heathrow for decades but the simple fact is that airlines want Heathrow. The average revenue per seat that customers pay to fly out of Heathrow is considerably higher than Gatwick, in fact it is the highest in the UK. So where does this all take us? If one accepts that the real capacity problem lies in London and the Southeast then it is there that the focus must lie. The Estuary project would be an incredible testament to the criticality of aviation to the UK’s economy and if designed and delivered correctly would come to dominate not just London and the UK’s Southeast, but the whole of Europe. The £50 billion project would be great if funded by foreign investors and built by British companies – a ten year building boom. But after multiple planning enquiries (T5 took 10 years) and the build timeline, we’re looking at 2030 to 2033 at the earliest if we started now, and let’s face it, Heathrow would then have to be closed. Can we wait that long? – maybe but interim demand and the capacity shortfall must be dealt with now. Can the regions deal with this demand? Partly but the truth is Schipol, Paris, Frankfurt and, dare I say it, Dubai will take up the slack. So it’s back to Heathrow and Gatwick, I’m afraid. Like it or not, the third runway at LHR is going to have to be built – and not just shorter landing runways. A second runway at Gatwick should be constructed post 2019, which is the earliest date the planners will allow. In any event, these runways must be completed by 2020 at the latest and for Gatwick, the reinstatement of the Gatwick Express rail connection to Central London at a minimum of fifteen minute intervals is a must, as would be considerable passenger terminal expansion commensurate with its role as a meaningful hub for London. As for the regional airports I can only point you in the direction of the Heseltine Report published last year which advocated delegation and empowerment to regional bodies, in other words, taking control of their own 9|Page

destinies, and this would include their airports. But empowerment and delegation theories depend on the ability of the regions to pick up the mantle and this invariably requires the emergence of a forceful and charismatic champion who has the means of stitching together the multi-stakeholders into a cohesive economic entity which then powers the regional economy. Obvious examples of this at city and city state level are Lee Kuan Yew in Singapore, Sheikh Mohammed Bin Rashid Al Maktoum in Dubai, Rudy Giuliani and Michael Bloomberg in New York and closer to home, Mayor Johnson in London. There are many other examples. Finally, ladies and gentlemen, let me conclude by saying that doing nothing in London and the Southeast remains a non-option. You might like to consider that should the 2017 UK referendum on EU membership produce a negative response, the need to get airport infrastructure upgraded and accelerated is doubly compelling driven by the need to grow the direct air links to new markets outside the EU.

Thank you so much for listening.

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