City of Gold: Dubai and the Dream of Capitalism (18 page)

Dubai didn’t have many hotels. There was one main tourist resort, the Chicago Beach Hotel. The strange name came from the Chicago Bridge & Iron Co., which welded giant floating oil storage tanks on the beach. It became known for a while as Chicago Beach.

Expats found Dubai little different than Kuwait City, Bahrain, or Doha: dull. It was best visited only long enough to replenish a bank account. Of course, old-timers now talk of the 1980s as the good old days, when expatriates and locals knew each other and the city was manageable.

The Iran-Iraq war, which left a million dead, was killing Dubai’s economy, despite the bounty of damaged vessels. Business was slow at the airport. The Jebel Ali port sat in silence. Sheikh Mohammed’s friend Sultan bin Sulayem ran the port, sitting at his desk with a flyswatter, pining for a real job. The oil price that spiked in 1979 dove into the doldrums
and stayed there. The 1980s were Dubai’s slowest decade since the 1950s.

Sheikh Mohammed, in his mid-thirties, sought an answer. He’d taken over a large portion of the city’s daily affairs after his father’s stroke. The city’s airport and tourist sector was under his charge. And when Sheikh Rashid died, Mohammed took over most of the city’s governance, which his easygoing elder brother Maktoum, the official ruler, was happy to entrust to him. It was Sheikh Mohammed, Dubai’s crown prince until becoming the emirate’s ruler in 2006, who would steer the next phase of Dubai’s development.

The young sheikh tinkered with the idea of pitching Dubai as a vacation spot, as he describes in his book
My Vision
. In the mid-1980s, he attended a meeting of Gulf Arab government officials. Sheikh Mohammed, who regularly professes distaste for politics, sat quietly as ministers bloviated on crises in Palestine and Iran.

“I was keen to change the subject. I said to the ministers, ‘Why don’t we try to develop this region, and particularly Dubai, as a tourist destination to attract people from all over the world?’” The officials ignored the young upstart. When Sheikh Mohammed repeated the question, one of them scoffed, “What is there in Dubai to make it a tourist attraction? You have nothing but humidity, red-hot sun, burning sand and barren desert!”
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There is no motivator like ridicule. When the young sheikh strode out of the gathering, he was formulating the opening moves of one of the most sudden and lucrative tourism plays in history. Turning Dubai into a vacation destination was the first step in the second phase of Dubai’s development, a phase that Sheikh Mohammed led. Sheikh Rashid had started the process. His ambitious third son would bring Dubai to heights that no one could imagine. And, when it came to governing Dubai, the triumph of Sheikh Mohammed’s tourism project gave him a leg up on his two elder brothers.

Sheikh Mohammed, like his father, was blessed with an uncanny knack for timing. In the 1980s, sun-starved Europeans were flying farther afield to escape the continent’s winter gloom. Their needs were simple: hot sun, a lounge chair, and cold beer. Tour operators flew them to Spain, Greece, or North Africa.

Dubai is sunnier and hotter than those places. The city gets around 350 sunny days a year. Six months may pass between rain showers. In January, the coldest month, the average high is 75 degrees. Dubai’s guar
anteed sunshine wasn’t a turnoff, it was an asset. Dubai also had forty miles of fantastic beach washed by a warm turquoise sea. And Dubai stocked plenty of beer. Sheikh Rashid’s pragmatism wasn’t matched in Saudi Arabia or Kuwait—or even neighboring Sharjah, where alcohol was banned.

Dubai also had a midsized international airport. Sheikh Rashid’s “open skies” policy allowed any airline to fly in without restriction, giving the airport the feeling of a duty-free port. Sheikh Mohammed upgraded the airport in the early 1980s, and it became a refueling stop between Europe and Asia. The city already had most of the tourist infrastructure it needed.

On one count, the Arab minister who had chided Sheikh Mohammed was right. Dubai is one of the few places in the Middle East without historic sites. It can’t touch the ruins and ancient quarters in Syria, Iraq, Egypt, or Israel. As it turned out, Dubai didn’t need them. It had practical advantages, like public safety and visa-free entry. It lacked hassles with touts, thieves, and corrupt bureaucrats. And Dubaians genuinely welcomed foreigners. Problem was, they lacked an efficient means of hauling them in.

In the early 1980s, Dubai had no airline of its own. Foreign carriers were supposed to meet demand for flights because Dubai’s ruler had given them unfettered access to his airport. This wasn’t good enough for his son’s tourism push. Sheikh Mohammed needed more flights, especially from Europe.

In those days, Gulf Air was the chief carrier. It was owned by the governments of Bahrain, Oman, Abu Dhabi, and Qatar. At the time, Gulf Air was embroiled in a dispute with Pakistan, which refused to grant it landing rights in the northern cities that supplied many of the Gulf’s workers. Pakistan preserved those rights for its state carrier, Pakistan International Airways, or PIA. Gulf Air fought back, leaning on Dubai to unwind PIA’s landing privileges. Sheikh Mohammed and his father refused, citing their open skies policy.

In 1984, Gulf Air retaliated by cutting its weekly Dubai schedule from eighty-four flights to thirty-nine. The cutbacks triggered a standoff.

Sheikh Mohammed had been lobbying for an increase in traffic. He demanded the airline restore the canceled flights. When Gulf Air refused, he closed the airline’s local office.

Dubai didn’t have many options. But it did have Maurice Flanagan, a British Airways executive who ran the Dubai National Air Travel Agency, which handled ticketing and supplied ground staff.

Flanagan is a burly eighty-year-old with a ruddy face and a hearing aid tucked behind his ear. His white hair is long enough to curl at the ends, giving him a cherubic look. He’s the airline’s executive vice-chairman. In 2008, with a mug of coffee in his fist, he sat on the edge of his buttery leather cube chair, and told me how he helped Dubai build an airline.

In 1951, Flanagan joined the British Royal Air Force as a navigator, flying in DC-3s and Bristol Brigands, a problematic dive-bomber that entered service in Malaysia. The Brigand’s twin engines had a dangerous knack for losing propeller blades. This would unbalance the propeller, which would wrench the engine off the wing and send the plane plummeting into the jungle. Fortunately, this didn’t happen when Flanagan was aboard.

After the air force, he signed on with BOAC, the airline that became British Airways. Flanagan ran BOAC’s operations in Bombay in the 1960s, increasing the number of Bombay-Dubai flights after Sheikh Rashid guaranteed a minimum number of passengers. By 1978, he found himself on loan to Dubai.

When the Gulf Air standoff began, Flanagan wrote a memo outlining three options. Each was disagreeable. First, do nothing and wait for the market to respond. Second, give in to Gulf Air’s pressure. Third, start a Dubai-based airline. A fledgling carrier would need government protection, which, he wrote, spelled the end of open skies.

Flanagan and his wife were celebrating their thirtieth wedding anniversary in England when Sheikh Mohammed summoned him back to Dubai. He’d read the memo. It was time to start planning. “I’m not saying to start an airline, but prepare to start an airline, just supposing I decide that we need one,” the sheikh said. Flanagan allowed that the best launch time was in October, when carriers publish their winter schedules.

In a few months, Flanagan returned to Zabeel Palace to describe his progress. This time, another young royal was present. He was twenty-six, nine years younger than Mohammed, but, strangely, he was Mohammed’s
uncle. It was Sheikh Ahmed bin Saeed al-Maktoum, Sheikh Rashid’s young half-brother.
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Ahmed, who had just graduated from the University of Denver, looked up to his nephew. Flanagan wasn’t told why Sheikh Ahmed was there. But the newcomer paid rapt attention.

Sheikh Mohammed had hired Deloitte & Touche, the international consultancy, to look into the feasibility of a state-owned airline. He was waiting on their findings before making a final decision. But in the interest of time, he asked Flanagan to hire staff and start building a carrier. The Englishman said he’d need $10 million. The airline also needed a name. The men tossed out suggestions like Air Dubai and Dubai International, but Sheikh Mohammed declared it would be called Emirates, with the UAE flag on the tail.

Many people say that was a mistake. Dubai missed a giant opportunity to introduce its name to the world. But at the time, there were hopes that Emirates might become the UAE’s flagship airline. That hope was laid to rest in 2003 when Abu Dhabi launched a rival, Etihad, and declared it the UAE’s national carrier.

Sheikh Mohammed swore the men to secrecy. Flanagan hired designers to create paint schemes for Emirates jets, staff uniforms, ticket covers, everything that got the logo. By July, word had leaked out that Dubai was working on an aviation project. Gulf Air executives asked for a meeting to patch things up. At the meeting, Sheikh Mohammed cleared up the ambiguity. “Gentlemen,” he told them, “I’m going to start my own airline.”
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The plan was on. In the spring of 1985, Flanagan got his $10 million in seed capital. Emirates was to be headed by Sheikh Ahmed, who’d never held a job. It fell to Flanagan to train the sheikh as his boss. “Tell Ahmed everything,” Sheikh Mohammed commanded. He warned Flanagan that $10 million was all the help he’d get. The airline would have to fly on its own. “Don’t come back for any more,” the sheikh said.

“What about protection against competition?” Flanagan asked, referring to the recommendation in his memo.

“Forget it,” the sheikh said. “That’s not the way Dubai works.”

In fact, Emirates did get more subsidies. Flanagan estimates the carrier got $90 million in gifts from the royal family. That includes two barely used Boeing 727s that the royal air wing handed over in 1985; payment help with another aircraft purchase; and a building to house its training quarters.

When word of Emirates’ launch leaked out, the skeptics brayed. Airlines were a tough business, and few expected the carrier to survive without subsidies. But Emirates appears to have proven them wrong. Flanagan leased two jets from Pakistan International Airlines—delighted to help after the Gulf Air hostilities. With the four-plane fleet, Emirates shoehorned its way into the air routes in the Middle East and South Asia, a region that would soon bear some of the world’s fastest-growing economies. The carrier made its maiden flight to Karachi on October 25, 1985. Again, Dubai’s timing was sharp. Emirates would develop at a torrid pace, just like the city and region it served.

By 1990, Emirates was flying to twenty-one cities, including London, Frankfurt, and Singapore. A year later, the carrier started buying—big time. The manufacturers got their first look at the chain-smoking sheikh with the gruff voice who would soon become one of their biggest customers. In 1991, Sheikh Ahmed slapped down $64.5 million for seven Boeing 777 long-range jets. It was a big bite for a six-year-old carrier, especially given that the triple-7s wouldn’t begin to arrive until 1996. But the growth in passengers warranted the investment. Emirates would carry 1.5 million by 1992.
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In 2001, when terrorists crashed four airplanes in the United States, the industry fell into a panic. Emirates had been negotiating a $15 billion purchase of fifty-eight aircraft, one of the biggest civilian deals ever. The sale was to be a milestone for France-based Airbus, a vote of confidence in its new A380 Superjumbo, designed to carry six hundred passengers. Emirates wanted twenty-two of the double-decker jets, the first firm order for what was then a concept.

But the airline sector was hurting. Ticket sales plummeted amid endless TV footage showing planes slamming into skyscrapers. Carriers cut routes and canceled orders. The U.S. government bailed out its money-losing airlines. All told, some 200,000 aerospace jobs were cut and the industry took a $12 billion loss.
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Emirates, with fifty-eight aircraft on the block, found itself in the catbird seat. Airbus and Boeing went from suppliers to supplicants. Airbus bosses phoned Emirates in a near-panic. Jobs hinged on Sheikh Ahmed’s order. Was Dubai going to pull the plug?

Perhaps Emirates managers were less afraid of turmoil than the rest of the industry. Emirates was one of the last airlines out of Kuwait when the Iraqis invaded in 1990 and the first back in 1991 when the U.S-led
coalition chased the Iraqis out. It made money flying to places others avoided, like Iran, Ethiopia, and Libya.

In November 2001, Sheikh Ahmed stepped into the breach. He proclaimed that Emirates would go ahead with its purchase, not mentioning that the price dropped in the interim. “We will maintain our plans to take delivery of 11 aircraft in 2002 and expect to weather the present crisis in the same successful way as we have other situations of the past 16 years,” Sheikh Ahmed told the press.
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The announcement went a long way toward restoring confidence in the airline industry. That year brought Emirates a record profit of $128 million.

Emirates has been wowing the industry ever since. In 2003, it bought seventy-one planes worth $19 billion. In 2007, Emirates ordered ten more A380 Superjumbos, for a total of fifty-eight. In 2008, as its first superjumbo entered service on the long Dubai-New York route, Emirates’ order book stood at 177 aircraft worth $58 billion.
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At the time of writing, Emirates operated 119 aircraft to 101 cities in 61 countries. It earned a profit of $1.45 billion in 2007, carrying 21 million passengers. Over two decades, the start-up grew into the world’s fifth biggest international airline. It handled more international traffic than American and United airlines, but less when the U.S. carriers’ domestic flights were included.
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Dubai’s airline looked set to move up the rankings, perhaps overtaking Singapore Airlines and British Airways.