Emirates vice chairman slams media response to Dubai debt, says carrier will see profits rise.
Dubai’s state-owned Emirates Airline said the debt crisis afflicting the sheikdom won’t halt a surge in profit or threaten the carrier’s independence and jetliner orders with Boeing and Airbus.
Calling the media response to the city’s debt-servicing issues “hate Dubai week,” Emirates vice chairman Maurice Flanagan said net income in the second-half ending March 31 will surpass the $205m posted in the first six months and should reach about $1bn next year.
“We confidently expect our second-half to be stronger than our first,” said Flanagan, who helped found the airline in 1985. “You wouldn’t know it from the media comment, but Dubai has a number of substantial businesses.”
Dubai’s DFM General stock index fell 7.3 percent on Monday in the first trading since state holding company Dubai World said it may delay loan repayments as it struggles with $59bn of liabilities.
Emirates, also owned by Sheikh Mohammed Bin Rashid Al Maktoum, added 22 percent more seats in the first half as most carriers reined in capacity to cope with the recession.
Flanagan said in a telephone interview that Dubai’s rulers are unlikely to cancel plane contracts while Emirates continues to make money and that the carrier has a detailed business plan for the expanding fleet.
“We’re not being stupid about it,” the executive said. “We don’t order aircraft without knowing what to do with them.”Still, Nick Cunningham, an aviation analyst at Evolution Securities in London, said the debt crisis has called into question the ability to finance a backlog that includes 58 Airbus A380 superjumbos, 50 A350s and a number of Boeing 777s.
“It makes the A380 and A350 orders look significantly more dubious as a prospect than they were before, and they were pretty dubious before,” he said. “Do I think a lot of them will ever get delivered? No, I don’t.”
Dubai is also unlikely to sell Emirates to help raise funds or to allow a merger, Flanagan said. The company also has no plans to join any of the global airline alliances.
Societe Generale economists said in a November 27 note that Dubai might have to offer Emirates as “collateral” in order to broker a bailout by oil-rich Abu Dhabi, possibly via a merger with the neighboring sheikdom’s Etihad Airways.
“I seriously doubt if the government of Dubai would consider a merger of Emirates with Etihad, or a sale of Emirates,” the executive said. “If a sale, or partial sale, were to be considered, it would be better later.”
Emirates has developed a business model based on the transfer of long-haul passengers between North America, Europe, Africa, India, East Asia and Australia that uses Dubai as a transit hub rather than a primary source of traffic. That should leave it less exposed to the vagaries of the local economy, according to the International Air Transport Association.
“Many carriers in the region, including those based in Dubai, facilitate long-haul connections,” IATA spokesman Anthony Concil said in a phone interview. “This buffers their businesses from the impact of shocks in the local economy.”