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Thu 26 Apr 2007 01:06 PM

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Emirates mulls low cost carrier

News comes as the airline announces a 20.2% profit increase and says it may buy more A380s.

Emirates is "thinking a bit" about starting a budget airline in the coming few years, its vice chairman said today as the state-owned firm announced a 20.2% increase in second-half profits.

"We are thinking a bit about [a low-cost carrier]," Maurice Flanagan told the Reuters news agency. "It's something for the next few years. The [Airbus] A380 could be a very good aircraft for that," he said without elaboration.

Sources played down the news when contacted by ArabianBusiness.com. "Emirates has no plans to start a budget carrier at the present time. We [are] currently focussed on our own organic growth," said a spokesperson.

However, launching such an operation would reflect the burgeoning ‘no-frills’ airline sector in the Middle East.

Earlier this year Jazeera Airways, the Kuwait-based low cost carrier,
established a base in Dubai

. The Sharjah-based Air Arabia has
recently completed the largest IPO in UAE history

to fund its expansion.

The no-frills model is also taking off in
the newly-liberalised market of Saudi Arabia

, where operators including National Air Services plan low cost carriers.

Dubai-based Emirates, the largest Arab airline, has also announced a 20.2% increase in second-half profit and said it may buy more Airbus A380s.

Net income in the six months to March 31 rose to AED1.9 billion ($517.4 million) from AED1.58 billion in the year-earlier period, Reuters calculated based on full-year data the company released today.

Emirates chairman Sheikh Ahmed bin Saeed al-Maktoum said the airline was close to a compensation deal with Airbus on its delayed A380s and may buy more of the aircraft.

"We are very close to completing in the next week in terms of compensation," he told reporters in Dubai. "In terms of cancelling the A380s, no. Maybe we are buying more," he added. "We'll let you know more sometime in the future."

Sheikh Ahmed said that Emirates has 'no interest' in buying a stake in Airbus. "I'm sure they [Airbus] are talking to some Arab private companies but not [to] us as an airline."

It was not clear whether this comment related to the Gulf emirate of Qatar, which has recently been in
talks with Airbus parent EADS

about buying as much as a 10% stake in the European aerospace company.

Emirates, the world's eighth-largest international air passenger carrier in 2005, operates a fleet of 102 aircraft and has another 106 on order, including 43 of Airbus's A380 superjumbo. It carried 10.5 million passengers in the second half, up from 7.52 million in the year-earlier period.

The government-owned airline plans to expand its fleet to 157 and double the number of its destinations to about 170 during the next five years, adding cities in the United States, Africa and India.

Sheikh Ahmed ruled out buying stakes in other airlines such as PIA. "There's nothing in the pipeline at the moment. We're focusing on the airline [Emirates], not investing in other carriers."

Emirates made today's announcements at an event held at the arena at Dubai's upmarket Madinat hotel. It had flown in journalists from across the world, especially those from its key hubs in Europe and Asia.

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