There are few people in business who really tell it like it is. Not afraid to speak their mind, suggest the unthinkable, but actually say what all of us are really thinking.
Which brings me smoothly onto our cover star this week, Emirates Airline executive vice chairman Sir Maurice Flanagan. He may be 83 years old now, but let’s be honest — there aren’t many around better than him. One man’s loose cannon is another’s living legend. The fact is that for the past 27 years, Sir Maurice has played an integral role in the growth of one of the world’s most successful companies. As he tells us: “I was given $10m by Sheikh Mohammed in 1985 and told don’t come back for any more or subsidy of any kind or protection of any kind. About $81m they put in, the shell of the training college, but that’s all.”
Twenty seven years on, Emirates has over 170 aircraft, and flies to more than 120 destinations in over 70 countries. Flanagan is probably one of the few people who can still remember that morning in October 1985, when Emirates flew its first routes out of Dubai with just two planes — a leased Boeing 737 and Airbus 300B4.
But the real question for Emirates is what next? Yes, it can carry on buying more planes and expanding into new markets. It can carry on making healthy profits that only change with the price of oil. We could all argue about the standards of service (I’m on the side that gives it nine out of ten), and debate endlessly whether they really should have taken those footrests off the A380s just to cut down on the plane’s weight.
But long term, in the bigger picture, what next? The “unthinkable” is of course whether Emirates Airline could one day be sold. Flanagan was brave enough during our interview to suggest “the time might come when it would make sense to do that.”
There is of course no suggestion that this is being seriously thought about at the airline, and Flanagan rightly stresses this is entirely his personal opinion. But his opinion counts, and is worth exploring. Depending who you ask, a future sale of the airline would bring in a pay day of around $11bn — some would argue closer to $15bn given its brand value. When you consider that its net cash assets are over $4bn, you can soon make a case that at this time, Emirates has the strongest asset value of any airline out there.
And that is precisely the problem. Name me a cash rich airline with the funds to pursue such a deal? You can’t, can you? The only “sale” option would be an IPO, which has been muted before. There would be no shortage of banks and institutional investors queuing up for a slice of the company. Though again, Emirates has never had a problem raising finance. The company’s last bond was oversubscribed by six times. It just doesn’t need to IPO.
So what next? Go down the acquisition route, in a similar way to Etihad? The company tried that with a stake in Sri Lankan Airlines, and by all accounts, is an experience it doesn’t want to repeat. As Flanagan himself says: “Absolutely not… It eats up an enormous amount of senior management time… They want you to develop that airline to be like Emirates.”
This final comment really hits the nail on the head — Emirates’ problem is that everyone wants to be like Emirates.
Which is why the growing feeling is that it will never be sold, it will probably never IPO and it certainly won’t go buying other airlines.
It will just carry on as it is. And nothing much wrong with that is there? In years to come, I suspect Sir Maurice Flanagan’s successor will be talking about an airline with over 300 planes, flying to 250 destinations in 100 countries.
Anil Bhoyrul is the Editor Director of Arabian Business.
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