Abu Dhabi, UAEWednesday 19 February 2020

Dnata has exposure to Thomas Cook bankruptcy

Emirates president Tim Clark says impact of tour operator's collapse is still being assessed

Tim Clark, president of Emirates airline, will step down from his role in June 2020. Bloomberg.
Tim Clark, president of Emirates airline, will step down from his role in June 2020. Bloomberg.

Emirates Group's airport services unit Dnata is exposed to UK's bankrupt tour operator Thomas Cook, which is expected to affect the group's first-half financial results, its president Tim Clark said.

An assessment of Thomas Cook's impact is ongoing but it is "not a small amount", Mr Clark said on Monday at an aviation conference in Dubai. "We will have to take it in the first half," he said, without specifying the financial value of the potential impact. Dnata counted Thomas Cook as a customer for services such as ground-handling and catering.

Emirates' earnings for the six months of the fiscal year, set to be reported in November, will still be better than the same period last year as the airline decreased capacity and rationalised routes in response to a weaker global economy that has seen a "flattening" in the airline's growth, Mr Clark said.

Thomas Cook, the world’s largest travel company – whose business divisions included a travel agency, own-brand hotels and an airline – filed for bankruptcy last month.

The demise of the company, which had faced financial difficulties for some time, triggered the biggest peacetime repatriation of travellers by the UK government. More than 22,000 jobs were lost worldwide, although its chain of 555 travel stores in the UK have subsequently been bought by competitor Hays Travel, whose founders have already rehired 421 staff.

On troubles with General Electric engine that have delayed deliveries of Boeing's re-engined 777X wide-body aircraft to Emirates, Mr Clark said the issues have been resolved and a flight test is expected by December. Emirates, however, will insist on a test period of 13 to 16 months for the new jet before deliveries begin.

Emirates, the launch customer for the 777X with an order of 150 jets, was scheduled to take delivery of eight 777-9 planes next year, but now doubts it will receive even a single jet in 2020.

"By the end of next year we were supposed to have eight of them, now it looks like we won't have any," he said.

Plane makers should not overpromise when it comes to new aircraft capabilities, the executive said, indicating Emirates’ growing ire with plane manufacturers and engine makers over delayed deliveries.

"I think we have to re-establish the absolute criticality of quality engineering going into these aircraft and delivering to the airline community, such as ourselves, aircraft that are fit for purpose from day one," he said. "We don’t wish to be mice in this experiment, we want to have mature aircraft that give us 95 per cent dispatch reliability."

Boeing said last week the 777X first flight is scheduled for "early next year" and the first delivery is expected in 2020.

Mr Clark also said Boeing's 737 Max, the narrow-body model grounded after two fatal crashes, will not fly unless it was "150 per cent safe to do so", but global aviation regulators need to be aligned on its return to service.

"Will it get sorted? Yes it will," he said. "I think there must be unanimity between regulators. You cannot fly the aircraft in the US but not in Europe or in Canada because consumers will push back."

Emirates does not operate the embattled jet but its low-cost sister airline flydubai has grounded 14 of the 737 Max planes. The no-frills airline said the six-month ban on the jet has set the airline's fleet back five years.

In his wide-ranging comments, Mr Clark also said retaliatory tariff measures between the US and European Union over Boeing and Airbus jets risks making air travel more expensive for passengers. The tariffs would increase the cost of the planes and push fares higher.

"The airlines that are customers of these aircraft will be affected and in the end the prices that we get charged as a result of tariff imposition will pass through, as they do, to consumers, so prices are likely to rise," he said.

The World Trade Organisation gave Washington approval earlier this month to impose tariffs on European-made planes and goods as penalty for illegal EU aircraft subsidies.

Updated: October 14, 2019 06:52 PM



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