x Abu Dhabi, UAEWednesday 17 January 2018

Expanding Emirates Airline could outgrow Dubai hub

Emirates Airline has said that it is expanding so rapidly that Dubai International Airport in its current form will not be able to accommodate all of the aircraft it has ordered.

An Emirates airline passenger jet taxis on the tarmac at Dubai International airport in Dubai. Kamran Jebreili / AP Photo
An Emirates airline passenger jet taxis on the tarmac at Dubai International airport in Dubai. Kamran Jebreili / AP Photo

Emirates Airline says that it is expanding so rapidly that it may outgrow its hub at Dubai International Airport.

“Dubai International, as it stands, won’t be able to accommodate all of our aircraft,” the Emirates president Tim Clark said in Boston last week after the carrier launched its latest route to the UnitedUSStates.

Emirates is in the process of aggressively expanding its fleet. Over the past two years, the company has taken on 45 new aircraft, many of which are large Airbus A380 planes. This year it expects to take delivery of another 22. At the Dubai Airshow in November, the airline announced that it had placed a US$76 billion order for 150 Boeing 777X aircraft, which Mr Clark described as “the largest order in aerospace history”.

The company’s rapid expansion has already prompted Dubai International’s authorities to expand by building a fourth concourse at Terminal 1 and enlarging Terminal 2, which will increase capacity to 90 million passengers by 2018. However, that was a move announced in 2011 and could still fall short of Emirates’ future requirements.

Emirates has long been linked with a possible move to the new Al Maktoum Airport at Dubai World Central near the Dubai 2020 Expo site.

“Others are going [to DWC]. I believe that flydubai will operate from there. I think others will do that,” Mr Clark said. “The Government of Dubai will build a world-class field there. It will accommodate all or some. And as we get closer to the time they will decide what’s going to happen. But having said that, don’t forget that they have said quite clearly that Dubai International Airport today will remain open. So whoever’s left there. Wow. You’ll be a city airport. I mean you couldn’t have a better access to the greater Dubai. And if we are moved, just say, look at all the terminals that we’ve just built. They will be inherited.”

The airline has repeatedly ruled out the possibility of splitting its hub between Dubai International and the new airport, but analysts still suggest that this could be a possibility.

“Tim’s remarks are very telling. To me, its an inference that Emirates may well split operations between Dubai International and Dubai World Central,” said Saj Ahmad, the chief analyst at StrategicAeroResearch.com. “They already have their cargo operations at Dubai World Central, so it would make sense to shift some passenger operations there too.”

Mr Clark said that the decision to ground 20 aircraft from May as the north runway at Dubai International Airport is repaired would cause the company disruption but would not result in any job losses.

“The north runway shutdown of course gives us difficulties,” he said. “It’s obviously taking 50 per cent of the production away, so it’s doing some damage to us. But we’re having to manage that. We’re doing our best to deal with the knock-on effects. We have to put 20 aircraft on the ground and each of those aircraft has six sets of crew. So we’re inviting them to take leave. We’re not getting rid of anybody we’re just having to run the operation a bit tighter.”

The construction work will take place over 80 days from May 1 to July 20.

Earlier this week Bloomberg reported that Emirates was seeking to raise $2bn through four different 12-year bank loans.

Emirates declined to comment on the reports, but a spokesman said that the company was “well positioned to finance all its upcoming aircraft deliveries. We look at all financing options and it has never been a problem for us to get support from banks or financial institutions as we have a track record of profitability and cash generation, plus a very stable management team.”

Mr Ahmad said that Emirates “by seeking out sources of funding now, de-risks itself from having to make bad financial commitments later on and also when market conditions become less attractive when the loan(s) are required at shorter notice” .

“Emirates has been a big fan of sukuks and there’s a good chance they’ll go back here to capitalise – demand for Emirates sukuks are always strong so attracting investors is easy – but because the figure of $2bn is smaller than previous Emirates money-raising needs have been, this is a shorter term loan that’s needed – probably to cover pre-delivery payments or pay off balances on jets it has already,” he added.

lbarnard@thenational.ae

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