Dubai Slump – Effect on Emirates
March 26, 2010
The recent Dubai slump is an area of concern not just for the property sector, as has been reflected across the market when trading re-opened. However, it is unlikely to have quite such a dramatic impact on the region’s aviation business. Dubai-based Emirates holds a global reputation for excellence, serving over 90 global destinations and as with a number of other regional carriers, operates a hub and spoke model that relies heavily on feeder transferring traffic.
Both Etihad and Emirates airlines have experienced tremendous growth in recent years, with the aviation sector as a whole in the region showing further growth trends in recent months despite the backdrop of falling demand in other regions – a positive trend that is expected to hold and continue in the coming months and years ahead. Despite wider global financial uncertainties, there is a very real and increasing demand for air travel within the region and with this is mind, it is anticipated that Emirates and Etihad will continue to take delivery of aircraft on schedule, wherever possible.
When it comes to the question marks currently being raised over the potential financial control of Emirates, as to whether it will potentially be used as a bargaining chip or under guarantor, it is important to understand that the airline is regarded as one of Dubai’s crown jewel assets. With a significant number of A380s on order and demand for services in the region strong, growth forecasts indicate that the airline could become the world’s largest long-haul carrier within a decade, contributing significantly to the region’s desire to ensure Dubai is the major international travel hub, linking the Middle East with Asia, Europe, North America and Australasia.
In addition to this invaluable contribution to the region’s vision of where it wants to be, unlike the wider airline community, Emirates is also able to boast a profitable return on its business. Whilst the dust may not have settled just yet, it is highly unlikely that the Dubai government will be keen to risk using such a valuable, flagship asset as a bargaining chip. On a wider note, as with any business, the shareholders have a say in directing their company’s business. However, a point worth making is that there are opportunities for the regional carriers to seek ways in which to improve synergies, creating strategic partnerships and alliances to improve network coverage in order to better serve the community and avoid duplication, whilst driving valuable efficiencies and improvements in environmental performance.
Whilst the shifts across the economic landscape over the last 18 months have been seismic, highlighted by the recent news from Dubai World, and are a keen reminder against complacency, the development of aviation within the region is built on more solid foundations and looks set to continue with an overall more positive growth trend.
