Originally Posted by
Mr_Ed
If you look at Dubai's history it has a tendency to make bold decisions around future demand (see Jebel Ali port and the new Maktoum International Airport for example). They look 20-30 years ahead and are often prepared to take short term hits as a result. So I wouldn't be surprised if they maintained their high growth approach.
On the other hand they have been devasted by the collapse of the oil and gas industry in the Middle East and the stalling regional economy as a whole. So much of their premium traffic comes from regular business travellers and well off local nationals that the cost savings companies and individuals are now implementing has really affected them in a bad way, especially given the high margins regional travel has.
I definitely agree that Dubai has a history of longer term projects, but I don't think EK and Jebel Ali are comparable.
Jebel Ali was built in response to Port Rashid's success and to try and relieve pressure from it. It was not really a success story until the 90s when the government had to incentivize shipping lines to use Jebel Ali over Port Rashid, and the firing of the management contracts at both ports (and the creation of Dubai Ports Authority).
In fact, imho, the success of Jebel Ali is more about the success of the Jebel Ali Free Zone (freedom from municipal laws, ownership rights etc.) attracting companies to set up business there which the government could charge fees/rent to, rather than the port itself.
The problem for EK is that its "infrastructure" - the hard product, the connecting experience, etc., - does not seem to be attracting customers as well as it was before, and that EK cannot really afford short term hits because it is highly leveraged, with future commitments in the next couple of years (i.e. aircraft deliveries).
I think that means a decision has to be made at the ICD level whether they are going to ride it out and try to mitigate losses, or change strategy (with the capital investment that would require - i.e. more debt).