Dubai Finacial problems: Fallout for EK
 

Due to Dubai's financial problems, restructuring of Dubai World, the ultimate owner of EK might possible result in a sale of the airline to raise cash.

http://www.telegraph.co.uk/finance/g...till-call.html

i dont think they have any intention to give up even a small piece of ek.

i'm sure they'd run to abu dhabi again if it came down to it.

That may be true, but Abu Dhabi has its own airline which happen to compete with EK.

The first things EK would have to do is to scale down the expansion and cut some of the already existing frequencies.

One of the defining points of this time round is that AD isn't supporting them as fully as they would need.

It's odd that this is being described as a shock though - the writing has been on the wall for quite a while.

As far as Emirates goes, an EK/EY merger does make a fair amount of sense. If they could run high speed transport from AD to the new Dubai airport, even more so - from downtown AD to the new airport probably isn't THAT much further than downtown Tokyo to NRT, for example...

That'd require a lot of pride swallowing, though.

...and for this very reason it won't happen.

It's a bit early to start predicting the fall of Emirates, but they will need to agree payment of the debt, and Emirates may well be used as security, though given that Emirates don't own very much - planes are leased not owned - any security would be against the brand. Interesting though... DNATA on the other hand...
It's a shock because Dubai kept saying that there was no problem, even though the man on the street when presented with very little information can see that a problem was on its way. If Dubai had admitted much earlier that there was an issue, the markets would have had more warning, and would probably said 'well, it had to happen, but it's not the worst thing on earth, now we can deal with it'.

Dubai is still very wealthy, and can probably take the strain of the debt, but they should have planned a little better for it, and then the world markets would not have reacted in the way that they have.

Dubai needs to be a little more open than it currently is, and needs to stop hiding behind glossy marketing - I can't see that happening in the short term. Unless big-bro Abu Dhabi steps in and forces its hand...

+1

I can't see the Al Nahyans agreeing to any sort of merger of EY with EK.

The rumours about how this is affecting EK have started... not worth repeating here I don't think, but would be interesting to hear if there has been an effect.

Well, rumour, and a persistent one at that, is that Abu Dhabi do have a stake - and it may or may not be a substantial one.

You may well be correct, however having been in Abu Dhabi and working closely with EY five years ago, I still don't think that if there is any assistance from the AD govt, it will be financial and not one that would impact on EY. It is my view, and only an opinion, is that EY would prefer to be a stand alone airline. They have the financial clout, why would they want to have any sort of merger with EK? Time will tell but I think EK is still financially sound.

They may well have no choice, or find it the lesser of the various evils with which they will be confronted.

However, if EK was put up for sale, I am sure there would be several other enthusiastic buyers in the queue ahead of EY.

It was my understanding that the last time Dubai approached AD about backing some debt, AD wanted to take control of some significant Dubai assets.

This included flagship items such as Emirates, Burj Dubai, etc. Dubai balked and approached Saudi Arabia.

Politically, AD didn't want this to happen so they backed down and gave up the cash without all the strings. It might be different this time around.

Abu Dhabi only gave Dubai half of what it had asked for, and through state-owned commercial banks rather than the Central Bank this time.

Totally agree, I would assume they would not and besides it would mean a huge climb down. AD could still invest in EK and use it as collateral without taking control.