extramileage

Enjoy!

http://www.emirates.com/us/english/a...-rebuttal.aspx

eternaltransit

Bedtime? It's the middle of the day!

We pretty much covered most of the things in the infamous thread, but the Emirates pdf is quite comprehensive, especially about the fuel hedging. Turns out that EK did have enough cash to post all margin calls and the only time they didn't want to (but was able to if required), was when Morgan Stanley wanted 750M USD on deposit to prop up their liquidity position during the financial crisis time, and ICD happened to have 750M USD cash on hand to do so!

I'm actually surprised by the quite detailed rebuttal of all the points by EK. Much, much more convincing than the US3 publications, with sources and methodology. They even go into detail about their fuel purchases, leasing from DAE, airport and terminal construction finance across the world and fees - in fact, it is quite line-by-line as "promised" a few months ago. I was quite sceptical they would go into this kind of details, but there it is!

Also quite a lot of British snark - I think Tim Clark had a hand in drafting it personally

DYKWIA

Oh, come on, do you really believe anything that a muslamic airline would produce?

Of course they say they are not subsidised, but those of us "in the know" won't be fooled by the made up 'facts' in that document.

Nurse!!

m3red

Shame we could not have had this a few weeks ago! It was the longest and one of the most entertaining threads ever on this board but surely that would have killed it dead.

kuroko

Dont think so

lighthand

Nope the naysayer will not believe it, even if the US Gov did the audit themselves.

LE4603

I doubt it, am sure they would have said something along the lines of "ofcourse they are going to say that, but I know the facts... not that I'm going to back them up, but I know them, trust me".

rankourabu

Paging the self-declared millionaire 'industry expert'

lighthand

They just did.

"Emirates can submit as many pages as it wants," said Jill Zuckman, spokeswoman for the coalition of U.S. airlines and unions known as the Partnership for Open & Fair Skies. "Our investigation shows that these massive subsidies have allowed Emirates, Etihad and Qatar (Airways) to expand far beyond what market forces could ever support."

YuropFlyer

I thought FD1971 was "silenced" yet again

Xlr

I just did a brief reading through most of it (I haven't read the section on counter-allegations).

I expressed my interest in the fuel novation mystery in the previous thread, and their explanation seems reasonable.

Waiting for US3 to comment on the issued raised in this report.

extramileage

Oh the irony that a day later we hear that the US Gov't is investigating the big US airlines over possibly colluding to limit seat capacity. Good luck limiting OpenSkies.

avcritic

There is nothing new in this well prepared document. Just one more pdf after html, pdf, docx, pptx and print media.

Like I said in the past, repeating and rephrasing in different presentation formats and in perfect english is not going to move the needle, particularly for non-believers.

On the allegation of "Airport Infrastructure and User Fee", rebuttal is a non-answer answer. For long EK claimed "we pay same as others" now has a change of heart to "no two airlines pay the same"(which is actually industry standard practice based on ownership and airlines ATMs at a given airport).

Does it indirectly imply that they pay far less than others? Its a slip up.

eternaltransit

Nothing new? Are you joking - or indeed even reading the same document (http://content.emirates.com/download...ponse_Main.pdf) as the rest of us?

The only thing that doesn't change is the consistent EK position denying both the general and specific allegations against it - providing evidence and information to back up their response, using non-EK sources (e.g. citing their counterparties/using public information).

For everything else there is a wealth of new information published (and how is "using perfect english" even a relevant observation?).

Specifically:

- the allegation about fuel hedging: EK has 4 pages about the specifics of the transaction, the novation process and the reasoning behind it (and compares to similar justifications by DL) as well as confirming Morgan Stanley being the counterparty (new information), the hedges were not settled at a loss (new information), that EK either did (using cash or credit) post all margin calls or when ICD did, that EK at the time could have done so, that EK sent dividends to its owner matching any losses that its owners took on specific hedges settling (new information) and that in the end EK was out 100 million USD on lost profits by not owning the trades at maturity (new information).

In short, there is a lot of new information in there about the trades (which we noted previously would be very interesting to see to make an evaluation). None of what they publish is inconsistent with how the over-the-counter derivatives market works.

- EK states that they did not have loan covenants in place and that collateral for the derivatives trades did not require them to be in cash instruments only (new information) - the Anderson report assumed that there would be loan covenants and that only short-term cash would be allowed to meet a margin call. Clearly anyone in finance at that level on FT could tell you that is not accurate - it depends on the two counterparties to the trade.

- EK publishes new specific information about trades alleged to not be at arms length: specifically, fuel purchases and sale-leaseback. They publish the fuel costs charged by ENOC and 4 other supplies on a 3,6 and 12 month average basis (new information) and conclude that ENOC is in-line and sometimes more expensive than the others.

- The sale-leaseback transaction is detailed, and new mention of a non-UAE, non-EK affiliated entity (Allco - now a victim of the financial crisis!) detailing the sale prices to DAE and Allco and showing them to be comparable (new information)

- As to the airport use fees and airport servicing charges, the dnata-EK services were analysed by a presumably independent CPA in New York http://content.emirates.com/download.../Exhibit_4.pdf and found to be at market rates (new information). The justification for not publishing into the public domain confidential commercial data (i.e. contract prices) is, as discussed in the other thread, I think, acceptable. This is a good compromise.

- Airport fees: I'm not sure your conclusion that "Does it indirectly imply that they pay far less than others? Its a slip up." is valid. EKs position has always been that it pays market rate (for its circumstances) and doesn't benefit from any support beyond being a large operator at an airport: that is, it is natural for a major customer at a facility, anywhere, to be given preferential terms in the course of business. The allegation is that if another company the size of EK with operations at DXB of a similar scope, but wasn't owned by Dubai or the UAE, they wouldn't get such a deal. This is of course denied by EK.

There is new information however, in that it is not illegal for airports to not cover their costs from user charges, under all the international agreements that are relevant in this case. They also publish and bring to light the practices by major US airports in offering airport charge incentives. Whilst it may not technically be new, as it is public information, it has been brought to light in an more accessible way. There is also new information in the charging policy for airport fees. Obviously we don't know if EK gets a rebate due to their heavy use. Would a rebate cause EK to cease being a going concern? Doubtful, but a question that needs to be asked.

None of this of course is a comment or opinion as to strength of EKs arguments in their response. But to say there is nothing new and to say that they are simply "rephrasing" things is just not correct and verging on disingenuous. They are not just rephrasing, they are elaborating and offering more information that they provide sources for. This is clearly "new".

lighthand

I would have thought that by posting a detailed rebuttal, complete with sources, calculation methodology and third party findings, was something that no one in the industry has ever done.

To be very frank the point-blank denial of fact by OFS, seems to imply that they think all members of the paying public cannot read/understand financial terms and methodology.

I was one of those who voted undecided in the old tread. But in light of this new information (which btw I think is too much information), I believe EK really is not a scam.