Emirates Airline considers IPO

EMIRATES Airline is considering a public flotation on the Dubai Financial Market, in a bid to raise cash to fund its ongoing expansion strategy.

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By  Anil Bhoyrul Published  April 24, 2005

EMIRATES Airline is considering a public flotation on the Dubai Financial Market, in a bid to raise cash to fund its ongoing expansion strategy. In an exclusive interview with Arabian Business, chairman H.H. Sheikh Ahmed bin Saeed Al-Maktoum said proposals for an initial public offering (IPO) had already been submitted to the Dubai government, which owns the airline. “We have one new aircraft coming every month for the next five to six years and that takes a lot of financing," said Sheikh Ahmed. “Whether we do an IPO is a decision for the government. We are always thinking about it but we haven’t taken a firm decision. It’s something we have looked at but I am waiting for the owner to make any final decision,” he added. With Emirates' new Airbus A380s to pay for, as well as new routes to the US, China and Europe, raising new money is still an issue for the carrier, despite its spectacular growth. Its fleet is now 73 strong but will grow to nearly 200 by 2012, with one new aircraft being delivered each month. It is also the world’s most profitable airline, and any flotation would give it a market value of several billion dollars. For the year to March 2004, Emirates' profits came in at US$476 million, a 74% rise on the previous year. In the six months following that, the airline's profits were US$236 million, a 40% jump. With an average yearly growth rate of 15%, Emirates now serves 77 cities in 54 countries. It has also ordered 45 of the new A380 superjumbos – a third of the entire order book. Last year Emirates raised US$500 million through a bond issue in Luxembourg, which was 25% oversubscribed. But with one new plane due to be delivered to it each month, the airline is now looking at other sources of finance. It has also suffered from increased fuel costs, which have doubled in the past four years. Sheikh Ahmed explained: “You know what has happened in the last year with oil prices. That has pushed the airline into a lot of costs. And when it comes to costs, somebody’s got to pay. Its good that it is a problem that is hitting everybody across the globe. I mean, no airline can escape this problem.” He added: “At the end of the day, whichever type of business you run, you have costs and you have profit margins. It's always the way — you have to keep your profit margin. And this is not something that is happening on a temporary basis. Okay, if fuel prices were only going to rise for one or two months then I would pay for it." In a wide-ranging interview, Sheikh Ahmed also defended the company's policy of adding fuel surchages to passengers' fares. “This is something that has been going on for sometime," he said. “Nobody can tell you today where oil prices are going. All we have seen is the prices go up. And I’m not going to pay for that.” Sheikh Ahmed also rounded on his critics, who have claimed that the company receives unfair subsidies from the Dubai government. “Yes, a lot of people criticise us," he said. “When you look at the aviation industry worldwide it’s a losing business. Every year it loses US$5 billion. So people think all airlines should lose money. They think we should lose money. And because we make money they find it strange.” Emirates has been at the centre of stiff criticism from rival airlines over the alleged subsidies. Air France has claimed the Dubai airline receives over US$500 million of savings by not having to pay any corporation tax. Other airlines have privately suggested that Emirates receives special rates on fuel, and government financial guarantees. Sheikh Ahmed rejected all the claims.

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