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Emirates’ $15 billion vote of confidence

Emirates Airlines is investing a staggering $15 billion in air fleet expansion, part of Dubai's bid to reach a target of 15 million annual visitors by 2010.

Emirates Airlines has just revealed how it plans to spend around US $15 billion on air fleet expansion in the next decade. In back to back press conferences this morning, His Highness Sheikh Ahmed bin Saeed Al Maktoum, chairman of Emirates, announced an $8.4 billion deal with Airbus followed by a $6.6 billion deal with Boeing.

The bulk of the Airbus deal is made up of a firm order for 22 Airbus A380s, with an option for 10 more. That contract alone is worth around $7 billion. Emirates is also ordering three Airbus A330s, worth $415 million, and eight A340-660s, worth $1 billion.

Boeing is not, however, being left out of Emirates' ambitious expansion plans. Emirates has signed a letter of intent with the American aircraft manufacturer to acquire 25 Boeing 777-200 and 300 aircraft. The planes will be delivered between 2004-10.

Questions were inevitably asked about why Emirates is making the orders at such an uncertain time for the airline industry. Sheikh Ahmed said that Emirates and the Dubai Government remain committed to a target of 15 million visitors annually by 2010. Achieving such a target will only be possible with the new aircraft, he said.

“This is part of a carefully planned strategy reflecting the vision of His Highness [Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai,” said Sheikh Ahmed. “This is a difficult time, but our long term plans require us to plan ahead.”

The A380, Airbus’s forthcoming 550 seat-plus aircraft is particularly important in realising that 15 million visitor target, Sheikh Ahmed added. “The A380 represents the only way forward for an airline like Emirates,” he said, because of the lack of availability of new landing slots at major airports like Heathrow.

Sheikh Ahmed would not reveal specifically how Emirates intends to fund the acquisition programme. He spoke of the company’s expected natural revenue and profit growth, and did not rule out a further bond issue. A recent bond issue on the Dubai Financial Market raised AED 2 billion for the airline.

The agreements make Emirates the largest customer in the world for the A380 and amongst the largest for the 777. When the expansion programme is complete, Emirates will have a fleet of around 100 airplanes.

Sheikh Ahmed revealed that 5 new routes will be announced next year. Flights to North America are expected to begin in 2003, and this was one of the main reasons for the acquisition of the A380. Sheikh Ahmed said it was also, “likely” that Emirates will be a customer for Boeing’s planned Sonic Cruiser .

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