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Dubai Aerospace Enterprise and Emirates: Balancing the Books

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Angus Taverner

Director- Global Affairs

Tag: Dubai Geostrategic Affairs UAE
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News at the Berlin Airshow this June that Emirates Airlines had signed an order for a further 32 Airbus A380sthe new leviathans of long haul travelcaused considerable excitement and even disbelief in some quarters.  Assuming no delays, this will bring Emirates fleet of the Airbus flagship to 90 by 2017.  Given the financial challenges that Dubai has faced over the past 2 years, analysts seemed confounded by this fresh order worth an estimated $18 billion.
More surprises were in store at the subsequent Farnborough Airshow in the UK where Emirates announced an order for another 30 Boeing 777-300 ERs, the wide-bodied aircraft on which Emirates transoceanic successful growth has been largely built.  The total Boeing/Airbus orders were estimated to be worth about $25 billion, an amount nearly the same as the debt that Dubai World is struggling to re-schedule.
However, behind the headline grabbing news, a specialist international newsletter called AirFinance Journal quietly revealed that the new Emirates orders were not really new contracts from Dubai at all but instead represented a re-balancing of the books for Dubais other venture into the aerospace sector, Dubai Aerospace Enterprise (DAE).  Over the last 3 weeks it has become apparent that the Emirates decisions do rather directly match DAEs reduction in orders from the two major aircraft builders.  DAE had had a strategic plan to build an aircraft leasing division with its orders, now largely cancelled, of 15 Boeing 787 Dreamliners, 10 Boeing 777 300s, 18 Airbus A320s and 7 Airbus A350s.  Emirates orders have been more than compensated the manufacturers.
To some critics, this swapping underscores Dubais lack of commercial transparency and gives fresh ammunition to those who accuse Emirates of benefitting from covert state funding.  However, in the arcane world of aircraft acquisition, aviation analysts considered these decisions as welcome moves to rebalance resources and keep the industry stable.  This is not only because it takes pressure off DAE.  It also plays to strengthening the better established Dubai airline, Emirates.  It is also a subtle because the aircraft manufacturers themselves would rather not see aircraft being delivered to customers who may not be able to use them in a still uncertain market.  That would not only encourage negative perceptions of the aircraft themselves but also adversely affect the overall market and subsequent pricing.
What some may have perceived as a dubious example of commercial sleight of hand in fact seems to have been broadly welcomed by the aviation sector and especially by the worlds two main aircraft manufacturers.  Commentators are now largely agreed that the move makes eminent sense and should allow Emirates to expand further as planned without putting undue pressure on its less secure sibling, DAE. 

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