Dubai is unlikely to look to sell-off part of Emirates Airline soon, despite reports that one of the airline's founders has said the time may come when such a move would "make sense".
That's the verdict of an aviation analyst who spoke to 7DAYS yesterday, after the airline's executive chairman Sir Maurice Flanagan was quoted as saying that selling a share in the airline to investors could be on the agenda in the years ahead. Saj Ahmad, chief analyst at StrategicAero Research, said he didn't expect such a move any time soon.
The aviation analyst shares his thoughts below...
Q. How likely do you consider it that Dubai would sell a stake in Emirates Airline in order to raise funds?
A. At present, I don't think the Dubai Government will entertain any knee-jerk reaction by selling off part or all of Emirates to raise capital.Look at it this way - it didn't happen in the wake of Dubai's financial problems 2009, and now that traffic, tourism and the UAE economy is picking up momentum again, it's even less likely they need to look at the airline as some sort of cash-cow ready to be culled. There is plenty of liquidity in Dubai and a stake in Emirates being sold is a distant, not near term prospect.
Q. What kind of factors need to be weighed up before such a decision is taken?
There are far too many variables to list in their entirety but for Emirates to be sold off, there would need to be a big buyers market on an international scale. With capital markets in lucrative regions like the EU and USA still languishing and concern in Asia about too much airline competition chasing the same traffic, will investors really pluck up the courage to splash out on a Middle East airline?
You also need to consider Emirates itself. It has over $4 billion in cash alone. Does it really need more cash? That's not even taking into account marketable securities that would add another $2 billion to their financial war chest. There are airlines in Europe that are worth less than Emirates' cashstrength.
Q. What changes do you think would be in store for the airline if it was part-privatised?
This would depend on how much of the carrier is spun off and who buys it. There would likely be immense strings attached to any share sale so as not to dilute or remotely influence the current management team's running of the airline.
Assuming a stake was offered, I honestly do not think there would be any changes to the way that the airline was run. And why would you change it? Every year but one since 1985, Emirates has been profitable. There is not asingle full-service or low cost airline anywhere in the world that can attest to such excellent management. If it ain't broke, don't fix it.
Q. If the decision was taken to sell a part share in the airline, when do you think would be the best time to do so?
Again, this would depend on the prevailing economic conditions. While IPOs have been discussed before, the likelihood of it happening before the end of this decade appear remote-to-nil. There's no specific time to do any share sale - we're all in for a long, long wait.
Q. How attractive do you think the airline is to investors?
In a word - very.
While some in Europe and the USA and even Asia, love to hate Emirates because of its success, overshadowing their own failures - the fact is thatEmirates would reap in investors from all over the world and everyone with money would be vying for a piece of the action. That in itself will drive up its value.
Even individual investors would be attracted because the brand, company and global presence is so strong, it's hard to see where you can fault what Emirates has achieved in nearly three decades. It is epic.
Emirates too knows just what an asset it is - and they are doing astellar job of using that to their strategic advantage - not just for now, but for the long term. And their investment in their new marketing campaign, "Hello Tomorrow" is just the start of things to come.
© 7Days 2012
