Emirates Airline faces unprecedented economic turbulence
Posted on 10 June 2009 with no comments from readers
Emirates Airline is considering delays to delivery of its new planes as record passenger numbers can not compensate for falling passenger revenues, its president Tim Clark told Reuters on the sidelines of the International Air Transport Association meeting in Kuala Lumpur.
He said the largest carrier in the Middle East is not delaying any deliveries this year but might cut aircraft deliveries over the next two years depending on market conditions. However, he stressed that the slowdown in deliveries would not last for any longer than this, and that the airline had funding in place until mid-2010.
$52bn expansion
The airline has 160 Boeing and Airbus aircraft on order worth $52 billion and has deliveries scheduled right through to 2018 by when the fleet will stand at 196 passenger planes compared to 126 today.
This fiscal year there are 18 new aircraft due to arrive, including six A380 super jumbos. Emirates has ordered a total of 58 A380s and 76 Boeing 777-30ER jets.
Emirates is hoping to stay in the black for its next financial year, added Mr. Clark. The Dubai Government owned airline is carrying 13 per cent more passengers than a year ago but with seat revenues down by 25 per cent.
This contrasts with the global industry outlook with experts predicting combined losses in the year ahead of around $9 billion. Aside from the global financial crisis and its impact on business travel, fuel costs are also rising and swine flu is having an impact, particularly in Japan.
Cabin pressure up
If the global economic recession continues – and with trade slumping around the world more rapidly than in the 1930s that does seem perfectly possible – then airlines will indeed be facing unprecedented economic turbulence that could not only derail the best laid expansion plans but lead to a wave of mergers and consolidation.
Dubai Government has strongly denied talks with Abu Dhabi based Etihad to create a single national carrier, and Qatar Airways is also preceding with a huge expansion of its fleet. But too much capacity in any industry does usually result in rationalization and consolidation and it is hard to see how the huge costs of the airline industry will be able to stand up to this pressure in a long recession.
