Emirates-Etihad merger talk seems premature
Posted on 30 November 2008 with no comments from readers
The international papers are full of the rumors that either Abu Dhabi is demanding a stake in Emirates Airline for a debt bailout plan for Dubai, or making a merger with its loss-making carrier Etihad a condition for financial help to meet sovereign debts of $80 billion.
However, any seasoned Dubai observer would simply say that it is too early to comment. Clearly negotiations have begun between Dubai and Abu Dhabi about the impact of the global financial crisis, and it is Dubai that has fairly large debts while Abu Dhabi has none.
Win-Win
The logic for the richer emirate to inject capital into the commercial capital of the federation is obvious, and both will emerge winners from this process: Dubai will get its money and Abu Dhabi will get some excellent new investments.
Whether that includes Emirates Airline remains to be sorted out, and Dubai will be reluctant to give up the jewel in its crown. However, the name of its airline already suggests it is the national carrier, and streamlining the local aviation sector could make sense while at the same time paying for the massive fleet expansions now in progress.
Rival airlines would love to see Etihad and Emirates collapse into some kind of a mess of competing managements and differences over debt management. But that is not likely to happen. The sheikhs of Dubai and Abu Dhabi are the best of friends and are more likely to work as powerful partners than rivals.
April time-line?
On the other hand, if there is to be a re-jigging of ownership among the governments of the UAE it is not going to be a five-minute job. My hairdresser told me he had heard Abu Dhabi would have everything sorted out by next April, and he has been a good source of accurate rumor in the past.
The important thing to note is that the UAE has no net debt as a surplus nation, and is probably the best positioned country in the world to emerge from the present financial crisis not only with its commercial interests in tact, but better positioned for the future.
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