*Source: DTN News / Carol Matlack on November 27
(NSI News Source Info) DUBAI, UAE - November 28, 2009: As if Airbus and Boeing didn’t have enough to worry about already, the looming debt crisis in Dubai has cast a shadow
over a backlog of aircraft orders, worth more than $60 billion, from Dubai, Inc.
The biggest – but by no means the only – example is Emirates, Dubai’s government-controlled carrier. It has more than $30 billion worth of planes on order from Airbus, including 53 of the double-decker A380, for which Emirates is by far the largest customer. Emirates also has placed 70 orders for Airbus’s forthcoming A350 widebody. And Airbus has outstanding orders from state-controlled leasing outfit DAE Capital totaling about $12.6 billion.
No surprise, then, that shares in Airbus parent European Aeronautics Defence & Space Co. fell more than 3% on Nov. 26 when the Dubai government asked to postpone debt repayments.
Boeing is considerably less-exposed than Airbus to potential turmoil in Dubai, but it still has plenty at stake. Emirates has about $4 billion worth of Boeing 777s on order, while DAE Capital and low-cost carrier Flydubai have a combined $16 billion on order from Boeing. As U.S. markets reopened on Nov. 27 after Thanksgiving, Boeing shares were down 1.2%
Emirates, which in less than a decade has grown from obscurity into one of the world’s biggest airlines, has long said that it receives no government subsidies. Even so, the debt crisis could wreak havoc with its future. Travel to Dubai had already started to slump as the economy weakened earlier this year – although Emirates is cushioned somewhat because about 60% of passengers coming through its Dubai hub are on flights connecting elsewhere.
A scarier prospect for Emirates is that Dubai’s oil-rich neighbor, Abu Dhabi, might demand control of the airline as part of a deal to bail out its debt-strapped neighbor. Abu Dhabi’s state airline, Etihad, has ambitions to become a global player and turn the Abu Dhabi airport into a major hub.
If that happens, it’s unlikely Abu Dhabi would take delivery of all Emirates’ order backlog, in addition to the 100 aircraft it has ordered. Longterm market analyses by Airbus and Boeing predict that air travel in the Middle East will grow an average 6% to 7% annually over the next two decades, too little to absorb both carriers’ order books. And those estimates were made before the Dubai debt crisis.
The outlook for DAE Capital and Flydubai is worrisome, too. Both now have small fleets and have been counting on robust revenue growth to pay for new aircraft purchases. It could add up to a very bumpy ride for both Airbus and Boeing.
over a backlog of aircraft orders, worth more than $60 billion, from Dubai, Inc.
The biggest – but by no means the only – example is Emirates, Dubai’s government-controlled carrier. It has more than $30 billion worth of planes on order from Airbus, including 53 of the double-decker A380, for which Emirates is by far the largest customer. Emirates also has placed 70 orders for Airbus’s forthcoming A350 widebody. And Airbus has outstanding orders from state-controlled leasing outfit DAE Capital totaling about $12.6 billion.
No surprise, then, that shares in Airbus parent European Aeronautics Defence & Space Co. fell more than 3% on Nov. 26 when the Dubai government asked to postpone debt repayments.
Boeing is considerably less-exposed than Airbus to potential turmoil in Dubai, but it still has plenty at stake. Emirates has about $4 billion worth of Boeing 777s on order, while DAE Capital and low-cost carrier Flydubai have a combined $16 billion on order from Boeing. As U.S. markets reopened on Nov. 27 after Thanksgiving, Boeing shares were down 1.2%
Emirates, which in less than a decade has grown from obscurity into one of the world’s biggest airlines, has long said that it receives no government subsidies. Even so, the debt crisis could wreak havoc with its future. Travel to Dubai had already started to slump as the economy weakened earlier this year – although Emirates is cushioned somewhat because about 60% of passengers coming through its Dubai hub are on flights connecting elsewhere.
A scarier prospect for Emirates is that Dubai’s oil-rich neighbor, Abu Dhabi, might demand control of the airline as part of a deal to bail out its debt-strapped neighbor. Abu Dhabi’s state airline, Etihad, has ambitions to become a global player and turn the Abu Dhabi airport into a major hub.
If that happens, it’s unlikely Abu Dhabi would take delivery of all Emirates’ order backlog, in addition to the 100 aircraft it has ordered. Longterm market analyses by Airbus and Boeing predict that air travel in the Middle East will grow an average 6% to 7% annually over the next two decades, too little to absorb both carriers’ order books. And those estimates were made before the Dubai debt crisis.
The outlook for DAE Capital and Flydubai is worrisome, too. Both now have small fleets and have been counting on robust revenue growth to pay for new aircraft purchases. It could add up to a very bumpy ride for both Airbus and Boeing. 
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