Emirates Will Not Cancel Jet Orders

The panic over Dubai has seemingly spread to Emirates’ ability to induct airplanes into its growing route network – it’s a downturn, but don’t expect cancellations.

Emirates has (if I recall correctly) only ever terminated one firm order since its inception – and that was for the Airbus A340-600 - which failed on every conceivable level to set the air transport world alight – but in fairness, the entire A340 family before it set the precedent for that ominous accolade.

The airline still has the following number of jets to take delivery of (firm orders):

· 53 Airbus A380s

· 70 Airbus A350s

· 23* Boeing 777s

Yes, the outstanding orders seem high (in value and quantity) – but the Middle East is one region that is continuing to see sustained traffic growth. Despite the spate of “Dubai Disaster” stories slapped on the front page of every press publication from Los Angeles to Hanoi and beyond, Emirates hasn’t bitten off more than it can chew.

In the next 5 years, Emirates has to phase out no less than 68 older jets from its fleet.

Below is a list of what will need to be replaced:

· 29 Airbus A330-200s

· 8 Airbus A340-300s

· 10 Airbus A340-500s

· 3 Boeing 777-200s

· 6 Boeing 777-200ERs

· 12 Boeing 777-300s

Note that this list is incomplete and may well grow to feature early build 777-300ERs, which have become the mainstay and backbone of Emirates fleet and operations over the last few years.

Emirates are only taking 78 more airplanes than it has today – and over a number of years too. Some of the press would have you believe they’re all due for delivery overnight and that’s where the fallacy is behind the scourge over all things Dubai.

Lets be fair, its not the first time Bloomberg has erred in getting wrong commentary on a hot topic, especially one as controversial as airplane orders. Bloomberg’s commentator fails to acknowledge that the debt that Dubai World is saddled with has nothing to do with the airline, how its run or funded.

Noor Islamic Bank and Mashreqbank have provided millions in financing for Emirates – they won’t stop just because of the ongoing crises in the UAE. Further, these deliveries are spread out over a decade or more – the ability to absorb them is not as concentrated (time-wise) as some would believe, particularly as the A380 still has production issues and the A350XWB hasn’t even been built yet!

Emirates hasn’t even deferred any of its existing orders and a week into the “lets bash Dubai” festival is hardly verifiable evidence that money for them is an issue. The Dubai World headache is with other institutions that propped up a property market that has started to sink.

Emirates built its business model based on transfer traffic through and from Dubai International Airport and eventually through Dubai World Central Al-Maktoum International Airport.

Just eight hours flight time outside of Dubai, almost two-thirds of the world's population is within easy reach - part of the reason why Etihad Airways and Qatar Airways too have big orders yet to be fulfilled.

But of course, a guest on Bloomberg isn’t expected to know these things and will remain uninformed for when the next boom cycle arrives in the air transport industry – right around the time when the 787 and A350XWB dominate widebody deliveries – backed primarily by a significantly greater number of Sharia-compliant financial powerhouses offering backstop credit facilities for their procurement.

If the airplanes on order like the A350XWB, for example, fail to meet the mission requirements perhaps yes - but not because the non-cognizant proclaim it.

 

 

 

 

 

 

 

 

* As at October 2009