Emirates gets $2 billion injection from Dubai govt

Dubai - The global aviation industry has been hit by the drop in passenger traffic following the Covid-19 pandemic.

Dubai's flagship airline Emirates has received Dh7.3 billion ($2 billion) from the emirate's government as it faces a cash crunch caused by the Covid-19 pandemic, a bond prospectus seen by Reuters shows.

Industry insiders and aviation sources said the airline's business model received a severe setback due to the slump in travel demand in the wake of the coronavirus pandemic. The airline was left with no choice but to ground its fleet comprising Airbus A380s and Boeing 777s as its long-haul travel suffered a major hit and is expected to be the slowest to recover from the crisis.

The government provided Dh7.3 billion to the airline it owns after Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Dubai Executive Council in March promised equity to Emirates to see it through the crisis, the prospectus shows.

No such injection has been publicly announced by the government or the airline. The details were disclosed in a prospectus for a potential bond issuance by the Dubai government.

"Any further support will be subject to the airline's requirements and will depend on the impact and duration of the ongoing Covid-19 situation," according to the document.

The department of finance declined to comment. Dubai's state media office and airline did not immediately respond to Reuters requests for comment.

Emirates in May said it planned to raise funds to manage the impact of the pandemic. It raised Dh4.4 billion in the first quarter.

"Aviation has been one of the worst-hit industries during the pandemic and Emirates has cut jobs as it tries to manage the crisis," sources have said.

Saj Ahmad, an analyst at London-based StrategicAero Research, said Emirates, like countless airlines across the world, is heavily impacted by the decimated fall in demand due to Covid-19 and other international travel restrictions.

"Emirates still has a robust cash position, but given the level of refunds that have been issued since March 2020, there's no question that its cash reserve will have been hit," Ahmad told Khaleej Times on Monday.

"Critically, with no imminent sign of travel resumption being the way it was prior to the pandemic, like other rival airlines, Emirates getting a cash boost is not out of the ordinary and indeed, if further funds are required, it's a pretty safe bet that the Dubai government will provide whatever is necessary to keep the carrier in a cash-rich position," he said.

At the same time, he said Emirates has been rationalising its fleet, staff levels and bolstered its cargo operations. In concert with flydubai, Emirates is now serving over 100 destinations again but its evident that demand is still weak and yield is weaker still.

"The bond issuance for additional funds for Emirates will no doubt assist the airline going forward as bookings show some recovery depending on the city pairs served, but any sense of normality for the entire aviation industry is still way off in the horizon," Ahmad concluded.

muzaffarrizvi@khaleejtimes.com

With inputs from Reuters