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Could EK Go Bankrupt?  
User currently offlineFlydubai From United Kingdom, joined Aug 2005, 162 posts, RR: 0
Posted (9 years 2 months 4 days 3 hours ago) and read 7336 times:

Emirates, the Dubai based airline is currently one of the world’s fastest growing airlines with a fleet of over 70 aircraft and a massive expansion pack. It currently seems very unlikely that they could go under, but EK have ordered almost 100 wide body aircraft including 43 passenger A380 jets and many people say this is simply too many.

If so what are the future consequences for EK?
Is bankruptcy a possibility?

Hamzah

43 replies: All unread, showing first 25:
 
User currently offlineTrekster From , joined Dec 1969, posts, RR:
Reply 1, posted (9 years 2 months 4 days 3 hours ago) and read 7307 times:

Its strange how the carriers in that part of the world seem to be expanding VERY FAST.

During my first a.net meet last april, i had never heard of Eithad. First i knew of em was a big sign saying they were coming soon. Now look, they have ordered A380's and alot of other heavy jets


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 2, posted (9 years 2 months 4 days 2 hours ago) and read 7251 times:

If the rumors are correct, another large order for A350's is expected at the Dubai Air Show.


"When all is said and done, more will be said than done".
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 3, posted (9 years 2 months 4 days 2 hours ago) and read 7236 times:

Quoting Lumberton (Reply 2):
If the rumors are correct, another large order for A350's is expected at the Dubai Air Show.

Please modify my previous post to a "rumored large wide body order". Just realized that my previous post could be flame bait.  Wink



"When all is said and done, more will be said than done".
User currently offlineLhrmaccoll From , joined Dec 1969, posts, RR:
Reply 4, posted (9 years 2 months 4 days 2 hours ago) and read 7206 times:

Hmm and you ask yourself where the money is coming from?
Government. They are sitting on a massive oil field, so finance isn't a problem, neither is the 'oil prices' that you hear of. The whole of the UAE is funded off oil money, there is no way they will be facing financial crisis, they are too profitable in their current position.
Alex


User currently offlineFlydubai From United Kingdom, joined Aug 2005, 162 posts, RR: 0
Reply 5, posted (9 years 2 months 4 days 2 hours ago) and read 7141 times:

Quoting Lhrmaccoll (Reply 4):
They are sitting on a massive oil field, so finance isn't a problem

Dubai's oil will run out in the next 20 years and are not sitting on a 'massive' oil field. It’s relatively small compared with Abu Dhabi's.

Hamzah


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 6, posted (9 years 2 months 4 days 2 hours ago) and read 7126 times:

Quoting Flydubai (Reply 5):
Dubai's oil will run out in the next 20 years and are not sitting on a 'massive' oil field. It’s relatively small compared with Abu Dhabi's.

Hamzah

Hamzah:
Everything I've read supports what you noted in your post and EK is adamant that they do not get cheap oil. Having said that, they must have one h*ll of a business plan! I realize that this has been discussed "ad nauseam", but the big question remains: what will the competition do when they try to dump all this capacity on the market?



"When all is said and done, more will be said than done".
User currently offlineGeorgiaAME From United States of America, joined Aug 2005, 985 posts, RR: 6
Reply 7, posted (9 years 2 months 4 days 2 hours ago) and read 7088 times:

Yes they can go bankrupt, same way Saudi Arabia can run out of oil.

I'm in complete agreement with Lhrmaccoll

These are mini fiefdoms, with more money than God, trying to enter the 20th century using high tech toys to do so. I would say the analogy would be a KLM or the old Swissair during the 1950s, essentially huge international only carriers based in a postage stamp sized countries with no real need for internal air service. And they did a very good job at it for a long time, until international economic realities changed, and alas, so did the airlines. Just how many oil executives need transport in an A-380 on a daily basis for the foreseeable future? How many tourists are going to be attracted to the beaches of politically unstable Gulf States with a potential terrorist lurking behind every oil storage tank? How many Indians need to be transported between London or NYC via a non Indian carrier? Answer: time will tell. I think the real question should be, could an EK actually turn out to be a viable airline for the long run rather than how many airplanes can they buy? My gut feeling is no. And until they are willing to fly to the real economic powerhouse in the region, Israel, I have no need to fly with them.



"Trust, but verify!" An old Russian proverb, quoted often by a modern American hero
User currently offlineYUL332LX From Canada, joined Feb 2004, 820 posts, RR: 1
Reply 8, posted (9 years 2 months 4 days 2 hours ago) and read 7079 times:

According to Goldman Sachs, EK makes the same returns as the European carriers on prices 45% lower.

A lot of airlines will go bankrupt before EK...



E volavo, volavo felice più in alto del sole, e ancora più su mentre il mondo pian piano spariva lontano laggiù ...
User currently offlineZSOFN From United Kingdom, joined Jun 2005, 1413 posts, RR: 5
Reply 9, posted (9 years 2 months 4 days 2 hours ago) and read 7044 times:

State supported airlines do not last. This is being discussed here (Don't want to blow my own trumpet!):

Hard Times: US Vs European Approaches (by ZSOFN Aug 21 2005 in Civil Aviation)


User currently offline7LBAC111 From United Kingdom, joined Jul 2004, 2566 posts, RR: 35
Reply 10, posted (9 years 2 months 4 days 2 hours ago) and read 7036 times:

Quoting Flydubai (Reply 5):
Dubai's oil will run out in the next 20 years and are not sitting on a 'massive' oil field. It’s relatively small compared with Abu Dhabi's.

Aren't both these cities in the same country. Therefore how could oil in one city run out before the others. Jeez.

7LBAC111



Debate is what you put on de hook when you want to catch de fish.
User currently offlineZSOFN From United Kingdom, joined Jun 2005, 1413 posts, RR: 5
Reply 11, posted (9 years 2 months 4 days 1 hour ago) and read 6998 times:

Quoting 7LBAC111 (Reply 10):
Aren't both these cities in the same country. Therefore how could oil in one city run out before the others. Jeez.

The UAE is made up of 7 "Emirates" which are seperate administrative regions. I don't know quite how autonomous they are though.

Quote:
7 emirates (imarat, singular - imarah); Abu Zaby (Abu Dhabi), 'Ajman, Al Fujayrah, Ash Shariqah (Sharjah), Dubayy (Dubai), Ra's al Khaymah, Umm al Qaywayn

-from the CIA website

And Wikipedia

[Edited 2005-08-22 00:04:19]

User currently offlineBA From United States of America, joined May 2000, 11153 posts, RR: 59
Reply 12, posted (9 years 2 months 4 days 1 hour ago) and read 6989 times:

Oil and natural gas exports account for only 30% of the United Arab Emirates' GDP and it is getting less and less year by year as the country develops its tourism and investment industry. They have never been a major oil exporter like Saudi Arabia and Kuwait are (and Iraq once was).

Only time will tell the fate of Emirates and the other booming gulf carriers, however to say that oil is funding all these carriers and that once oil runs out, these gulf states will go back to being bedouins is a very innaccurate and black and white forcast..

Quoting 7LBAC111 (Reply 10):
Aren't both these cities in the same country. Therefore how could oil in one city run out before the others. Jeez.

Yes, but they are each in their own emirate (state) and each have a very high degree of autonomy. Infact, the emirate of Abu Dhabi and the emirate of Dubai compete with eachother very heavily.



As FlyDubai said, the Dubai's oil reserves are very minimal and are expected to run out by 2016. Having said that also, they export very little of it. They mostly use it to supply themselves. Abu Dhabi is the oil powerhouse in the country and is responsible for sharing its oil with the rest of the emirates and also at the same time, exports it.

Dubai however, does have large natural gas reserves.

Regards



"Generosity is giving more than you can, and pride is taking less than you need." - Khalil Gibran
User currently offlineBA From United States of America, joined May 2000, 11153 posts, RR: 59
Reply 13, posted (9 years 2 months 4 days 1 hour ago) and read 6980 times:

Quoting ZSOFN (Reply 11):
I don't know quite how autonomous they are though.

They are very autonomous, especially Dubai which has a tendency to bend the rules...

Regards



"Generosity is giving more than you can, and pride is taking less than you need." - Khalil Gibran
User currently offlineZSOFN From United Kingdom, joined Jun 2005, 1413 posts, RR: 5
Reply 14, posted (9 years 2 months 4 days 1 hour ago) and read 6963 times:

Quoting BA (Reply 12):

I see - good informative post that!


User currently offlineFlydubai From United Kingdom, joined Aug 2005, 162 posts, RR: 0
Reply 15, posted (9 years 2 months 4 days 1 hour ago) and read 6960 times:

Quoting 7LBAC111 (Reply 10):
Aren't both these cities in the same country. Therefore how could oil in one city run out before the others. Jeez.

Dubai and Abu Dhabi are both states which are very independent; however all seven states of the UAE are ruled by a supreme council if that's what you mean.

Hamzah


User currently offlineFlydubai From United Kingdom, joined Aug 2005, 162 posts, RR: 0
Reply 16, posted (9 years 2 months 4 days ago) and read 6858 times:

Quoting GeorgiaAME (Reply 7):
could an EK actually turn out to be a viable airline for the long run rather than how many airplanes can they buy?

Good question.

Hamzah  Smile


User currently offlineExPedia From Canada, joined Aug 2005, 49 posts, RR: 0
Reply 17, posted (9 years 2 months 4 days ago) and read 6830 times:

I believe that EK and many other "3rd country" carriers servicing Europe in the West and Asia/Pacific in the East stand to have tremendous futures - although CAX outpacing demand has killed many companies, and not just airlines so nothing is certain.

Why? China.

More than 1b people looking to go somewhere, and only now being able to do so. EK strikes me as being just about as well positioned to service this new business as anyone.

[Edited 2005-08-22 01:32:28]


-- ExPedia
User currently offlineHZ747300 From Hong Kong, joined Mar 2004, 1689 posts, RR: 1
Reply 18, posted (9 years 2 months 4 days ago) and read 6807 times:
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I don't know if they will go bankrupt, but there is not enough room for that much capacity on the market, prices would have to become dirt, dirt cheap. Yields would drop dramatically.

For a long time, Saudi Arabian Airlines, then Saudia, was the glutonous airline of the Gulf. I remember taking several 747 flights from the Kingdom to various points in Africa and the JFK flight with no more than 30 or so people. Now in the summer, the JFK was always full. I think the realities of the business caught up to Saudia, and when my Dad went back to work for them (1999-2005), they had changed to a more smartly run airline--no more overcapacity, planes actually left on time (there's a thought!), and routes that make much more sense.

I still don't know how they are going to place 40 (I assume 3 operational spares) on the network. I understand in the technical sense replacing two 772 flights with one A380, but to use them as additional capacity--that's going to be interesting to watch.



Keep on truckin'...
User currently offlineKaitak744 From United States of America, joined Jul 2005, 2392 posts, RR: 3
Reply 19, posted (9 years 2 months 3 days 23 hours ago) and read 6740 times:

Well, to simplify things, their future fleet (if the A350 order goes through) will be:

40+ A350-long thin routes or short haul
10+ 777-200LR-long thin routes
30+ 777-300ER-long medium routes
45 A380-long high capacity routes


User currently offlineLTBEWR From United States of America, joined Jan 2004, 13140 posts, RR: 15
Reply 20, posted (9 years 2 months 3 days 22 hours ago) and read 6664 times:

I would say they are at far less risk of bankruptcy than most other airlines. For one thing that EK won't have to worry about is something that affects almost all airlines - financing costs. In effect EK's aircraft are being purchased for cash, so the costs of leasing overhead, financing and interest costs that other airlines have to pay, doesn't exist for them, something rare for the industry. With very modern fleets, they also save on MX costs. Yes, they may overexpand their capacity, run into MX, safety and security issues as well as political and economic situations and so on that may affect them in the long run, but not for many years.

User currently offlineGEnxPower From United States of America, joined Apr 2005, 121 posts, RR: 0
Reply 21, posted (9 years 2 months 3 days 21 hours ago) and read 6618 times:

Thanks for the info BA. Informative.

Just a quick question. I know EK ordered 40+ A380's, but I also heard they leased 2 passenger A380's from ILFC. Is that right? Can someone confirm it?

Now, why would EK want to do that when they are going to have 45 of their own? Is it to get delivery earlier? Thanks for answering, guys.


User currently offlineFlydubai From United Kingdom, joined Aug 2005, 162 posts, RR: 0
Reply 22, posted (9 years 2 months 3 days 14 hours ago) and read 6419 times:

Quoting GEnxPower (Reply 21):
Just a quick question. I know EK ordered 40+ A380's, but I also heard they leased 2 passenger A380's from ILFC. Is that right?

Its right. http://en.wikipedia.org/wiki/Emirates

Hamzah


User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 23, posted (9 years 2 months 3 days 13 hours ago) and read 6384 times:

Quoting GeorgiaAME (Reply 7):
Just how many oil executives need transport in an A-380 on a daily basis for the foreseeable future?

Oh I didn't know EK ordered 45 A380 for transporting oil executives...thanks for the update!

Quoting GeorgiaAME (Reply 7):
How many tourists are going to be attracted to the beaches of politically unstable Gulf States with a potential terrorist lurking behind every oil storage tank?

I love American paranoia combined with a total lack of knowledge. Well, not having any of these annoying paranoid and clueless people down there is one reason why I love vacation in Dubai so much...

And btw, on entering the UAE I'm not given a feeling of being a criminal as it happens in certain other countries thanks to senseless pictures and fingerprints...

Quoting GeorgiaAME (Reply 7):
And until they are willing to fly to the real economic powerhouse in the region, Israel, I have no need to fly with them.

Hey, that powerhouse status must be the reason why Israeli airlines have been booming and expanding like crazy lately...

Btw, number of terrorist attacks in the UAE: 0 (zero). Israel: Countless. No further comment required.


Regards
Udo

[Edited 2005-08-22 12:02:33]

User currently offlineB6sea From United States of America, joined Aug 2005, 340 posts, RR: 0
Reply 24, posted (9 years 2 months 3 days 13 hours ago) and read 6383 times:

ok so here's what I think, they could go bankrupt, i mean... anything's possible right? but I doubt they will because of the massive development plans the emirate of Dubai has... I mean if you look at it, Its crazy... but I've been reading articles in magazines such as conde naste, travel and leasure... saying that hotel occupancy is in the 90% range... even disneyworld doesnt have that sooo if the demand is there then there's no bankruptcy on the horizon... also I believe that the opening of the Chinese and the Indian markets will play a MAJOR roll in Emirates' future

25 Fly2CHC : I agree that at first view 45 A380s seems a lot, howevr it was only a matter of years ago that we were in awe of SQ's order for 77 B777s. They seem to
26 Lemonsoda : A useful way to disentangle the challenges EK faces, and hence, arrive at more interesting answers to the real question of this thread. What intrigue
27 ILOVEA340 : Something that rarely gets mentioned here is that the 9/11 attacks really helped the economies of the Gulf region. The money which was originally inve
28 Adria : there is no reason why EK should go bankrupt in the let say near future. And if you think that the government is such a big help for EK to expand in
29 ORDagent : I spoke to my EK sales rep on a visit to the office last week. Per her they are having very high load factors and can't keep up with it. They hope to
30 Post contains images Udo : Come on, sarcasm hasn't yet killed anyone. Btw, which countrymen are you talking about? If you disagree with anything I said you are free to criticiz
31 Cloudy : The success of Emirates is not based on either cheap oil or government subsidies.These factors exist only in the imaginations of those who have not lo
32 LH477 : Israel has good fundamentals....but in that region real economic powerhouse, please....With the likes of Saudi Arabia, Kuwait, UAE, Qatar, Baharain,
33 Lemonsoda : Yours. What you call sarcasm I call posturing. I am not. This is not a private argument. Your choice of themes is the issue. Make an effort to get yo
34 B6sea : Don't kid yourself, Israel is a major economic power, especially in that region with much money flowing in to the country from all parts of the world
35 Col : I looked at the UK pax figures for Dubai in July 2005 v 2004, and this should give you some ideas on how they are doing, and why they are short of aer
36 EKGOLD : Correct. we have daily trouble getting rooms for visitors to Dubai unless booked many weeks in advance. Most 4* and above hotels are reporting greate
37 Flydubai : The demand for BHX-DXB is very high. Most of the flights are fully booked. Weeks before the second daily flight was introduced EK were flying a 773 i
38 LH477 : I don't doubt that Israel is an major economic power in the region. I am simply refuting the posters claim of who the real economic powerhouse in the
39 Toering : Quick question: How many of the A380 orders are from airlines in the same region as UAE?
40 B6sea : sorry, I misread "THE economic powerhouse" as "AN economic powerhouse"... sorry about the misunderstanding... also for GeorgiaAME: it's not emirate's
41 Flydubai : I think they leased or bought their A340-300's from SQ. Hamzah
42 Post contains images David_itl : I've played around with the provisional flying programme and worked out loads for the three airports based upon the information I had to hand. GLA le
43 LH477 : No problem mate.....
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