As the worldwide aviation industry continues to cope with erratic demand and government restrictions limiting air travel, the issue of bailouts is often broached with extreme care and as an avenue of last resort. Not so at Emirates, which has an ace up its sleeve that guarantees its survival: it is truly too big and too essential to fail.
Emirates: The Essential Airline
Speaking to FlightGlobal, Emirates’ President Sir Tim Clark explains this almost nonchalantly:
“The shareholder, Dubai, needs the airline – it’s critical to its existence. So they’re going to have to step up in the short term to help us out which they will do, no doubt. Then we’ll get through it and we’ll start putting cash back on our balance sheet.”
And he’s right. In this era, we talk often about bailouts on Live and Let’s Fly, but there are few nations where one airline is so absolutely critical to the economy that it would be crazy to even consider letting it fail.
Emirates is the prime example. No groveling on Clark’s part will be necessary. Indeed, Dubai has flourished with Emirates as its economic engine, a state-run airline model that has legitimately proved indispensable.
Clarks says Emirates will “probably need cash from the shareholder sooner rather than later,” but notes that it is “holding our own” thanks to increased cargo service.
This month about half of all daily operations are exclusively cargo sectors. For example, on August 11thoperated:
- 113 passengers sectors with cargo in the belly
- 27 sectors operated with freighter aircraft
- 75 sectors operated with passenger aircraft with only cargo in the belly
- 6 sectors with cargo cargo loaded on seats and in overhead bins
- 8 sectors with seats moved from passenger aircraft carrying cargo
But even with revenue showing unexpected resilience, Emirates is operating only 40% of its daily operations pre-pandemic (and that includes the new concentration of cargo flights). Without an easing of travel restrictions that will likely only come with a vaccine or widespread, rapid, reliable testing, Emirates will continue to operate at a loss.
There’s nothing like taking the pressure off dire economic times than knowing that your owner depends upon you for its survival. Dubai has been wise to diversify its investment portfolio beyond oil and Emirates has proved an economic engine that has brought wealth and status to the otherwise tiny emirate. With that comes a high degree of confidence that Emirates is too essential to fail because it has single-handedly made Dubai a global hub.