IPO talk dismissed by Sheikh Ahmed but more B777-300s could be on the way soon

Speaking to Arabian Aerospace at yesterday’s results presentation Sheikh Ahmed said “An IPO is not going to happen this year or next, beyond that I cannot say as is the decision of the government. But there is no need to do it.”

Sheikh Ahmed’s view was echoed by analyst Saj Ahmad of FBE Aerospace who said: “Given Emirates healthy cash balance, an IPO is beginning to look more of a faint hope as each year passes. There isn't a pressing need to launch an IPO and I wouldn't be surprised if this is the stance they hold until the turn of the decade.

“For those wanting to subscribe to an Emirates IPO, the wait will be a long one. Theoretically, Emirates could launch an IPO this year of they wanted to. That they do not need to or want to launch an IPO points to the fact that there is no intrinsic value for them to do so at this moment in time,” he said.

Sheikh Ahmed also shrugged off the issues over the political problems with Canada restricting access to the country from Dubai. He said that Canada represented a small market for Emirates so not the end of the world if the issue is not resolved, but he said he was confident that with the help of the politicians Emirates will be able to offer an increased service.

Despite saying how much the recent fuel price increases had hurt the airline – more than political uprisings –Sheikh Ahmed said Emirates has scrapped its fuel surcharge. “Emirates is not trying to take advantage of its passengers. When the fuel prices drips the surcharge is dropped,” Sheikh Ahmed said.

Analyst Saj Ahmad says this may be a short-term movement.

“Given the volatility in commodity prices, particularly oil, it would be irresponsible to rule out the possibility of further fare hikes this year,” he said   “All it takes is a strong run for oil prices to climb 5% or more and every airline, including Emirates will have to assess how they offset that cost - usually it's the fuel surcharge that moves - and given the ease at which it can be withdrawn, such instances will become the norm. Even if Emirates raises wholesale ticket prices as well, we're likely to see the airline rein in the amount it charges so as not to stifle demand.

  Saj Ahmad also believes Emirates will continue to buck the recent airline trend and remain profitable.

“Emirates will still emerge profitable in the forthcoming year - of that there is no doubt. The big question is whether the fall of in demand in the GCC and North Africa rescind enough to return and help the bottom line. Remember, this is an airline that is exceptionally well run and has turned a profit in every year but one since it was launched.”

While Sheikh Ahmed says that any orders for the airline will come at the Dubai air show later this year, Analyst Saj Ahmad says that is likely to be Boeing 777-300s. He sees three key challenges for Emirates over the next year or so.

“First, airplane deliveries, second regional competition and thirdly political moves against them. “ Ahmad said. “Airbus still hasn't managed to ramp up rates on the A380, therefore Emirates is at their mercy. Added to that is the near certain delays to the A350XWB, so again, Emirates will have to fulfill that shortfall somehow and I see them plugging this with yet more 777-300ERs. “Second, Qatar Airways and Etihad are competing for the same global traffic market while at the lower end, the likes of flydubai and Air Arabia provide excellent value for money as well as drive traffic away from traditional carriers. Thirdly, we have seen the likes of the Canadian Govt holding back on more slots for Emirates and the EU is continually whining about unfair competitive advantages that Emirates allegedly enjoys yet offers no tangible evidence to support such outlandish claims. It could be argued that the Airbus orders that Emirates has, are huge leverage tools - and we have witnessed this with the 22 extra slots afforded to UAE airlines just last week by France. All it takes is an Emirates threat to cancel orders and the Europeans are on the back foot. 

“Emirates will almost certainly add 777-300ERs to its fleet. It's a the backbone of their operations and they need more - particularly as the airline gears up the phasing out of older Airbus A330-200s and A340-300s. Emirates is unlikely to cancel any of its remaining orders, however, the near 100% likelihood of a lengthy A350XWB delay could force Emirates' hand at buying more 777s, especially because Airbus still has a litany of production issues that prevents them from ramping up output on the loss making A380 line.’