Dubai pledged financial assistance for state-owned Emirates as international airlines scrambled for government bailouts amid the global travel rout. The government will inject new equity into the carrier, one of the world’s leading long-haul airlines, during this “critical period”, Sheikh Hamdan bin Mohammed Al Maktoum, the crown prince, said in a statement on Tuesday.
Dubai is the latest government to intervene in the sector reeling from the coronavirus pandemic. The global airline industry will burn through $61bn of their cash reserves during the second quarter of this year, according to the latest forecast from its trade body.
IATA, the industry trade body, on Tuesday warned carriers are facing an “enormous cash problem” and face a net loss of $39bn in the three months to end of June. The cash outlook comes just a week after IATA warned the pandemic would slash airline revenues by $250bn this year.
Governments around the world have been launching rescue packages for the aviation industry, including a US stimulus bill that earmarked $58bn in loans and guarantees for US airlines. Singapore has put together a $13bn rescue package for its national carrier. Regional rival Qatar Airways has also said its cash reserves are running low and it would soon have to approach its government shareholder for assistance.
Sheikh Hamdan said Emirates was of strategic importance to the economies of Dubai and the United Arab Emirates, playing “a key role in positioning Dubai as a major international aviation hub”. Similar to other airlines, Emirates has been hit hard by global travel restrictions and reduced demand. Scheduled passenger flights were suspended last week from its home base at Dubai airport, which is usually the world’s busiest in terms of international passenger traffic. The airline has grounded much of its fleet, placed employees on unpaid leave and cut the salaries of its 105,000 workforce by up to a half
. Emirates, founded in 1985, has long defended itself against accusations of undue government assistance, most recently from US airlines that are now also seeking state support. Founded in 1985, Emirates is one of the cornerstones of Dubai’s services, trade and tourism-oriented economy, which is more exposed than its oil-rich neighbours to the economic fallout from the virus. The government and its related entities have debts of about 110 per cent of gross domestic product, according to the IMF. During the global financial crisis, the emirate turned to the UAE’s capital of Abu Dhabi to underwrite bailout loans to stave off a damaging default.
Regional airlines had already been facing headwinds, given growing competition, sluggish demand and geopolitical turmoil. Abu Dhabi’s Etihad has been reporting large losses. Emirates has denied reports that senior UAE officials were considering a merger of Emirates and Etihad. Bankers said Emirates and the Investment Corporation of Dubai(ICD), the emirate’s state holding company, have been holding talks with local and international lenders to arrange a support package. ICD declined to comment. ICD holds Dubai’s corporate crown jewels, including Emirates, as well as stakes in several UAE banks, such as Emirates NBD, Dubai’s largest lender. “Forget about fiscal deficits,” said one Dubai-based financier. “It’s time to throw the economic rule book out the window.”
Culled from Emirates website