emirates Would you fly an airline thats collateral for a loan?

Reader Dawn writes:

My husband and I are flying to Australia in June via Dubai, business class on Emirates. It’s an anniversary trip, and we’ve been looking forward to being spoiled on what has sounded like a great way to fly. But now I read that the airline may go under because of the financial crisis in Dubai. Should I be worried?

No. I wouldn’t worry quite yet.

For starters, the airline is not going under. I don’t know where you heard that. There is chatter that the airline is collateral in a bailout of Dubai’s debt by Abu Dhabi. But even then, collateral doesn’t mean collapse. Far from it.

Emirates has built one of the best brands in global aviation, and it’s actually profitable. (Gasp!) There’s no evidence that the airline itself is in any financial trouble.

And even if it were collateral for another loan, and if it were taken over by creditors, it is implausible that it would just close shop. It’s too valuable as a brand. And did I mention that it’s profitable?…

And in a further effort to calm nerves, the airline has also restated its commitment to its aircraft order book. Recommitment in and of itself is really just talk, and hardly evidence of anything, but at least they’re not canceling orders.

So, Dawn, I wouldn’t worry about your tickets. And I would book on Emirates today, myself. Have a great trip.

How about you, wise and worldly readers? Would you fly Emirates in light of the Dubai crisis?

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9 Responses to “Would you fly an airline that’s collateral for a loan?”

  1. Oliver Says:

    Each and every major US carrier has a greater chance of going out of business…

  2. Mark Ashley Says:

    Oliver, your comment quite succinctly sums it up.

  3. nzm Says:

    Abu Dhabi doesn’t want to use Emirates Air as collateral on a loan – they want ownership! But if there’s anything that Sheikh Mohammed bin Rashid Al Maktoum (ruler of Dubai and vice-Pres of the UAE) will want to keep his hands on, it will be his precious airline.

    It’s about the only thing about Dubai that is profitable at the moment, so there are no worries about flying with them or keeping the tickets.

    Flying Emirates is a joy. I’ve flown in all 3 classes. Economy can be hit-and-miss depending on aircraft and crew (if the aircraft isn’t fitted with their superior ICE entertainment system, then it can be a long trip, and if you get recent trainees, the cabin service can be a bit lax), Business Class is wonderful, and First Class is fantastic. The airline is also one of the few remaining in the world which gives out very decent on-board cosmetic bags filled with great goodies. The bags are very usable after the flight too!

  4. Allan Says:

    I’ve flown Emirates out of LAX numerous times. I would fly that airline over any other airline (well, maybe except Singapore) in a heartbeat. I would live in a parked Emirates 777 if I could.

    Economy on Emirates has better service than Business Class on United or American.

  5. Merricks Barbados Says:

    I have to agree with Allan, above Emirates are the leading airline, have flown buisness and economy with them to Dubai from UK, all i can say is A M A Z I N G … as to living in a parked 777, umm i’ll have to think on that! :)
    Ally R.

  6. nzm Says:

    Stop the press.

    News just out of Dubai from a friend indicates that the local whisper around town is that Emirates is in talks with Etihad Air (the national airline of the U.A.E. and based in Abu Dhabi which is the capital city) for a buy-out.

    Apparently all is not as well as it seems with the Dubai-based airline. Non-ownership of most of their planes (i.e. leased) means that the balance sheets have looked better than they should. No assets = no liabilities.

    However, if Etihad do buy out Emirates, all flights will go ahead as planned, as Etihad would dearly love to have Emirates’ routes.

    Will post more as I hear more!

  7. Mark Ashley Says:

    A merger of Etihad and Emirates, with Etihad remaining in control, would not be a terrible outcome for consumers, frankly. The Etihad product is very, very well-regarded. I’ve never flown Etihad, but those I know who have — whom I trust — are very pleased.

    Thanks, nzm!

    Edited to add: I’m not sure the leased planes are a problem, per se, unless they really were including the planes as fully-owned assets on their books.

  8. nzm Says:

    Creative accountancy and lack of transparency is a global issue – but in Dubai, it’s an art-form! It wouldn’t be surprising if leased planes were on the books as assets.

    Other airlines would also slag off Emirates as having an unfair advantage when it came to profitability and airfare prices, as being government-owned in an oil-producing country, they were able to get cheaper fuel. That may or may not have been the case – who knows for sure, except for the owners and top men in the company, and they’re not going to tell!

    Etihad has always suffered as the smaller, lesser-known sister of Emirates, but has a great emerging brand, and stellar service too. Although established in 2003, it wasn’t until 2006 that Abu Dhabi began to focus on it, when it became apparent that Gulf Air (which at that time was owned by Bahrain, Oman and Abu Dhabi), as a company, wasn’t going in the direction that Abu Dhabi wanted it to go in. So they started building up Etihad.

    I still love Dubai and the U.A.E. and would move back there in a heartbeat, if the opportunity arose for us to do so!

  9. Joe Karcia Says:

    These are all just false rumors. To be honest, Emirates is highly profitable with this year reporting 400% + while Etihad yet to break even. So in real sense, if any merger to take place (if any), it is good for Emirates and Emirates will retain management control since they have marvelous experience.

    And I have traveled Emirates several times, its a pleasure. Regarding Dubai debt issues, it is nothing worse or better than most metropolitan cities. So don’t listen to media. Life still continues here and there are new developments being inaugurated as well.

    An Expat in Dubai – happy and loving it.

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