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Emirates To Receive $2 billion State Aid Package
In the midst of massive layoffs and reorganizations of aircraft orders, Emirates has secured a bailout that will give the company some momentary peace of mind. An aid package of 7.3 billion dirhams, or about $ 2 billion, was granted to Emirates by Dubai’s government, which further reported in a document that it is ready to send more aid to the airline.
“Any additional support will be subject to the requirements of the airline and will depend on the impact and duration of the current situation of the Covid-19 pandemic,” the government’s statement said, per a Reuters report.
The details were not publicly discussed, as the information appeared in a prospectus for potential bond issuance by the Dubai government. Debt is one of the ways Emirates has been able to stay afloat over the past months, as it raised 4.4 billion dirhams in the first quarter of 2020.
Emirates was severely affected by the pandemic because its business model is based on the use of large aircraft and a hub & spoke system that allows it to transport passengers between the most important traffic nodes in the world. The industry anticipates that long-distance travel, which the airline relies on, will be the last to recover from the crisis, which is why Emirates is particularly threatened.
The Emirati operator reopened some scheduled passenger flights on May 21 after suspending most of its operations for almost two months. The airline is expected to expand its network to 80 destinations in September, CEO Adel Al Redha said. However, some routes have been axed: in Latin America, both Santiago de Chile and Buenos Aires have lost their connecting flights to San Pablo (Brazil) for the connection to Dubai.
Emirates has started the process of laying off thousands of workers to maintain liquidity amid an ongoing recession. The carrier is considering other ways to streamline the business. Following a request for cabin crew to take extended voluntary unpaid leave, analysts believe the company is considering further cuts.
The airline is also negotiating with Boeing on a redesign of orders for new wide-body jets, with a clear intention of reducing the 777X order for smaller and cheaper 787 Dreamliner aircraft. This change would severely impact the 777X project, as Emirates’ order is by far the biggest one for the aircraft.
Following an initial reduction from 150 to 115 777X, a further cut to this tally will deliver a significant blow to the aircraft’s projected backlog. The tally now stands in 309 orders, and it is highly unlikely for it to grow in the context that COVID-19 has created. Emirates also has an order for 50 Airbus A350-900 that at this point in time is likely to be reduced or dropped.
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