Rays of Light at Dubai Airshow Overshadowed by Debt Crisis

 - November 30, 2009, 10:17 AM

News from the international airshow circuit can be revealing and deceiving in equal measure. Two years ago, the 2007 Dubai Airshow generated a record-breaking $155 billion in orders. This year’s Dubai Airshow, held November 15 to 19, saw just $14 billion in new business announced. And then, less than a week after the show closed, world stock markets shuddered at the news that Dubai World–the government-backed holding company behind many high-profile property developments in Dubai–had told creditors and bond holders that it cannot honor repayment commitments, some of which fall due in December. Dubai World owes $59 billion–the lion’s share of Dubai’s total debt of $80 billion–and it now says that it must unilaterally defer repayment of $35 billion for at least six months. So Dubai’s entire state debt amounts to just more than half the value of orders placed in just five days at its 2007 airshow.

So severe has been the blow to Dubai’s credibility on global financial markets that some analysts have even suggested that Dubai will have to relinquish control of flagcarrier Emirates Airline to its neighboring emirate, Abu Dhabi, as part of a possible deal to ease its debt crisis. The Dubai government, which owns Emirates, has not commented on the proposition, but there is no doubt that the airline–by complete contrast with Dubai World’s apparently ill-conceived real-estate speculation–remains a very viable asset and so, theoretically, a credible piece of collateral against which to restructure Dubai’s debts. Two weeks ahead of the latest Dubai Airshow, Emirates announced results for the first-half of the current financial year that showed a 165-percent increase in net profits to Dhs732 million ($205 million) and 18-percent growth in passenger traffic.

But back to this year’s Dubai Airshow: what does the business announced there tell us about the current state of the air transport and aerospace sectors in the Middle East? Well, Dubai’s somewhat particular troubles apart, evidence that airlines across the wider Arab world continue to expand revealed itself both through new aircraft orders and contracts covering equipment and services in support of previous waves of fleet expansion. Abu Dhabi’s Etihad Airways was prominent in this respect, placing $750 million worth of contracts with various equipment suppliers and service providers. But the biggest order of the 2009 show came from the nearby horn of Africa, from where Ethiopian Airlines confirmed a $3 billion deal to buy 12 Airbus A350XWBs–part of $5.3 billion worth of deals announced by Airbus in Dubai, including an MOU covering 10 A320s for Yemenia Airlines. Boeing sold eleven 737-800s to a pair of Algerian carriers, Air Algerie and Tassili Airlines. Other Middle Eastern operators announcing purchases of new aircraft, systems and services included Oman Air, Bahrain Air, FlyDubai and Jazeera Airways. Unusual for a show on its home turf, Emirates Airline itself was not among the headline makers, but maybe that isn’t a bad thing given that Dubai was to make global headlines for all the wrong reasons just a week later.