03 December 2009

CAPA: Emirates unlikely to be pawn in debt restructuring

SYDNEY Ã¢â¬' Consultants Centre for Asia Pacific Aviation have largely dismissed speculation in some quarters that Emirates airline could be used as collateral by the government in Dubai as part of a deal to solve its debt problems involving Dubai World.

Says CAPA, Ã¢â¬ÅâœIt has been suggested for example by one bank that, although largely independent of Dubai World, Emirates Airline may be used as collateral by its government owner.

Ã¢â¬ÅâœThis is a backhanded compliment in some ways to an airline that is often accused of being government subsidised and uncommercial.Ã¢â¬~

CAPA said that as the debt deferral/restructuring is put into context and as some more clarity emerges about what might happen as Dubai WorldÃ¢â¬â¢s mountainous debt problem is resolved, Ã¢â¬Åâœthere are several threads of interest in the aviation sector in particularÃ¢â¬~.

Ã¢â¬ÅâœProbably most important is firstly the role that Abu Dhabi will play in securing any debt coverage or perhaps acquisition of actual assets; and, secondly, the extent to which Dubai World may be forced to liquidate any or all of its assets as part of a promised restructuring, acceptable to its creditors.

Ã¢â¬ÅâœIn the absence of any sovereign guarantee, liquidation of some assets would seem inevitable as the price of gaining creditor approval for any restructuring of the debt.

Ã¢â¬ÅâœAnd, what that generally means is it will essentially be preceded by an audit of every asset in which the group has an interest.

Ã¢â¬ÅâœWhatever help Dubai might seek from the federal treasury of the UAE Ã¢â¬' effectively meaning Abu Dhabi Ã¢â¬' there would almost certainly be strings attached.

Ã¢â¬ÅâœAnd it is likely that those too would involve the need to liquidate some of the assets, encumbered or not.Ã¢â¬~

But CAPA says any bail out involving Emirates airline Ã¢â¬Åâœhas to be an unlikely scenarioÃ¢â¬~.

Earlier this week, Emirates president Tim Clark said, "Dubai will navigate itself out of this, as will we. I am confident that the airline will not be affected by this."