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Dubai Economic Fallout

As Emirates introduces the A380 on Paris route, questions arise over future of Dubai world and economic situation in Dubai

Wolfgang H. Thome, eTN Africa Correspondent  Dec 03, 2009

Information was released by the Kampala office of Emirates that the airline, presently already flying twice daily from Dubai to Paris, is set to introduce an Airbus A380 on the route by end of this year, well ahead of the initially planned February 2010 date. Emirates said they will initially use their giant airliner three times a week as of 29th December, but eventually move to daily flights use of the A380 by mid January 2010.

The award-winning national airline of Dubai flies every day to Entebbe, via Addis Ababa, offering a comprehensive network of onward flights out of DXB across the world, making it a favorite for Ugandan and international travelers.

The same source, as well as other sources in Dubai, however, would not be drawn into any discussion on the potential economic fallout for the airline, now that Dubai has sought a 6-month moratorium on debt repayments of nearly US$60 billion, connected to Dubai World and its construction subsidiaries and associate companies.

However, as literally all is interconnected under the proverbial ‘Dubai Incorporated’ in the Emirate it will be interesting to watch what is going to happen in Dubai over the coming weeks and months, and if indeed the current shockwave across the global financial markets caused by the announcement last weekend will have an impact on Emirates’ passenger numbers and tourist arrivals in Dubai.

Emirates has a record number of new aircraft on order, including being the largest customer for the Airbus A380 and if Dubai should be downgraded by credit rating agencies this may well also cause fall out for both Airbus and Boeing. Downgrading by credit rating agencies normally attracts interest penalties, i.e. debtors will have to pay more for their loans.

Meanwhile, probing questions are being asked around the globe if the gloss has finally come off the world’s erstwhile glitter city, where only the largest, tallest and most expensive was in the past ever good enough.

There is now concern and intense speculation, that Dubai World’s failure to meet their massive financial obligations may spill over to other companies in Dubai or even other Gulf countries, affecting their credit rating too and influence ongoing and planned projects, while also asking what impact this deferment will have on the global financial sector, which is just recovering from the fallout of last year’s crisis. This fear has been underscored when Abu Dhabi, which had previously already come to the financial aid of their ‘cousins’ in Dubai, made it known that they would only grant conditional support on a case to case basis to try and stem the tide and not give an open cheque, probably looking at their own ambitions to capture a larger share of the lucrative tourism, aviation and property development trade, having lagged behind Dubai for long in these fields.

However, the cash injection earlier in the week by the UAE Central Bank for banks and financial institutions in the UAE may at least temporarily cool the worries of imminent collapses, but the questions will nevertheless remain and answers are needed what the Dubai World restructuring will eventually entail, what projects, in particular the ones’ in Africa are being delayed or completely shelved and how the Dubai property market and its values will be affected.

One thing is almost certain though, the times of quick profits and huge yields in Dubai are now gone, as are many of the expatriates, many of whom provided a good market for holidays to Eastern Africa. It can only be hoped that neither Emirates (the airline) nor tourism to Dubai will suffer too much and for too long as the rest of the world is coming out of recession and growth, albeit slow and small, is taking hold again. Maybe small is beautiful after all...

As Emirates introduces the A380 on Paris route, questions arise over future of Dubai world and economic situation in Dubai
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