DUBAI – The debt of Emirates Airline, which has $50 billion worth of planes on order, is not guaranteed by Dubai’s government, an official at the company said Thursday.
Emirates, the Middle East’s largest airline and one of Dubai’s best assets, has borrowed heavily to build its fleet and challenge the world’s leading carriers. The company has 10 loans and bonds maturing by 2013 worth almost $1.7 billion, according to Standard & Poor’s Ratings Services.
“None of our loans or bonds is guaranteed by the government of Dubai,” said the spokesman for Emirates in an email to Zawya Dow Jones.
Dubai’s government said this week that it’s not responsible for the $26 billion worth of direct debt it’s trying to restructure belonging to one of its largest state-owned companies, Dubai World.
Last week, Dubai’s government raised fears of a default in the emirate by unexpectedly seeking a standstill on Dubai World’s debts. Creditors were dealt a further blow when the sheikdom’s rulers said they have no liability for these debts, raising further worries over the status of loans to government companies in Dubai.
Standard & Poor’s has downgraded six Dubai government-related entities, or GREs, to junk territory in the aftermath of the standstill announcement, saying the likelihood of extraordinary support from the Dubai government for the companies is “low.
“Dubai government is either unable or unwilling, or both, to provide extraordinary government support in the form of timely and sufficient financial support to those of its GREs that provide essential government services on its behalf,” S&P said with the downgrade.
Dubai’s total debt, including the obligations of its government companies, is now estimated at about $100 billion.
Emirates currently operates a fleet of 139 aircraft. Its order-book stands at 156 aircraft, with a total value of approximately $50 billion. It’s the largest customer for the giant Airbus A380 passenger plane.
Tim Clark, the airline’s president told Zawya Dow Jones Nov. 30 that the company won’t be affected by Dubai government’s debt restructuring talks.
The company is part of Investment Corporation of Dubai, a giant government-owned holding company set up to house the sheikdom’s best assets.
A downturn in global tourism has so far failed to hit the company’s profits. Emirates said last month that first-half earnings almost tripled to 752 million U.A.E. dirhams ($205 million).
The airline is a key customer of Boeing Co. and Airbus, a unit of European Aeronautics Defence & Space Co, or EADS. Emirates has about $34.8 billion worth of orders with the European manufacturer.