Interesting views, many seem a little based in la la land; quite appropriate for Dubai.
The world is in the worst down turn since the 40s. The last time we were involved in this type of economic climate, after Sep 11, the situation went on for a few months. EK was effectively alone in the market, now there are 3 major regional airlines fighting over the spoils. Ek made cock all in the first half but will hopefully make a little more in this half; there will be no profit share. All of the major economies are in recession and will be for the foreseeable future. Dubai has a liquidity problem and at the moment we are committed to take another 17 aircraft this year. Much of our revenues come from markets where the currency has weakened against the dollar which means the revenue side of the balance sheet has fallen by in some places over 40% over the last 6 months. One of our biggest markets, the UK, has taken a 30% currency hit in the last year. The dwindling oil price has insulated us from the shock.
Looking forward, when do we realistically expect things to improve? 2010, 2011... By then if EK keeps expanding we will be in a loss making situation and retrenchment will take place. We have a good cash balance which will help us through the difficult times but in no way guarantee our future development. The fact is that we are not immune to the world situation, the are uncertainties about the UAE leadership and the way in which Dubai and Abu Dhabi will negotiate a bail out hang over EK's head.
Yep the theme of this thread, random AD insertion is silly but I think a few of us need to wake up and smell the coffee. Some difficult choices face us in the future and an expansionary strategy with the world economy as it is carries significant risk. The management don't take their decisions based upon the measley profit in the last quarter but rather on where they expect to be in the months to come. We have always believed we can survive and pick up the pieces in the future but now, in our own backyard, we are the poor relations. If the this recession is prolonged, anyone waiting for a job from EK will be unlucky. Recruitment has gone from around 300+ to 50 or so and I think we will rationalise the fleet and ditch some of the older aircraft to maintain the yields as the new aircraft arrive. But if you think our current modest profits mean we don't have to do anything you are sadly mistaken. The US realised several cycles ago that the only way to survive was to be ruthless over cost control and keep or make the operation as lean as possible. If that decision is delayed it becomes almost impossible to turn it around in time.
Over the coming months, ADs will be the least of our problems. I'll be keeping my powder dry for some more important battles that we will face in the future. You might not agree with me and this is only my opinion but I'd be interested if anyone can explain to me why we are going to be insulated from the down turn and offer a more optimistic view of the future.
Schnowzer
