Tim Clark, president of Emirates, speaks to journalists on the sidelines of the 80th International Air Transport Association's annual meeting in Dubai. Deena Kamel / The National
Tim Clark, president of Emirates, speaks to journalists on the sidelines of the 80th International Air Transport Association's annual meeting in Dubai. Deena Kamel / The National
Tim Clark, president of Emirates, speaks to journalists on the sidelines of the 80th International Air Transport Association's annual meeting in Dubai. Deena Kamel / The National
Tim Clark, president of Emirates, speaks to journalists on the sidelines of the 80th International Air Transport Association's annual meeting in Dubai. Deena Kamel / The National

Emirates boss wants troubled Boeing to foot its multibillion-dollar plane retrofit bill


Deena Kamel
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Boeing will take at least five years to overcome its current crisis and the troubled US plane maker should foot the bill for Emirates' multibillion-dollar programme to retrofit its 777 wide-body jets amid delays in the development of the newer 777X version, Emirates president Tim Clark has said.

The years-long successive delays in the new aircraft's development programme have forced Emirates to put additional Boeing 777s through retrofit and the airline boss wants Boeing to pay for the extensive refurbishment it is undertaking.

“We need our aeroplanes, we cannot face constant delays, we've got a business to run and the bill for refurbishing all these aeroplanes should be put at Boeing's door,” Mr Clark, president of Emirates, said on Sunday on the sidelines of 80th International Air Transport Association (Iata)'s annual meeting in Dubai.

In May, Emirates said it would be completely refurbishing another 28 Boeing 777 aircraft, after the original plan called for 53 777s to undergo a full makeover.

The Boeing 777-9 model is about five years late and was scheduled for delivery in 2025, but Emirates currently has “no visibility” on the latest time frame of when it can be handed over, Mr Clark said.

At the Dubai Airshow in November, Emirates signed a deal for firm orders for 55 additional Boeing 777-9s and 35 Boeing 777-8s. The airline’s 777X order book currently has a total of 205 jets, making it the biggest buyer of Boeing wide-bodies.

However, Boeing will need five years to address the problems arising from its current safety and quality crisis before meeting plane production demand from new and existing customers, according to the Emirates Airline boss.

“Boeing needs to step back and say 'what did we get wrong over the last 10 or 15 years and how do we address that?', he said.

“They need to go back to where they were and if they do that, the whole process is salvageable, fixable and we can get things back to where they need to be. How long will that take? I think we have a five-year hiatus on our hands.”

Mr Clark is an aviation industry veteran whose airline is a major buyer of Boeing and Airbus wide-body aircraft and he often weighs in on performance issues at both manufacturers who make the planes for the long-haul routes it specialises in.

The airline executive said he is scheduled to meet Stephanie Pope in “the next day or so” during the Iata annual meeting that is taking place in Dubai for the first time from June 2 to June 4.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: June 03, 2024, 5:59 AM