An Emirates Airbus A380. EPA
An Emirates Airbus A380. EPA

More planes on the cards as Emirates expands



SINGAPORE // Emirates Airline is weighing a plan to buy more wide-body jets from Boeing and Airbus as it seeks to expand its global network.

"We are once again reviewing our fleet," Tim Clark, the Emirates president, said yesterday on the sidelines of the airline industry's annual gathering in Singapore.

"We have identified opportunities outside the fleet growth plan that we have."

The additional aircraft would be bought incrementally, rather than in one big order, to help "squeeze a little bit more out of the operation".

Emirates currently operates 153 aircraft and is expanding at a rapid clip, carrying 31.4 million passengers for the financial year ending on March 31, a growth of 14.5 per cent from the previous year.

The airline and its subsidiary companies earned US$1.5bn (Dh5.5bn) for the financial year.

The airline is looking at buying more Boeing 777-300ERs, long-haul, wide-body jets that form the backbone of its current fleet and are used on routes including the US west coast and points in Asia.

It will also look at ordering more of the Airbus A350, a new wide-body jet being developed using lightweight composite materials. The A350 is scheduled to enter the market around 2014.

"The aircraft in frame would be more ERs [extended ranges], possibly some more A350s," he said.

Emirates has 90 Airbus A380 superjumbos on order, and Mr Clark said the airline "would like to buy more" but was unable to do so because of infrastructure constraints at Dubai International Airport.

"We just can't fit it in," he said.

The carrier aims to decide by the time of the Dubai Airshow, scheduled for November, whether to order more aircraft. It currently has 200 on order.

Emirates, based in Dubai, is the largest of the Gulf's three long-haul carriers - the others are Qatar Airways and Etihad Airways - which are redrawing the global aviation map by building up hubs to carry transfer traffic between Asia, Europe, Africa and the Americas.

Their success has triggered accusations of protectionism from some European and Canadian airlines. But this week, the International Air Transport Association (IATA) called on these carriers to stop trying to block the expansion of their Gulf rivals.

With its expansion plans, Emirates will grow to 250 aircraft by 2020 and link virtually any two major cities in the world via its Dubai hub.

The airline hopes to do this by pushing Boeing and Airbus to extend the range of jets such as the A380 and 777, allowing them to reach cities such as Los Angeles from Dubai at full capacity.

Emirates needs an improved version of the 777-300ER between 2017 and 2019 to replace the ones it received in 2005, Mr Clark said.

"We are pushing Boeing to get on with the job," he said.

Airbus designed the A380 superjumbo to fly for 14 hours, but Emirates is pushing the manufacturer to reduce the weight of the jet and extend its range for service between Dubai and the US west coast. Emirates plans to open A380 service to San Francisco next year and to Los Angeles later.

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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.”