Dubai’s flagship carrier Emirates Airline has authorized banks to arrange a dollar-denominated Sukuk sale this year. This would be the airline’s second bond sale in 2013.
A statement by the airline, issued to the Gulf News, reads that “Emirates has mandated Citigroup and Standard Chartered Bank as Joint Global Coordinators and Joint Lead Managers, together with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank and Emirates NBD Capital as Joint Lead Managers, to arrange a series of fixed income investor meetings in the UAE and Europe commencing on March 7”.
The statement also added that a USD Regulation S Sukuk benchmark offering may follow subject to market conditions. In late January, the Dubai-based carrier had issued a USD 750 million, 12-year amortizing bond. As liquidity returns to the market, the airline will attempt to attract investment through these bonds. The bonds are critical to the dynamic expansion plans of the carrier, which is expecting an 18-20 per cent increase in sales this year. The airline is also set to expand its operations in Asia and enjoy a 12 per cent increase in the number of passengers.
Etihad Airways, a rival of Emirates, is also in the process of briefing major institutions at financial roadshows in New York and London. About 60 global financial institutions have shown an interest in the Abu Dhabi-based carrier and now account for an estimated USD 7.1 billion in cumulative funding for the airline’s expansion. The bond sales also help these airlines to achieve a diversified finance strategy by tapping traditional and emerging financial instruments.
Some of the most prominent Gulf airlines have to make tough decisions between competing financial instruments as they benefit from strong market performance and high financial credibility. Some of the most commonly used instruments by these airlines include commercial debt, Islamic structures, operating leases, tax leases, and European and US export credit agency supported financing.