'What has happened to the market as a consequence of the war in Iraq and Sars [Severe acute respiratory syndrome] has forced a lot of airlines to rethink their long-term plans,' says Sheikh Ahmed bin Saeed al-Maktoum. 'At Emirates we take notice of the global situation but we don't believe that life should stop.'

Few of the industry's executives assembled at the Paris Le Bourget Air Show in June could have anticipated the full extent of Emirates' bullish optimism for the future, however. This was manifest through its commitment to the 555-passenger A380 superjumbo produced by Europe's Airbus Industrie. The aircraft, which comes into service in 2006, will be the biggest production passenger plane in the world, eclipsing the veteran 747 Jumbo built by US rivals The Boeing Company. Emirates has committed to buying no less than 21 A380s.

Calculated risk

'Some say we are swimming against the current. But we are not in the business of gambling; everything we do has to be studied before we make a decision. Business will come back and purchasing aircraft is a long-term strategy,' says Sheikh Ahmed.

In addition to the A380s, Emirates has added to its existing orders for A340s from Airbus and firmed up an agreement to take 26 Boeing 777-300 ER (extra long-range) aircraft on lease terms from Singapore-based International Lease Finance Corporation and General Electric Capital Aviation Services of the US. By 2011, Emirates will have over 100 large commercial aircraft in service.

Sheikh Ahmed says: 'In real terms the order is an increase on the previous deal we announced at the Dubai Air Show in 2001. At that time we talked about $15 billion but to reach a final agreement on orders of this size can take quite a long time and many things can change. Part of the new order is for an A340-600 ER, which wasn't available to us two years ago. The new order, on top of the $7 billion concluded from the 2001 deal, gives us a total order book of about $27 billion.'

These aircraft, combined with aggressive international marketing and route expansion, will move Emirates, which is shedding its regional status, closer to the upper echelon of international airlines. Its emerging fleet of predominantly extra long-range aircraft will open up premium routes direct from Dubai to the east and west coasts of the US as well as Australasia, while enabling it to expand its existing high-yield routes to Europe and the subcontinent.

However, Emirates is yet to convince a cynical industry that its success is built purely from sound judgement. Its announcement of a whopping 74 per cent hike in net profits for fiscal 2002/03 to AED 907 million ($247 million), in what was a tough 12 months for the industry, took many by surprise. This, coupled with its aggressive fleet expansion programme, has fuelled speculation about the sources of the airline's funding. Emirates - which is wholly owned by the government of Dubai - asserts that its growth is being financed solely from its own balance sheet.

'Many people ask how can Emirates continue to invest,' says Sheikh Ahmed. 'We receive no additional funding or subsidy from the government of the UAE. The airline is supported entirely from its own resources. Everything that goes on the books is accounted for on the balance sheet.'

Leasing

Financing for the new aircraft is expected to come from Emirates' traditional sources of funding. Since 1996, the airline has secured $4,700 million to fund its ambitions. The depressed state of the market has also helped the airline in its negotiations with manufacturers desperate to keep production lines running. According to Sheikh Ahmed, the acquisition of the 777s on long-term leases is such a case in point.

'The 777s are leased aircraft. Emirates will not pay one penny before the delivery of the aircraft, which will be handled by the leasing companies. We will pay for the aircraft as we receive them. The rest of the order will be financed through our usual structures,' he says.

This is likely to include another bond. Launched in 2001, the company's first local currency-denominated note closed oversubscribed at AED 1,500 million ($409 million). 'We are looking for a rating within the next year and this we expect to lead to another bond. But for the time being we have no requirement for extra funds,' he says.

Restructuring is another essential element of the airline's strategy. In early July, the carrier announced a streamlining of its management structure by consolidating the positions of director and senior general manager into senior vice-president positions. 'The main reason behind the changes was to have a more efficient structure for the future. We also wanted to give more authority to UAE nationals. They have been with us for some time and they now understand both the business and the company,' says Sheikh Ahmed.