"The financings, for three wide-body aircraft, were especially notable as they were completed at a time when Japanese/German equity was virtually non-existent for these type of transactions"

Dermot Mannion,
Chief Director (Finance, IT and Services)

In the very first year that the award has been instituted, Emirates bagged Euromoney’s award for “Global Airline Treasury Team of the Year 2001”. The award was given after Emirates completed a string of innovative and landmark financing deals. During the financial year, a total amount of US$ 828 million was raised by Emirates, on the international financial markets, at an attractive all-in cost of funding.

Emirates initiative to fund an A330 aircraft, which for the first time combined Islamic and Export Credit financing, has won an exceptional “quadruplet” in global financing awards. As well as the Treasury Team accolade, the financing won the global “Aircraft Leasing Deal of the Year 2001”, a major investment banking award, given by Jane’s Transport Finance magazine, the “Asset Finance Deal of the Year for Global Aircraft Finance” given by Institutional Investor’s Asset Finance International magazine and Euromoney’s Air Finance Journal Deal of the Year for the Middle East/Africa region. Following this successful funding, Emirates also financed one A330-200 aircraft using Islamic funds exclusively which represents a further diversification of funding.

In addition, two A330-200 aircraft were financed on 12-year Japanese operating leases valued at US$190 million. The lease was arranged by Credit Agricole Indosuez. Finally, one A330-200 aircraft was financed on a 10-year German operating lease valued at US$95 million which was arranged by Citibank. These structures provide very attractive low-cost funding for Emirates and were especially notable as they were completed at a time when Japanese/German equity was virtually non-existent for these types of transactions. This demonstrates the continued confidence the international financial markets have in Emirates.

As the Chairman has reported, Emirates maiden bond issue in July 2001 was a runaway success. The bond was initially launched for Dhs 750 million and was over-subscribed by more than two and a half times. The bond was closed for an amount of Dhs 1,500 million (US$408 million). This was not only Emirates first ever bond issue but also the first bond to be issued by a UAE corporation and to be listed on the Dubai Financial Market. This bond arranged by HSBC and the National Bank of Abu Dhabi, represented the development of an important new source of funding for Emirates and a major milestone in the development of financial markets in Dubai.

On the treasury risk management side, Emirates maintained a balanced portfolio approach towards its interest rate and currency exposure, where appropriate, by structuring aircraft financing leases in currencies in which revenues are generated to form a natural hedge, or, by entering into strategic forward foreign exchange contracts or interest rate/currency swaps. The balanced strategy has allowed Emirates to keep its exposure to movements in interest rates and currency at manageable levels and optimise the related impact on the income statement.

The induction of new state-of-the-art financial systems continued to complement the expansion plans of the Emirates Group. During the current year, Finance successfully completed its design and acceptance of the internet version of Oracle Financials 11.i targeting a go-live date early in the next financial year. Emirates Group is now a member of Oracle Financial Customer Advisory Board for Europe, Middle East and Africa which enables Finance to influence the future development of the software product.

Finance’s commitment to implement best practices has also extended into the area of storage and retrieval of financial documents. Finance cutover a 8000 documents per hour high-speed imaging system using IBML Image Trac 1 scanners for airline revenue accounting functions. The system, which has the capability to scan, store and retrieve documents of varying sizes, has been fully integrated into our revenue accounting system (RAPID) and will be available for all bureau customers of RAPID in the future. This is targeted to improve the productivity of the revenue accounting section by 10%.

Management Accounts weekly analysis of airline route profitability was further strengthened by cutting-over to POWER, our latest multidimensional analytical system which provides electronic information in a more timely and efficient manner. The management accounting team also provided strategic financial analysis to support the Airbus A380 fleet acquisition programme and the related engine selection.

On the insurance front, following the events of September 11, Emirates was one of the first airlines to ensure continuity of insurance for acts of terror by replacing its liability insurance for such incidents by an indemnity from the Government of Dubai. This ensured compliance with our legal obligations and continuity of cover for our operations until commercial insurance became available.