One of the world’s branded airline, Emirates said to have refrained from making equity investments in other airlines. The Emirate president Tim Clark says investing in other companies is not worth the time and money in terms of returns.
Though Emirates reported profits year after year, reported a profit of $US762 million, it decided to stay on side in terms of investments.
He believes that buying equities in other airlines would take away management attention on Emirates. He cited his experience in investing money-losing government-owned carrier Sri Lankan Airlines in 1998 for his reason to stay away from Airline investments.
According to Business insider, Emirates spent $US70 million to acquire 43.6% of Sri Lankan Airlines, and Clark was tasked with transforming the airline’s business and products, but he felt the political interference make his task difficult.
“I was down there between six and eight times a year,” he told Business insider., “Sri Lankan politics was volatile. There was a war going on and we had a lot of problems to deal with.” By the time the partnership ended in 2008, Emirates had managed to turn Sri Lankan around through great difficulty.
“The experience left a lasting impression on Emirates and its president. In short, he doesn’t think it’s worth it.” ..as reported in Business insider “What it taught us, in the end, was that the management time being soaked up in the M&A activity and the subsequent on-going management of these airlines to protect your investment was disproportionate to the return,” Clark said.
Recently some airlines invested in airlines that reported profits in after low fuel prices, but Emirates refrained from this.
Delta holds significant stakes in Air France/KLM, Virgin Atlantic, China Eastern, AeroMexico, and Gol.
American Airlines invested $US200 million China Southern,
United Airlines spent $US100 million on equity in Brazil’s Azul.
Etihad purchased large chunks of Alitalia, Air Serbia, Jet Airways, Virgin Australia, and Air Seychelles.
Qatar Airways hold major stakes in LATAM, Cathay Pacific, and IAG, the parent company of British Airways.
Tim says that Emirates has grown organically to a scale where equity acquisition would no longer make strategic sense for the airline.