The government of Dubai founded the airline with an initial capital injection of $10 million. Many competitors have always cited preferential treatment from the government of Dubai, as the explanation to Emirates rapid growth, which sees its sales grow 20% a year, and double in size every four years.
Analyzing the financial reports of Emirates group, audited by PWC, demonstrates that there are no unfair advantages in the form of government subsidies. Every financial year Emirates airlines pays the government of Dubai in dividends, which have now totaled up to $2.3 billion.
There are however a few government policies which have benefited Emirates Airlines indirectly and allowed it to expand in such a rapid rate.
The government of UAE has always played a crucial role in the country’s economy. Supported by the high price of oil, coupled with its abundant supply of the natural resource, the government has been able to diversify its economy. It has invested $52.7 billion into the travel and tourism sector of the country only in 2013. In recent years, the UAE has become a popular tourist destination.
The number of tourists arriving in Dubai has increased from 5 million in 2002 to a staggering 10 million in 2012. The government aims to attract around 20 million tourists by 2020.
Dubai’s emergence as a tourist destination, coupled with Emirates Airlines dominance in the region coupled with its far reaching direct flights, has allowed Emirates to rapidly grow.
According to the Global Enabling Trade Report the UAE is ranked 19thout of 132 countries, putting its trading infrastructure ahead of countries such as France, Ireland and the US. The UAE was ranked first regionally and 11th globally in terms of quality of air transport infrastructure. The technological factors in the UAE has emerged the country as a logistics hub. The UAE demonstrates its long term commitment to trade, with investment in infrastructure to reach $130.34 billion by 2016
Analysing UAE’s macroeconomic policies like government expenditure in infrastructure, one can see why Emirates airlines has gained substantial market share over the past decade. Indeed, the government of Dubai plans to open an aviation city while the city already consists of two international airports, one of which is the 2nd largest in the world.
Tax Free Policy
The UAE and the government of Dubai do not have any tax laws for businesses, including airline...