The unrest across the Arab world is beginning to impact on top Dubai based companies with disappointing financial results. Emirates Airline’s full-year profits came in at a record $1.5 billion compared with an expected $2 billion while Arabtec posted an 80 per cent slump in first quarter profits to just $7.2 million.
Emirates has suffered from the higher fuel prices that have come in the wake of unrest, revolutions and civil war in the region this year. There have also been many disruptions to flight schedules due to the unrest and the Japanese earthquake and nuclear disaster.
Sky-high profits
Most of the set back probably occured in the first three months of 2011, leaving a questionmark over the rest of the year. That said few global airlines could match this profit performance, if any.
Arabtec has recently made much of its strategy to diversify away from dependence on the UAE, and into Saudi Arabia, Pakistan and Egypt. But regional unrest is now most probably delaying the roll out of these plans. The company provided no explanation for its plunging profits in the first quarter.
But it said arbitration continues over a cancelled contract to build the Meydan racecourse in Dubai. Its joint venture partnership is seeking $780 million in compensation for the cancellation of the project in January 2009.
Sudden stop
Many projects in Dubai have stalled since the credit crisis just over two years ago and local contractors have lost income as a result, although Arabtec is regarded as a strong group and has won notable projects in Abu Dhabi.
Both Emirates and Arabtec are local blue chips and the results today are a reminder that as a regional hub city Dubai is not immune from the recession in non-Oil States which is a direct and inevitable consequence of the Arab uprisings and disorder in many countries.
How long this will last and what the ‘new normal’ for Dubai business might be is what most concerns business leaders in the city.
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