The main issue that has been identified in the given case study is how Emirates Airline PDF

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The main issue that has been identified in the given case study is how Emirates Airline (EA) decides to fund the purchase of new planes.From the case study, EA was able to obtain $1 billion in capital in March 2013 by issuing Islamic and conventional bonds. EA announced to issue 10 years amortizing ...

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The main issue that has been identified in the given case study is how Emirates Airline (EA) decides to fund the purchase of new planes. From the case study, EA was able to obtain $1.75 billion in capital in March 2013 by issuing Islamic and conventional bonds. EA announced to issue 10 years amortizing sukuk bond which have a ten-year maturity date of 2023 and an amortising structure with a five-year average weighted life. This means that the sukuk will depreciate the bond's value over time, and the full amount will be paid before the maturity date. Furthermore, EA returned a $550 million sukuk bond that was used to repay the purchase of a plane in 2005. In 2013, EA will need to raise around $5 million in order to pay for its existing aircraft purchases. As a result, the offering of sukuk only raised $1.75 billion. To ilustratre, the profit rate on the selling of 10-year amortising Islamic bonds is 3.857 percent accounted $1 billion and the balance of $750 million is from the sale of 12-year amortising normal bonds, at a coupon rate of 4.5 percent. In addition, the Islamic bonds, which mature on March 19, 2023, were issued at a price of 99.331. Although the bonds are issued at a lower price, the yield curve at the time of issuance should be similar. However, the yield on sukuk bonds is 48.6 percent (4.51 percent - 4.024 percent) basis point, which is lower than the yield on normal bonds. Hence, EA most likely issued the sukuk bonds as a result of the cheaper borrowing cost. Finally, EA financial department is working to find the best approach to fund a new aircraft or planes in the future year. In fact, analysts were divided on whether to focus on repeating sukuk issues, researching different sorts of sukuk bonds, or relying on conventional financial arrangements.

In 2013, EA was able to raise over $1 billion in capital through the issuance of conventional and Islamic bonds. The company issued a 10-year amortizing sukuk bond with a maturity date of 2023. In 2005, EA used its $550 million sukukbond to pay off its aircraft purchase. However, the sukuk will eventually lose its value. The Islamic bonds' sale only raised $1.75 billion. The profit rate on the sale of these securities is 3.857 percent. The balance of $750 million is allocated for the sale of standard bonds. The EA financial department is trying to find the best way to fund a new aircraft or a new plane in the future....