DUBAI: A preliminary deal to sell 36 A380s to Emirates blew up in an Airbus hospitality chalet moments before the Gulf carrier was expected to shower $30 billion (SR112.5 billion) on the planemaker and its US rival Boeing at the start of last week’s Dubai Airshow.
Two top Emirates officials broke the news to Airbus CEO Tom Enders and his sales chief John Leahy that the widely expected $16 billion deal would not be signed that day, leaving uncertainty over the future of the world’s largest jetliner.
The halt came so swiftly that Airbus PR executives who were already in place for a double-signing ceremony a hundred yards away found themselves awkwardly among the audience as Boeing walked away with the sole Emirates order, worth $15 billion.
The unusual stumble in slick air show choreography highlights problems over timing and trust that may even now complicate a deal between Airbus and Emirates, people aware of the matter said.
One of the closest and most successful relations in aviation is looking bruised and throws up new complications for Airbus just as it struggles to maintain business as usual at a time when it faces British and French compliance probes.
A day after Airbus’s hopes were dashed, airline president Tim Clark publicly delivered a message from Dubai’s government saying it wanted a guarantee from Airbus that it would keep producing the A380 for 10 years, before the state-owned carrier would agree to placing a new order.
Enders emailed Clark calling the ultimatum, first reported by Reuters, unhelpful, two people aware of the matter said.
Airbus and Emirates declined comment.
“There is a worrying breakdown of the relationship between Airbus and Emirates,” said a person familiar with close to the talks.
“Airbus was confident of getting a deal,” a Gulf source added. “But Dubai does not want to be taken for granted.”
Air show delegates said Emirates and Airbus must now resolve problems of visibility if a deal is to be done.
Many in the industry say Airbus appears directionless as Leahy is due to retire in January, the guardian of the Emirates relationship, Habib Fekih, did so earlier this year and doubts grow over whether Enders will secure a new CEO mandate in 2019. Meanwhile the probes have badly clogged Airbus decision-making.
On the Emirates side, top executive Clark — although full of energy at 67 and dismissing talk of retirement — is likely to hand over the baton at some stage, and it is uncertain how committed other managers are to the A380 flagship.
“Nobody knows who is going to be in charge of the other side later, which doesn’t help,” said a person familiar with the matter.
The Airbus board will however have to think hard before giving Dubai the guarantee it wants, which would go beyond the scope of a normal contract for specific planes.
“It’s not something any company can easily do, especially on something dragging down the bottom line,” the same person said.
For Emirates, the problem runs deeper than simply buying an aircraft from Airbus.
Airlines deal directly with numerous suppliers, from landing gears to tires and entertainment systems. Each takes its cue from the planemaker as conductor of a large orchestra.
“If you’re the only customer your fear is the manufacturer will lose interest and that becomes a signal to suppliers to make support a lower priority,” a person close to the matter said. “Then you end up unsure who is supporting what.”
The biggest question mark hangs over the massive engines.
In 2015, Britain’s Rolls-Royce won its largest-ever order, worth $9 billion, to displace US consortium Engine Alliance to power a batch of 50 four-engined A380s for Emirates.
But to win the deal it gave ambitious fuel-consumption targets and Emirates signalled last week the cards could be shuffled again for the potential new order. “If we ordered more, we might contemplate talking to both sides,” Clark said.
But Engine Alliance output ends in 2018. Keeping its assembly lines warm would require a fresh commitment from its parents General Electric and Pratt & Whitney.
“That’s a pretty big ask right now. It all comes down to money,” a person close to the consortium said.
GE is involved in a major rethink of strategy and wants to be more selective about investments, while Pratt & Whitney is absorbed with fixing delays on smaller engines.
Keeping engine makers on board is all the more challenging because of the lack of an A380 second-hand market.
Engine makers make money on spares and services over the working life of an engine which is usually 20-25 years.
But in another accident of timing, the first A380 to carry passengers, in 2007, was being mothballed in France just as Airbus was trying to cling on to an Emirates deal at last week’s show, after just 10 years in service with Singapore Airlines.
That sets a worrying precedent for suppliers of Emirates, which usually operates planes for 12 years and around 20 of whose A380s may exit the fleet to make way for new purchases.
Faced with the possibility that any new A380 engines may have only half their budgeted life, engine makers may charge more for them up-front or more in hourly service contracts.
Still, Emirates believes an Airbus guarantee over the life of the program could break the logjam and generate new orders.
“I would think a revitalization of the line would bring the big players together and say what can we all do to make this work ... including propulsion,” Clark said.
Pride may yet work in favor of a deal over the A380, which is Airbus’s only path into business with Emirates for the time being after the airline placed new orders with Boeing.
“This (Airbus) management took the decision to launch the A380 so killing it now would make them look foolish,” a senior air show delegate said.
“They have got to be able to say that when they left, the A380 was still being built.”
Airbus faces tricky hurdles over stalled A380 Emirates deal
Airbus faces tricky hurdles over stalled A380 Emirates deal
Saudi cement sales up 5% to 12.84m tonnes amid sustainability drive
RIYADH: Cement sales in Saudi Arabia saw an annual increase of 4.93 percent in the third quarter of 2024, reaching 12.84 million tonnes, according to recent data.
Figures released by Al-Yamama Cement showed that 96.18 percent of these sales were domestic, with only 3.82 percent being exported.
The data covers 17 Saudi cement companies, with Al-Yamama Cement holding the largest share of domestic sales at 12.47 percent, amounting to 1.54 million tonnes, despite experiencing a 27.18 percent decline during the period.
With the successful acquisition of Hail Cement Company by Qassim Cement Company, QCC now leads the market with the highest share among its peers at 13.37 percent, or 1.65 million tonnes, moving Al-Yamama Cement to second place.
Saudi Cement, Southern Cement and Yanbu Cement held 8.96 percent, 8.49 percent and 8.18 percent shares of the domestic market respectively.
The highest growth in domestic sales was recorded by Umm Al-Qura Cement, which saw a 69 percent increase to 372,000 tonnes during this period, despite holding a relatively small 3 percent market share.
City Cement’s local sales rose by 52.69 percent annually to 739,000 tonnes, while Tabuk Cement experienced a 27.3 percent increase, reaching 429,000 tonnes.
In terms of cement exports, Saudi Cement dominated with 80.45 percent of total shipments, amounting to 395,000 tonnes this quarter. This figure represents a 13.18 percent increase compared to the same quarter last year.
Najran Cement accounted for 11 percent of exports for the quarter, totaling 54,000 tonnes, marking a 24 percent decline. Eastern Cement with 8.55 percent share saw a 133 percent rise in exports, reaching 42,000 tonnes.
Saudi Arabia also exported 1.08 million tonnes of clinker during this period, marking a 41 percent decline compared to the same period last year.
Clinker, a crucial intermediate product in cement production, is commonly exported due to its cost-effectiveness. It is more economical to ship it to other countries for final processing into cement than to produce the finished product and then export.
According to a report by AlJazira Capital, the total utilization rate of the cement sector in Saudi Arabia stood at 72.8 percent in September.
This figure represents the proportion of the cement production capacity that is actively being used to meet demand.
A utilization rate of 72.8 percent indicates that, on average, the cement industry in Saudi Arabia is using just over two-thirds of its available production capacity.
Saudi Arabia is a prominent player in the global cement industry, ranking among the top 10 producers worldwide. The Kingdom’s production capacity has been bolstered by significant investments to meet both domestic demand and export opportunities.
Key factors driving Saudi Arabia’s cement industry include its robust infrastructure development, housing projects, and initiatives under Vision 2030, which aim to diversify the economy and reduce reliance on oil revenues.
Saudi Arabia’s path to decarbonization
In October, Saudi Arabia’s cement sector took a significant leap towards decarbonization with the announcement of a joint venture between the UK’s Next Generation SCM and Nizak Mining Co., a subsidiary of City Cement.
The collaboration is focused on producing supplementary cementitious materials locally, utilizing an innovative, energy-efficient technology.
This new method requires only one-sixth of the fuel compared to conventional cement production and operates at lower temperatures, significantly reducing operational costs and carbon emissions.
The technology already demonstrates a 99 percent reduction in emissions, producing just 8 kg of CO2 per tonne of calcined clay, compared to the global average of 600 kg per tonne.
The joint venture is part of the Kingdom’s broader decarbonization strategy, which is aligned with Vision 2030 and the Saudi Green Initiative.
As part of these proposals, the Kingdom has set an ambitious goal of cutting carbon emissions by 278 million tonnes annually by 2030.
This venture, which will have its first production plant in Riyadh, is expected to produce up to 700,000 tonnes of low-carbon supplementary cementitious materials in its second year of operations, starting in 2025.
The project is also crucial for the domestic production of low-carbon concrete, as traditional SCM alternatives, like fly ash and slag, are not readily available in Saudi Arabia.
The venture will not only help Saudi Arabia meet its sustainability targets but also strengthen its position as a regional hub for low-carbon materials, generating both economic and environmental benefits.
Speaking in October, Majed Al-Osailan, CEO of City Cement, emphasized the long-term impact of the project, stating that it will create jobs, improve access to sustainable building materials, and create export opportunities for the Kingdom.
According to a study by the Boston Consulting Group in September, Saudi Arabia stands to gain a significant competitive advantage in the global cement industry as the sector moves toward decarbonization through carbon capture and storage.
The competitive dynamics of the industry are shifting due to the high costs associated with CCS, which is essential for achieving net-zero emissions by 2050.
One of the primary factors influencing future competitiveness is a plant’s proximity to CO2 storage sites.
Cement plants located within 200 km of CCS hubs could see abatement costs reduced by half compared to those located farther away.
This geographical advantage will be crucial in determining cost competitiveness on a global scale.
Saudi Arabia, with its lower energy costs, is well-positioned to capitalize on this advantage according to the study. The Middle East, in general, benefits from cheaper energy, which could give Saudi plants a $20 per tonne cost advantage in CCS over the global median.
This would allow Saudi Arabia to emerge as a key export hub in the global cement market.
Plants in the Kingdom that can minimize their CCS abatement costs will be internationally competitive, particularly as global trade dynamics shift and demand grows for low-carbon cement.
Moreover, Saudi Arabia’s energy infrastructure and strategic location near key shipping routes bolster its potential as a regional and global supplier of cement.
With substantial investments in CCS technology and renewables, the Kingdom could not only meet domestic demand but also serve international markets more efficiently, securing its position in the evolving global cement trade.
As the cost of CCS implementation rises, the global competitive landscape will be reshaped, with plants closer to CO2 storage hubs and renewable energy sources becoming more attractive.
Saudi Arabia’s competitive edge, therefore, lies in its ability to leverage its energy resources and strategic location, potentially making it a leader in the export of low-carbon cement solutions.
Oil Updates – crude heads for weekly gains on anxiety over intensifying Ukraine war
LONDON: Oil prices extended gains on Friday, heading for a weekly uptick of more than 4 percent, as the Ukraine war intensified with Russian President Vladimir Putin warning of a global conflict.
Brent crude futures gained 10 cents, or 0.1 percent, to $74.33 a barrel by 7:48 a.m. Saudi time. US West Texas Intermediate crude futures rose 13 cents, or 0.2 percent, to $70.23 per barrel.
Both contracts jumped 2 percent on Thursday and are set to cap gains of more than 4 percent this week, the strongest weekly performance since late September, as Moscow stepped up its offensive against Ukraine after the US and Britain allowed Kyiv to strike Russia with their weapons.
Putin said on Thursday it had fired a ballistic missile at Ukraine and warned of a global conflict, raising the risk of oil supply disruption from one of the world’s largest producers.
Russia this month said it produced about 9 million barrels of oil a day, even with output declines following import bans tied to its invasion of Ukraine and supply curbs by producer group OPEC+.
Ukraine has used drones to target Russian oil infrastructure, including in June, when it used long-range attack drones to strike four Russian refineries.
Swelling US crude and gasoline stocks and forecasts of surplus supply next year limited price gains.
“Our base case is that Brent stays in a $70-85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside,” Goldman Sachs analysts led by Daan Struyven said in a note.
“However, the risks of breaking out are growing,” they said, adding that Brent could rise to about $85 a barrel in the first half of 2025 if Iran supply drops by 1 million barrels per day on tighter sanctions enforcement under US President-elect Donald Trump’s administration.
Some analysts forecast another jump in US oil inventories in next week’s data.
“We will be expecting a rebound in production as well as US refinery activity next week that will carry negative implications for both crude and key products,” said Jim Ritterbusch of Ritterbusch and Associates in Florida.
The world’s top crude importer, China, meanwhile on Thursday announced policy measures to boost trade, including support for energy product imports, amid worries over Trump’s threats to impose tariffs.
Saudi Arabia’s GACA ushers in new era of passenger experience with AI
JEDDAH: Saudi Arabia’s aviation authority is revolutionizing the passenger experience by incorporating artificial intelligence into its services, in alignment with the nation’s strategic aviation plan, a senior Saudi official said.
At the 2024 Global Civil Aviation Forum in Shanghai, Abdulaziz bin Abdullah Al-Dahmash, vice president of the General Authority of Civil Aviation for Quality and Passenger Experience, highlighted the authority’s ongoing initiatives designed to improve passenger satisfaction.
A session dedicated to GACA’s role in enhancing the passenger experience featured international experts and focused on the authority's efforts to align with Saudi Arabia's aviation strategy and Vision 2030.
The discussion underscored Saudi Arabia's use of data analytics and AI to transform the aviation sector, supporting the National Aviation Strategy and the broader Vision 2030 objectives. This approach is part of the Kingdom's goal to achieve excellence in both aviation services and infrastructure.
The National Aviation Strategy serves as a roadmap to solidify Saudi Arabia’s position as a global leader in tourism, business travel, and logistics. Built around three core pillars — empowering national tourism, improving domestic aviation, and aligning with Vision 2030 — the strategy aims to enhance interconnectivity, increase the market share of national carriers, and expand airport infrastructure.
By leveraging its strategic location and investment potential, Saudi Arabia’s aviation strategy directly contributes to Vision 2030, which aims to strengthen services and bolster the travel and logistics sectors.
Al-Dahmash noted that to achieve the National Aviation Strategy’s ambitious goals, which include tripling passenger traffic to 330 million annually by 2030, Saudi Arabia is prioritizing major infrastructure projects.
This includes constructing new airports, such as the King Salman International Airport, and expanding existing ones to accommodate the surge in passenger numbers. Alongside this, there is a strong focus on improving operational efficiency and enhancing the overall passenger experience.
In this context, GACA is actively developing and implementing programs to meet evolving passenger expectations. One such innovation is the introduction of AI-powered systems that manage and monitor passenger flow, tracking wait times across Saudi airports.
Additionally, the “Bagless Traveler” initiative is transforming the travel process by enabling passengers to complete check-in and baggage handling from their accommodation. During its pilot phase, the service successfully assisted over one million passengers, with more than 2 million bags processed without incident.
Al-Dahmash also emphasized the importance of regulatory frameworks that GACA has implemented, noting that these efforts have significantly improved services at Saudi airports, leading to higher levels of passenger satisfaction. This success has garnered recognition, with several airports receiving local and international awards.
Moreover, GACA has presented its innovative passenger experience programs at global conferences, sharing its best practices with civil aviation authorities worldwide, demonstrating how others can leverage these advancements for similar success.
Closing Bell: Saudi main index slips to close at 11,840
- Parallel market Nomu gained 681.17 points, or 2.28%, to close at 30,540.28
- MSCI Tadawul Index lost 4.52 points, or 0.30%, to close at 1,486.82
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 27.40 points, or 0.23 percent, to close at 11,840.52.
The total trading turnover of the benchmark index was SR5.39 billion ($1.43 billion), as 98 of the stocks advanced and 131 retreated.
The Kingdom’s parallel market Nomu gained 681.17 points, or 2.28 percent, to close at 30,540.28. This comes as 63 of the listed stocks advanced, while 23 retreated.
The MSCI Tadawul Index lost 4.52 points, or 0.30 percent, to close at 1,486.82.
The best-performing stock of the day was Al-Baha Investment and Development Co., whose share price surged 10 percent to SR0.33.
Other strong performers included Saudi Reinsurance Co., with a 7.05 percent increase in its share price to SR43.30, and Saudi Chemical Co., which saw its share price rise 5.46 percent to SR10.24.
Saudi Cable Co. recorded the largest decline, with its share price dropping 4.02 percent to SR97.90.
CHUBB Arabia Cooperative Insurance Co. also saw its stock fall 3.13 percent to SR49.50.
Naseej International Trading Co. experienced a 2.64 percent drop in its share price, which fell to SR92.30.
On the announcements front, Saudi Awwal Bank has disclosed its intention to issue an SR-denominated Additional Tier 1 Sukuk through a private placement in the Kingdom, as part of its SR20 billion Additional Tier 1 Sukuk issuance program.
According to a Tadawul statement, the bank has appointed HSBC Saudi Arabia as the sole lead manager for the proposed offer. The statement said the purpose of the issuance is to strengthen the bank’s capital base and support the achievement of its long-term strategic objectives.
The amount and terms of the sukuk will be determined at a later stage, based on market conditions at that time.
Saudi Awwal Bank closed the session at SR31.40, down 0.63 percent.
The Saudi Investment Bank has announced the completion of its US dollar-denominated Additional Tier 1 capital sustainable sukuk offering under its Additional Tier 1 capital sukuk program.
A bourse filing revealed that the offer is valued at $750 million, comprising 3,750 sukuk with a par value of $200,000 each and a return of 6.275 percent.
The sukuk have a perpetual maturity, callable after five years. Settlement of the sukuk issuance is scheduled for Nov. 27, and the sukuk will be listed on the London Stock Exchange’s International Securities Market.
Saudi Investment Bank closed the session at SR13.88, down 0.29 percent.
Aramco to increase borrowing, focus on dividend growth, CFO says
RIYADH: Saudi Aramco plans to increase borrowing and focus on enhancing its dividend distribution strategy, revealed the company’s chief financial officer.
In an interview with Bloomberg, Ziad Al-Murshed explained that this move is part of the company’s efforts to optimize its capital structure.
Aramco is considered one of the pillars of the Saudi economy, encompassing the entire oil production chain, from hydrocarbon extraction to energy generation, as well as refining and commercial distribution activities.
“You’ll see us do a couple of things. One is, just take on more debt compared to use of equity,” Al-Murshed said during the interview.
“It’s nothing to do with the dividend, it is optimizing our capital structure so that we end up with a lower weighted average cost of capital,” he added.
Aramco returned to the debt market earlier this year after a three-year hiatus, raising $9 billion in two separate issuances. In June, it launched a $6 billion offering of dollar-denominated bonds, followed by a $3 billion issuance of Islamic bonds in September.
The CFO noted: “We had the luxury of sitting out those three years until the market became conducive.”
Al-Murshed provided insight into how the company increased its dividend by 4 percent in each of the past two years and is now paying over $81 billion in base dividends.
“We’re looking for it to be progressive over the years,” he said, adding that the company’s free cash flow supports this strategy.
While the company plans to issue debt regularly, Al-Murshed emphasized that it will not be overly frequent and revealed that Aramco has no plans to sell more debt for the remainder of 2024.
“We want to be active, but we don’t want to be too active,” he said.
The CFO further clarified that the company’s decision to sell debt is primarily aimed at broadening its investor base.
Al-Murshed did not specify whether Aramco would borrow to support its dividend payments, which are set to total $124 billion this year, exceeding the company’s earnings.
Earlier this month, Aramco reported a net profit of SR103.37 billion ($27.52 billion) for the third quarter of 2024, exceeding analyst expectations, which had projected a median net income of $26.9 billion.
However, in a statement released at the time, the company noted a 15.4 percent decline in net profit compared to the same period in 2023, attributed to challenging market conditions, including lower prices for crude oil, refined products, and chemicals.
Aramco’s vision remains to be the world’s leading integrated energy and chemicals company, operating in a safe, sustainable, and reliable manner.
