C O N F I D E N T I A L DUBAI 000041

SIPDIS

DEPARTMENT FOR NEA/FO; NEA/ARP FOR BMASILKO

E.O. 12958: DECL: 1/29/2019
TAGS: EFIN EAIR ECON PGOV AE
SUBJECT: EMIRATES AIRLINE AND DNATA TRANSFER TO INVESTMENT
CORPORATION OF DUBAI

CLASSIFIED BY: Jennifer Gavito, Acting Consul General, Consulate
General Dubai, UAE.
REASON: 1.4 (b), (d)

1. (C) On January 20, poloff met with Faisal Mikou, Executive
Vice President of Mergers and Acquisitions at the Investment
Corporation of Dubai (ICD), to discuss recent media coverage of
the transfer of Dubai-based Emirates Airlines and air travel
services firm Dnata to ICD. Mikou was puzzled by the press
attention, noting the decision to transfer occurred last year.
He did not, however, provide a direct answer as to why the
transfer took place. He explained that once the transfer was
complete, ICD could sell off percentages of Emirates and Dnata,
but only under appropriate market conditions. An Emirates
representative confirmed this in a subsequent conversation.
Mikou and the Emirates representative stressed that there was no
urgency to do so at the moment and that it is "business as
usual" for Emirates Airlines and Dnata.




2. (U) Vice President and Prime Minister of the UAE and Ruler of
Dubai Sheikh Mohammed bin Rashid al-Maktoum (MbR) established
the ICD as the investment arm of the Dubai Government in May
2006 with the transfer of the Government's investment portfolio
from the Department of Finance's Investment Division. ICD's
role is to supervise the government's investment portfolio. MbR
chairs ICD and board members can not be shareholders of any of
the ICD companies. ICD's portfolio includes approximately 70 -
80 percent of Dubai government-owned companies.




3. (U) On December 30, 2008, Emirates Group -- which includes
Emirates airline and Dnata -- confirmed its transfer of
ownership to ICD per a decree issued by MbR, but no reason was
given for the move. Emirates and Dnata will continue to be
wholly-owned by the government, yet indirectly by ICD. ICD is
now completing the process of transferring as many other of the
Emirates Group companies as the legal framework allows (only
those companies that are purely commercial and without
regulatory responsibility can be transferred to ICD).




4. (C) Comment: The conspicuous absence of an explanation for
the transfer of one of Dubai's key assets has sparked
speculation about the motivation for the move. One early theory
was that ICD's ownership of Emirates Group could mask the future
transfer of a percentage of the company to Abu Dhabi as payment
for a bailout of Dubai. A more likely possibility is that the
transfer allows the Al Maktoum family to comply with the letter
of the recent federal law restricting the business activities of
government officials without, in practice, losing control of
Emirates Group. End Comment.

GAVITO