The CEO of dnata Group has revealed the company can be ready with an IPO in six months should they get the directive. He also called the Dubai-based airport services and ground handling entity a “great IPO target”.
“Dnata is a good, profitable business and we could turn around [an IPO] reasonably fast. But would it be a good thing to do? I mean, one has to just look at the balance sheet,” Steve Allen told Zawya a day after the Emirates Group company reported an annual profit rise of 330% to UAE dirhams 1.4 billion.
Allen said that an IPO would only happen “once the bosses decide on it”.
“IPOs take a little bit of time because you need to make certain adjustments for your business. So, I would imagine it will be somewhere in the region of six months to one year if it were to happen. What helps is that we are a transparent business already. Our annual report is comprehensive, with regular quarterly reporting, so we won’t have too far to move on that.”
Speaking about dnata’s outlook for 2024/2025, Allen spoke about new verticals the company was focusing on in the short- to mid-term, including launching ground operations for private aircrafts in the US.
“We are actively looking at the US market to set up fixed base operations, basically providing ground handling for private aircrafts. We expect that to launch by next year.”
Without committing to investment targets for next year, Allen said the focus will be on more JVs and acquisitions in the pipeline, adding: “The big investment we have is not just on the retail side, although that is a massive opportunity for us. We have a large number of low-cost carriers talking to us currently, asking us to do the same we have done for easyJet and Air Arabia.”
Dnata’s Airport Handling unit is also set to launch operations at Rome Fiumicino (FCO), with a €20 million investment planned, to provide ground support equipment and employ 1,800 aviation professionals at FCO.
Through its JV with the Sharjah-based Air Arabia, dnata is also the sole flight caterer at Sharjah International Airport, a service it provides through Alpha Flight Services business.
“We will continue to pursue the growth strategy that we had pre pandemic, which was through acquiring smaller businesses and then growing them or through JVs where we grow together,” Allen continued.
According to him, dnata’s airport operations account for 46% of the company’s global revenue, followed by its catering and retail division at 34%, with travel driving 18% of the share.
“There is definitely more room for consolidation on the ground handling side, with the current big companies only covering about 35% of the business, so there’s a lot of opportunity there. If you look at the markets, then South America, the Far East, the Middle East are where there is room for consolidation. East Africa is another market that we are actively looking at,” he said, adding: “While Europe is fairly well consolidated, the US and Australia are developing markets where the biggest opportunities lie for us.”
Dnata is also poised to open its cargo facility in Amsterdam next year, poised to be its largest cargo operation with a Euros 40 million investment, with a €100 million commitment over 20 years. A cargo facility in Erbil, Iraq will also begin operations by November, a $14 million investment.
Allen further revealed that while dnata already accounts in the big three on the catering side, they are focussed on being the “number one travel agent in the Middle East,” with big room for growth in Saudi Arabia and Oman.
Speaking about financing, Allen said the company has “massive investments planned for buying new sustainable equipment,” to achieve its target of reducing its carbon footprint by 50% by 2050.
However, Allen declined to comment on numbers, adding: “We have mapped out what it will take to get us to 2030 and we will gradually introduce that over the time. If you look at our cash flow projections, we can envisage that there will be plenty of cash available for those investments.”
Quizzed whether dnata would consider tapping the bonds or sukuk markets, Allen did not rule it out. “If we saw a really good opportunity, then we could tap into those markets, but we have no plans at moment.”
Allen also spoke about dnata’s eventual move to the new $34.87 Al Maktoum Airport, revealing that the company had set a target for 2032, two years before Emirates eventually moves its operations to the new facility.
“There is a terminal building and an existing runway there already, but it all depends on the final design as to when exactly things will open. We will go through various design phases, but the big shift will happen anywhere between 2030 and 2035, in phases,” he said.
(Reporting by Bindu Rai, editing by Seban Scaria)
bindu.rai@lseg.com
