(MENAFN- Gulf Times) Emirates airlines' Islamic bonds are beating regional peers after slumping oil prices cut costs for the world's biggest airline by international passenger traffic.
The yield on the Dubai government-owned carrier's $1bn of sukuk due 2023 dropped 27 basis points, this year to 3.64% at 2.06pm in Dubai yesterday, according to data compiled by Bloomberg. The average yield on sukuk sold by issuers in the Middle East climbed 17 basis points in 2015 to 4.49% on July 10, JPMorgan Chase & Co indexes show.
"Lower oil prices help airlines, so there are operational reasons why it has become popular," Abdul Kadir Hussain, Mashreq Capital DIFC Ltd's Dubai-based chief executive officer, who runs the Middle East and Africa's best two performing Islamic fixed-income fund this year, said by phone on Sunday. Amortisation of the notes has also accelerated, which is "keeping the prices pretty well supported because people don't really want to sell a bond on which they are going to start getting cash back," he said.
The share of jet fuel in the airline's operating costs declined to 35% in the year to March, from 39% a year earlier, as the price of crude dropped by about half. The Emirates Group reported its second-highest ever profit in the period.
The Islamic bonds sold in March 2013 pay a profit rate of 3.875%. About $757.9mn of the sukuk are outstanding as 4.7% of principal is repaid every six months, according to data compiled by Bloomberg. The 2023 sukuk "has definitely been one of our top performing picks in the last 12 months," Hussain said.
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