Emirates, the world's largest airline by international passengers, is talking to banks about raising as much as US$1 billion through an Islamic bond sale that could happen in the first half, people familiar with the matter said.

The Dubai government-owned carrier joins a list of regional issuers seeking funding from international debt markets before higher U.S. interest rates push up borrowing costs. International bonds are particularly popular as cheap oil limits local banks'ability to underwrite large debt sales or to extend loans.

Emirates, which has built its Dubai operations into a hub for transcontinental traffic between the U.S., Europe and Asia, has been a regular borrower in the aircraft-financing loan market. Another reason the company is seeking a sukuk is that it wants to diversify its funding, the people said, asking not to be identified because the talks are private.

"Emirates always seeks diverse sources of funding, including bank finance, operating leases, Islamic financing, sukuk and bonds," a spokeswoman for the carrier said. "We are continually engaged in discussions with various financial institutions. We will not offer comment unless a deal is formally announced."

Record Pace

Governments in the Gulf Arab oil-exporting countries borrowed from international bond markets at a record pace in 2017 as they sought to cover budget deficits worsened by low crude prices. Saudi Arabia led the pack, raising US$21.5 billion through sukuk and other bonds, followed by Abu Dhabi's US$10 billion issue and Kuwait's $8 billion fundraising, data compiled by Bloomberg show.

Companies and banks may join sovereigns in the race to secure funding this year as they face a debt wall of about US$60 billion of syndicated loans and bonds falling due.

Emirates raised US$913 million through a sukuk issue with a 10-year lifespan in 2015. The Islamic bonds were guaranteed by the U.K.'s export-finance agency, with the proceeds funding the acquisition of four Airbus A380-800s --the world's largest passenger aircraft.