By Alexander Cornwell
ABU DHABI (Reuters) - The profitability of airlines based in the United Arab Emirates, the Middle East's main aviation hub, is likely to fall this year amid limited growth in demand, the head of IATA said on Tuesday.
The UAE is home to Emirates, which flies more passengers long haul than any other airline, as well as rapidly expanding Etihad Airways and low cost carriers flydubai and Air Arabia (AIRA.DU).
"The UAE carriers will have a year that is probably below 2016," Alexandre de Juniac, director general and chief executive of the International Air Transport Association (IATA), told reporters in Abu Dhabi. Low-cost carriers that offer long-haul services, as seen in Europe, could also soon start to take hold in the region, he said.
IATA said in December that Middle East airlines are likely to see profits fall to $300 million in 2017 from $900 million last year in part due to high capacity and limited demand growth, but did not give specifics on UAE carriers at that time.
Half-year profit fell 75 percent at Emirates and the airline's President Tim Clark said last week that while yield declines had halted it was still a tough year.
Air Arabia and flydubai reported lower full-year profit for 2016, while Etihad has not yet reported its results but has said it is reviewing its business.
Airlines in the Gulf benefited for years from high oil prices that spurred government spending and regional growth. But demand has softened and travel budgets have tightened after more than two years of depressed oil prices, exposure to weaker markets and currency fluctuations.
Emirates and Etihad are both reviewing their workforces, while Emirates has agreed with Airbus (AIR.PA) to delay the delivery of 12 A380 jets over the next two years.
Both airlines have hundreds of aircraft on order from Airbus and Boeing (BA.N) and neither has signalled further delays to deliveries.
De Juniac told Reuters that airlines across the world need to "manage their assets cleverly."
"There is a lot of capacity so it explains why the yield is declining and many companies are suffering," he said, but added that he "would not advise" airlines on how to define their capacity.
The growth of low-cost airlines that fly long haul, like Norwegian Air Shuttle (NWC.OL), is expected to continue to pressure established trans-Atlantic carriers as these newcomers expand using longer-range single-aisle aircraft to fly between smaller, cheaper local airports.
Growth of low-cost, long haul is "starting to accelerate" in Europe and Asia and is likely to eventually develop in other markets such as the Middle East, de Juniac said.
(Editing by Jason Neely and Susan Fenton)
8 comments:
No reason to panic.
Muddle East Airlines dying soon.Crews will balek Kampong due to reduced passenger load.Magic Carpet ride over, subsidised by Billions on oil.At below fifty ,and even more discoveries in Alaska and Russia,Egypt, Shale discovery, real economic style of running Airline will begin.Got jobs for Ex CEO Airlines coming ?Good days over. Trump will dismantle any subsidies by blocking access to USA.SQ will gain by crew migrating here.
Doubt so. The reason why I don't fly with Emirates is bcos their crew are rude. Now I fly with Singapore Airlines.
Their crew are rude? Some SQ crew aren't friendly either, being nicer to Western male passengers or those travelling First Class/Business. EK crew don't discriminate.
Not panic ,but happy due to rooting for SQ.Don't blame me,no subsidy of oil.Level playing field now.
Here we go again. Generally, most Crews from all Airlines are not intentionally rude unless, the three comforts are taken care of and of course ,fishing and sizing up big fishes and expat are fair game.Mono syllable answers are not conducive to conversations and most expats seems to be free and easy.However, due to the Brexit and turmoil in the world and low low price of oil,the execs are not traveling more than before,many majors company seems to be cutting back from Bankers to oil and automotive. When a war is raging on in Iraq ,Syria,Korean and SCS, major investments seems to stop.Don't blame the Crews,Investment in India the last.
No one ever in whatever form have able to conquer India after Alexander the great.Plus the passengers profile is not good.So expect a bad investment decision and thus loss of jobs in the Muddle East Air.Fishing for a partner is not a crime, only distasteful to the wrong party.
You seem to think the middle East airlines do well mainly due to fuel subsidy. WRONG!!!!
They do well because their service is good and their products are not outdated.
Guess it helps when you don't have Ah lian/Ah beng sounding flight attendants serving discerning passengers.
Legacy Airlines in USA says so on the proposed new route by the ME Airlines.Claimed subsidies of 50 billions.Trump would surely act by building on the Air too if possible to save US jobs.Read the above thorougly.As consumer pricing is good but subsididues is not possible at less than $50 US dollars.Saudi is going into industries from oil.Where can see the light when Saudi the biggest producer goes into industry ?See ahead,far far ahead.CX already loss this financial year,Jobs losses.Wont be surprise it spread to all Asian Airlines.Never say its bad but the parties for the Magic Carpet is going into fairy tales land.La la land ?
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