Middle East carriers face a challenging 2017
The international Air Transport Association IATA is predicting a drop in profitability for UAE carriers in 2017, and the recent ban from the USA and UK on large electronics devices on board could further add to Middle East airlines woes for the time being.
“UAE carriers will have a year that is probably below 2016,” IATA Director General and Chief Executive Alexandre de Juniac told reporters in Abu Dhabi, adding that low-cost, long-haul services could also soon start to take hold in the region.
IATA previously said 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.
The UAE is home to many carriers. Emirates, based in Dubai, is the world’s largest long-haul airline, but faces increased competition from its rival based in Abu Dhabi, Etihad Airways.
The UAE has also two home-based low cost carriers: flydubai and Air Arabia, based in neighbouring Sharjah. AirArabia is a very important player in the budget travel segment. The airline serves some 50 destinations out of Sharjah including Europe (Kiev, Istanbul & Rome).
All these carriers have regularly been among the most profitable from the region, but times are changing due to a series of factors that are squeezing profits. Earlier this year, Emirates President Tim Clark spoke of a “flat” 2017 for the airline, as external factors impact its business.
Emirates in fact reported a 75% drop in net profit in the first half of the 2016-17 financial year compared to the same period of 2015; the equivalent of US$214 million. Air Arabia and flydubai reported lower full-year profits for 2016 and while Etihad has not yet reported its results at time of writing, it has said it is undertaking a review of its business.
WILL ELECTRONICS BAN PARTIALLY DERAIL GROWTH OF MIDDLE EAST CARRIERS?
A new problem emerged recently with the ban by the United States and UK of electronic devices in cabins of selected airlines, all from the Middle-East and North Africa. Close to 750 flights per week (400 to the UK, 350 to the USA) are affected by the ban according to IATA.
IATA president Alexandre de Juniac says the ban will have a “significant impact” on airline revenues as it will encourage some passengers to seek indirect routes to avoid the inconvenience of flying through Abu Dhabi, Dubai, Doha, Istanbul, Kuwait or Cairo. Britain also includes Tunisia but excludes UAE airports.
US officials said the measure was intended to avoid possible terrorist attacks on airlines with explosive devices hidden in consumer electronics.
“The current measures are not an acceptable long-term solution to whatever threat they are trying to mitigate,” said de Juniac. “Even in the short-term it is difficult to understand their effectiveness. And the commercial distortions they create are severe. We call on governments to work with the industry to find a way to keep flying secure without separating passengers from their personal electronics.” Meanwhile, affected airlines are working on solution to soften the possible impact of the US ban on bookings. Airlines such as Emirates and Turkish allow passengers to keep their electronic device up to the boarding gate. Airlines affected by the U.S. ban on electronic devices are finding ways around the measures, introducing free Wi-Fi, tablets and laptops aboard US-bound flights as an alternative.
US officials explain the directive will run until October 14, 2017. But it could still be extended for another year. It will depend very much of Middle East carriers’ persuading skills over American authorities.