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Monday, 09 November 2009 07:58 UAE time

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Gulf carriers remain cautiously upbeat

by ArabianBusiness.com staff writer  on Thursday, 09 October 2008
NÄF: Gulf Air is progressing positively with its realignment strategy.

Some of the Gulf's major airlines are remaining cautiously upbeat about the 2008-2009 financial outlook despite predictions that the region's carriers will witness a slump in profit this year.

The International Air Transport Association (IATA) has predicted that Middle East airline industry profits will drop by US $100 million to $200 million in 2008 due to spiraling oil prices, but Gulf Air, Emirates Airline and Etihad Airways all believe they will weather the storm well.

"Gulf Air, like other carriers, is not immune to increasing oil prices or the global economic slowdown. The amount we pay per barrel is a big burden for the airline industry and the situation is definitely challenging," said Gulf Air CEO Björn Näf.

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This year will be a lot tougher than the last year, definitely.

"Industry figures have shown fuel costs increasing by $40 billion in one year. This is equivalent to the industry's entire fuel bill in 2002, which makes it difficult for airlines to forecast profit, with the worst-case scenario being several international airlines going bust.

"Against this scenario we are progressing with our realignment strategy and are continuing to see positive indicators resulting from this. In August we recorded the highest revenue in the airline's history despite having fewer aircraft, significantly reduced our non-fuel related expenses and increased our revenue per-available-seat capacity by 16%."

Näf said that by being based in the Middle East, the impact of the fuel prices and the global slowdown was "mitigated slightly".

"The Gulf is a major growth region in the world, which is expected to grow at 8% in the next 15 years. We are encouraged by this and we realise that we need to continue growing to meet this demand," he said.

He stressed that Gulf Air had ordered 59 new aircraft while nearly 50% of global new fleet orders derived from this region (approximately 500 aircraft).

"The size of the order clearly represents the rising prominence of the Middle East and its increasing emergence as a new focal point of global aviation," he added.

Etihad Airways, which reported its busiest summer period in its four-year history with more than 1.6 million passengers flying with the Abu Dhabi based airline in June, July and August, was also upbeat about its 2008 performance.

"Despite the significant challenges faced by the global airline industry, Etihad Airways is on track to meet its target of carrying six million passengers during 2008 and much of this growth can be attributed to the huge investment in Abu Dhabi, which continues to attract increasing numbers of business and leisure travellers to the UAE's capital," said Etihad spokesman Tom Clarke.

But Emirates Airline, which for the 2007-2008 financial year posted its 20th consecutive year of net profit ($1.45 billion), was more subdued about the year ahead.

"This year will be a lot tougher than the last year, definitely." said a spokesman.

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