Piloting the UAE's turbulent flight path

There has been plenty of gloomy news for the country’s airlines but clear skies are ahead, says Courtney Trenwith
Piloting the UAE's turbulent flight path
Flying low Etihad, Emirates and Qatar Airways are forecast to have their slowest growth expansion in a decade in 2017, according to CAPA.
By Courtney Trenwith
Sat 28 Jan 2017 01:18 AM

There was a lot of, let’s say ‘less-than-positive’, news about the UAE aviation industry last week.

Of course, the top headline was the departure of James Hogan from Etihad Airways Group. After at least a decade at the helm, he says he is moving to an investment company, along with his chief financial officer, James Rigby.

While Hogan may not be leaving Etihad on as smooth a route as he would have liked, the 60-year-old aviation veteran has indisputably helped the national carrier soar to the lofty position of being included as one of the ‘big three Gulf carriers’, something that airlines with several more decades of flying experience (Kuwait Airways, Saudi Airlines, Gulf Air (of which Hogan also led prior to Etihad, for example) have still not managed to achieve.

Hogan led a strategy at Etihad that has seen airlines globally re-assess their partnerships and question the value of large global alliances. While not everything has worked out as hoped and those partnerships are currently being re-assessed, the strategy has made a significant difference.

Etihad is not the only GCC airline reviewing its corporate structure and balance sheet. Dubai-based Emirates Airline confirmed to Arabian Business last week that it has made some positions redundant.

The airline said “a very small number of staff” had been affected and they had all been offered other positions within the company, including more junior roles.

In November, the airline reported a 75 percent decline in half-year profit. It has also warned it could cut routes.

Separately, Dubai International Airport CEO Paul Griffiths revealed last week he expects passenger growth at the world’s largest airport to slow over the next eight years due to capacity limitations.

The airport’s 7.2 percent passenger growth in 2016 was its second slowest growth rate in at least eight years, with the slowest in 2014 when runway work limited operations for 80 days. Griffiths said growth would be “incremental” until the airport hit 118 million passengers a year in 2023.

The situation is reminiscent of China. We watched in awe as the second largest economy continued to record skyrocketing growth in the teens, only to now lament at its annual increases of 6-7 percent — two, three, even four times the growth of developed countries.

In the case of Dubai, we will need to start viewing the city’s aviation measurements as a whole; while Dubai International adds several million passengers a year, so does the emirate’s second airport, Al Maktoum International. By 2025, Al Maktoum International is expected to accommodate 120 million passengers, including those on Emirates.

The inauguration of Donald Trump as US president also saw analysts warn that the Gulf airlines’ growth could be threatened by greater protectionism in the US, where multiple new routes are being announced by Gulf airlines each year.

But while there may be turbulence currently, the outlook is certainly bright. The Middle East is leading all other regions in demand growth, with a 12.2 percent increase in the year to November 2016, according to IATA. It is safe to say a significant majority of that growth is in the GCC. With the Middle East’s population growth also among the highest in the world and incomes rising, demand is not going to slow for the foreseeable future.

Airlines’ success will come down to their navigation of the turbulence, including how they rein in costs and increase efficiencies. Their ability to do that will also determine when they emerge from the grey clouds.

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