Gulf airlines stand to take a financial hit from the US ban on electronics in aircraft cabins as they roll out measures to deal with the controversial policy, experts have warned.
The costs could stretch into the millions of dollars if airlines are forced to put on new staff, add additional screening systems for checked-in devices and offer in-flight laptops, as Emirates proposed on March 27.
The Dubai-based airline had already announced it would provide a free packing-and-handling service for passengers on flights hit by the ban on electronic devices larger than a standard smartphone. Passengers will be allowed to hold on to their devices until boarding, when security staff at the gates will pack them into boxes and load them onto the flight. They will be returned to passengers on arrival in the US, free of charge.
Emirates president Tim Clark has since said the airline is considering loaning government-approved laptops to passengers during flights — “to help people do what they need to do in the absence of devices that are in the hold”.
Etihad Airways, meanwhile, said it would offer free Wi-Fi and iPads to first and business class passengers on all its US-bound flights from Abu Dhabi.
No details were revealed as to the bill for the services. But industry experts tell Arabian Business there are certain to be costs involved in coping with the ban.
Dubai-based aviation analyst Mark Martin, founder and CEO of Martin Consulting, claims Gulf airlines will require at least 10 extra “resources” (ground handling staff) per affected flight, one more screening machine at an average cost of $20,000 and one or two ‘sweetener’ measures to enhance in-flight entertainment, such as laptops for hire.
He says the additional ground handling staff are unlikely to be transferred from other divisions, because Gulf airlines, like other non-unionised airlines around the world, already face higher than average workforce attrition rates — about 30 percent per year compared to 15-18 percent for unionised airlines.
“Making a few new hires would be the right course of action. You could stretch the existing shifts but that would be risky in terms of workplace fatigue,” Martin says. “I believe most airlines view recruitment as an investment, particularly given the higher attrition rates at non-unionised airlines.”
Airport delays and disruptions as a result of increased paperwork and lengthier check-in times could incur further costs, although the three main Gulf airlines — Emirates, Etihad and Qatar Airways — have insisted that no US-bound flights have yet been delayed.
Chief analyst at StrategicAero Research, Saj Ahmad, says the US policy could have the domino effect of other airlines attempting to monetise it. For example, they could introduce a chargeable version of Emirates’ packing-and-handling initiative where passengers pay a fee to have their device placed in the cargo hold before boarding.
“Airlines will go to any length to extract money from passengers if they can get away with it,” he says. “In terms of exact cost, it’s hard to pin down and likely that none of the affected carriers will want to disclose this, but given the relatively small number of GCC airlines that service the US direct, the cost could feasibly be in the low [single digit] millions per annum.
“The real pacing item of such costs will be how long the US wants to keep this rule in place — or whether it chooses to expand it. Beyond that, it is likely that US airfares may get more expensive, to offset the logistical inconvenience of this rather odd ‘security’ policy.”
Neither Emirates, Etihad nor Qatar Airways would comment on the financial impact on their operations, while Dubai Airports insisted at the time of writing there had been “no discernable impact on our operations since the implementation of the ban”. It said that 4.6 percent of total passenger traffic in February was travelling to or from the US.
However, Emirates’ Clark said the rate of bookings growth to the US had dropped in the days after the initial ban by President Donald Trump. He told Bloomberg TV the policy “won’t help” demand for Emirates’ 18 flights a day to the US, while a true assessment of the ban’s impact could emerge later this month as travellers plan summer holidays.
The restrictions were announced on March 21 in response to a “substantiated” and “credible” terror threat to the West earlier in the year, according to US authorities. Electronic devices were banned from the cabins of US-bound foreign airline flights from eight Muslim-majority countries, including the UAE, Qatar, Saudi Arabia, Kuwait, Morocco, Jordan, Egypt and Turkey.
The restrictions apply to any device larger than a mobile phone, US officials said, and warned that extremists plan to target passenger jets with bombs hidden in devices including laptops, tablets and portable DVD players. Such devices will now be stored in the cargo hold.
The following day, UK authorities tightened security on flights from the Middle East, Turkey and North Africa. However, the British ban involves only six countries, two of which — Lebanon and Tunisia — do not feature on the US list. Nine airlines in total are affected by the policy.
Transit passengers could bear the brunt of the ban, which applies both to originating and connecting passengers. “Under the policy, the 30-minute or one-hour flight connection is history — electronic devices will have to be screened separately, and in addition to, regular transit luggage,” Martin claims.
The ban is expected to prompt some Gulf passengers to opt for indirect flights to the US or choose unaffected airlines. This would affect demand for Gulf carriers’ long-haul flights, but experts concede it is too early to get a meaningful picture.
JLS Consulting director John Strickland says: “Direct flights have a real value, not only in time and reduced fatigue. But at this point it’s difficult to quantify how many passengers may take an indirect, longer routing.”
Aviation industry body International Air Transport Association (IATA) told Arabian Business the ban would impact more than 700 flights per week between the UK and US and countries in the Middle East, Turkey and North Africa. IATA CEO Alexandre de Juniac added that the ban would have "significant impact" on airline revenues.
Andrew Charlton, managing director of Switzerland-based Aviation Advocacy, says: “There are a lot of issues here. The impact on Gulf carriers depends on three things. First, and most obviously, how long the ban lasts, and that is not clear.
“Second, the extent to which other nations follow suit. If few do, the impact on Gulf carriers will be greater, as it disadvantages travel with them as travellers look for alternative routings.
"On the other hand, if more countries bring in the ban for inbound travel to their country, clearly, the impact will be felt across the board. But again, the Gulf carriers have a lion’s share of the uplift so will be impacted in line with their market share.
“The third factor is what mitigation measures are put in place. Emirates has done some sensible things, but whether they are doing that just at Dubai or the port of embarkation, too, is key. In other words, is the entire journey going to be without a laptop, or only the Dubai-US leg? If the second, the impact is again lessened, but not eliminated.”
However, Ahmad notes that Gulf carriers serve only around a dozen US routes each in contrast to their massive presence in Asia, Europe, the GCC, Africa and Australasia.
“So, in the grand scheme of things, Dubai Airports CEO [Paul Griffiths] was right when he said the impact would be marginal, especially when you consider that premium cabins have come under immense pressure of late from a pricing and competitive standpoint as travellers eke out the best fares," he says.
In short, many business travellers — who are arguably those most likely to be irritated by the laptop ban — may have already been choosing cheaper alternatives to Gulf carriers.
Beyond the commercial impact, analysts lament security shortcomings in the new policy. “It’s the most ridiculous regulation anyone’s ever seen,” Martin says. “If a bomb was to explode in the cargo hold it would do more damage there than in the cabin because the pressurisation points are stronger.
“Instead of ramping up security restrictions on passengers, authorities should be better screening the resources that have regular and direct access to aircraft operations — catering teams, cleaners, flight dispatchers.
“This all reeks and stinks of a covert attack on Middle Eastern airlines [following the ongoing competition dispute between Gulf and US carriers].”
Qatar Airways CEO Akbar Al Baker, usually outspoken, told reporters in London he disagreed with the notion it was a deliberate attack on Gulf airlines: “I don't think it’s fair for me to say it is targeting Gulf airlines. As far as I am concerned it is a security measure and we have to comply with that.”
Bennet Waters, a counterterrorism expert at the Chertoff Group, who served in the US Department of Homeland Security, told Time magazine there was rationale behind the policy. He said: “[Cargo] bags are screened in a different way, often using more advanced technology. The policy separates the devices from their owners, and places them in the hold as opposed to having them potentially moving about in the cabin.”
It is also harder for someone to detonate a bomb when it is in cargo, as it requires a timer or trigger device that works with the barometric pressure.
Charlton says: “The logic is that a bomb in something like an iPad is small, and to be effective needs to be put against the skin of the airframe. That is possible to arrange when one has a window seat.
“In the hold, the baggage will muffle the explosion and there is a much lower chance that the bag holding the bomb is by the edge of the airframe, so, arguably, it is safer.”
But others remain unconvinced. “Given the use of lithium batteries, packing laptops in the hold requires very cautious treatment due to fire risk,” Strickland warns.
Richard Aboulafia, vice-president of analysis at Teal Group, says: “I’m concerned, as an aviation analyst and as a [US] citizen. It’s possible government officials are being truthful and that there has been intelligence that led to these measures, but I have my doubts, since the US carriers are completely unaffected.
"[The inclusion of] Abu Dhabi in particular is curious, since the US has a pre-clearance [visa] facility there.
“There are profound consequences if this move was not based on actual intelligence. The people implementing this ban are charged with the safety of the traveling public. If it was the result of political and/or commercial, rather than safety, considerations, it would damage the reputation and independence of those agencies. We could be looking at a very cynical and dangerous political manoeuver.”For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.