Hard Landing: GCC carriers tighten belts in turbulent times

By Shayan Shakeel 3 April 2017
Hard Landing: GCC carriers tighten belts in turbulent times Middle East carrier profits in 2017 will fall US$600 million from 2016: IATA

On a bright Monday morning in June in 2015, the world’s airline executives gathered in Miami to celebrate 70 years of the International Air Transport Association’s lobbying efforts, bullish and beaming at the prospect of a strong year in the black.

“For the first time in our history, the airline industry as a whole will earn its cost of capital,” IATA’s then director general Tony Tyler told reporters at the event.

Most of that profitability–the fastest growth rate since the post-recession spike in 2010–would come from North America, where carriers would generate nearly $25 in profit per passenger flown. The Middle East generated a more humble $7.71 per passenger in comparison, the world’s lowest margin according to IATA’s annual report. However, this figure included carriers such as Gulf Air, Oman Air and Kuwait Airways, which were all in the middle of announcing fleet modernisation and strategic revival strategies.

The GCC was a different story. In a year when global industry net profits totalled $35.3 billion, Dubai’s Emirates, the world’s biggest international airline, announced figures of $1.24 billion (AED 4.5 billion), a 40 percent increase from the year earlier. Emirates announces its annual results in May, and in 2015-2016 net profit would surge another 56.4 percent to nearly $2 billion. To put that into even deeper perspective, Emirates’ profit margins in 2015-2016 at above 8 percent matched the global average and were four times that of the combined Middle East’s figure.

The GCC’s other carriers recorded strong numbers as well. Qatar Airways net profit until March 2016 quadrupled to $445 million. And in what would become the holy grail of luxury, typical of the ‘world’s five star airline’, Etihad introduced its first class Residence Suites, round trip to New York on which would set a traveller back $32,000. The same year, the UAE’s national carrier’s announced 2015 profits of $103 million, it’s strongest to date.

In 2016, the bull run braked hard.

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