The airline business in the Gulf is always interesting, the dynamics shift regularly.  As this year’s ATM approaches there are a number of challenges brewing with 2017 looking likely to be a tough year for the region’s airlines.

In a number of global markets traffic growth is not keeping up with capacity increases and airlines are feeling pressure on their revenues. Even Emirates reported profits down by 76% over its first 6 months trading in the current financial year.  Etihad has signalled a possibly more cautious approach to its strategy of equity investments as it seeks to reduce exposure to losses at its 2 European partners, Air Berlin and Alitalia. In the Low Cost segment, Fly Dubai saw sharply reduced profits for 2016.

Low oil prices have saved airlines money on their fuel bills, but equally much of the saving has been passed through to customers in the form of lower fares.  The other side of the coin is that lower oil has resulted in reduced travel by the oil industry itself, frequently a user of business class tickets.  This has had a big impact on profitability in a number of markets of key importance to Gulf carriers.

On top of this, security challenges and terror threats have softened demand, especially from Asian travellers who would have transited the Gulf hubs on their way to Europe and who have now cancelled bookings.  There’s been plenty of exchange rate volatility too and with a new US Government in office, there have been more difficulties for airlines to navigate in terms of restrictions on travel for passport holders from a number of countries.

All in all a bumpy ride in store and plenty to discuss with our airline leaders at the ATM come April!