IATA official: Profit of UAE airlines will likely fall this year

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The profitability of airlines in the United Arab Emirates, one of the Middle East’s two big aviation hubs, is expected to fall this year, the director-general of the International Air Transport Association (IATA) told reporters on Tuesday.

“The UAE carriers will have a year that is probably below 2016,” IATA Director General and Chief Executive Alexandre de Juniac told reporters in Abu Dhabi, adding that low-cost, long-haul service could also soon start to take hold in the region.

IATA previously said Middle East airlines are likely to see profits fall to $300 million in 2017 from $900 million last year in part due to high capacity and limited demand growth. It did not elaborate.

The UAE is home to Emirates, the world’s largest long-haul airline, as well as rapidly expanding Etihad Airways and low cost carriers flydubai and Air Arabia. Its carriers have often been some of most profitable from the region.

Half-year profit fell 75 percent at Emirates and the airline’s President Tim Clark said last week that while yield declines had halted it was still a tough year. Air Arabia and flydubai reported lower full-year profit for 2016 and while Etihad has not yet reported its results it has said it is undertaking a review of its business.

Airlines in the Gulf for years benefited from high oil prices that spurred government spending and regional growth. But demand has softened and travel budgets have tightened after more than two years of depressed oil prices, exposure to weaker markets and currency fluctuations.

Emirates and Etihad are both reviewing their workforce, while Emirates has agreed with Airbus to delay the delivery of 12 A380 jets over the next two years. Both airlines have hundreds of aircraft on order from Airbus and Boeing and neither has signaled further delays to deliveries.

But the growth of low-cost, long-haul airlines like Norwegian Air Shuttle is expected to continue to pressure established trans-Atlantic carriers with its expansion using longer-range single-aisle aircraft to fly between smaller, cheaper local airports.

“The way people travel, their decisions for travelling, the amount of money they’re prepared to pay, new entrants coming to market, long-range single aisles, it’s all changing,” Clark said on March 9.

Growth of low-cost, long haul is “starting to accelerate” in Europe and Asia and is likely to eventually develop in other markets such as the Middle East, de Juniac said.

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