Europe’s big airlines fly above turbulence of Gulf

If Emirates chief Tim Clark is worried about “the gathering storm” in global aviation, then IAG’s Willie Walsh can see the silver lining.
British Airways owner International Airlines Group (IAG) said on Friday it expected a double-digit rise in operating profit this year after a strong second quarter — in sharp contrast to rival Gulf carriers including Emirates and Etihad Airways, who have reported markedly tougher conditions.
“All we can say is what we see,” said chief executive Willie Walsh. “Clearly what we see in terms of our performance does appear to be somewhat different to what others are saying.”
Air France-KLM added to the brightening horizon over European skies when the group reported better-than-expected earnings.
The narrative emerging from the big European carriers this summer contrasts sharply with that of their rivals in Dubai, Abu Dhabi and Doha — where regional political tension, a glut of planes and weak passenger demand has cast a pall over the sector.
Etihad on Thursday reported a net loss of $1.87 billion for 2016, despite carrying record passenger numbers, as losses from some of its equity alliance partners hit home. The Abu Dhabi-based carrier said it took total impairments of $1.9 billion — including an $808 million charge on exposures to equity partners, mainly related to Alitalia and airberlin.
Emirates has also had a tougher than usual year. In May, Emirates Group, which includes the airline and ground-­handling unit dnata, reported a 70 percent year-on-year drop in profits.
At the time, the Emirates Group chairman said he expected the year ahead “to remain challenging with hyper competition squeezing airline yields, and volatility in many markets impacting travel flows and demand.”
Stephen Furlong, an aviation analyst at Dublin-based Davy Research said that improving conditions in Europe contrasted with external factors affecting the Gulf, such as the travel policies of US President Donald Trump as well as the fallout from the crisis in Qatar.
“In Europe demand has been getting better, helped by the Macron bounce even after all the appalling terror attacks of the last year,” he told Arab News.
“Despite Brexit and everything else, do people still want to go on holiday to places like London and Paris? Yes they do.”
The latest data from global aviation body International Air Transport Association (IATA) shows how passenger growth in the Middle East has lagged the global average as a ban on the carriage of large portable electronic devices in the cabin from ten airports in the region to the US, has depressed demand.
Middle East carriers reported a 3.7 percent rise in demand in May from a year ago compared to growth of 7.6 percent globally for the same month.
The IATA data reveals that all regions excluding the Middle East and North America, posted record-high load factors in May — helped by falling airfares which were about 6 percent lower at the start of the second quarter than a year before.
Tim Clark, who joined Emirates in 1985 and helped to transform Dubai into a global aviation hub, this year warned about what he described as a “gathering storm” as the airline faced new competitive pressures.

Source: Arab News