Not even the Middle East immune to airline troubles
Published: 04 Aug 2008:The headwinds that have buffeted North American airlines are quickly spreading to Europe and Asia, and it would appear even the high flying Middle East carriers are not immune, according to an analysis by Center For Asia Pacific Aviation (CAPA).
Emirates President, Tim Clark, has said that soaring fuel costs had "knocked us for six", and the carrier has dropped its US$1.5 billion profit forecast this year. Clark added, "the way things have gone, a few hundred million dollars [profit] would be fine".
Emirates´ Clark described the present conditions as "probably the biggest crisis the industry has faced in the post-war era". Fuel used to account for 12 percent of Emirates´ costs, but has now reached 45 percent. Clark added, "We´re determined to weather this, even if it means compromising gross profits this year. We´ve got over USD4 billion on the balance sheet, so we´ve got enough cash."
The Emirates President forecasts an easing in fuel costs as the year progresses, predicting the price of oil to range between US$85-105 per barrel this time next year. However, if oil had spiked to US$170 per barrel in its recent surge, Clark estimates 25 percent of the world´s fleet "would have busted by the end of next year".
But cross-town rival, Sharjah-based LCC, Air Arabia, is bucking the trend, revealing a 14 percent increase in net profit for the three months ended 30-Jun-08 to US$22.3 million, on a 34 percent lift in passenger numbers. With a net margin of 16.8 percent, Air Arabia would have to be the world´s most profitable airline at the present. Its mix of low costs and access to rapidly expanding economies and travel markets makes it almost uniquely positioned in today´s difficult environment, highlighted CAPA.