Emirates

Qantas restructures in a bid to wrest back the initiative in a turbulent world

Qantas today announced a substantial reorganisation of its management structure designed to create greater accountability and transparency among its different business units. This comes at a time when the international aviation scene is in a greater state of turbulence than ever before, with alliance and partnership relationships reaching a critical stage.

Splitting domestic and international operations into two separate business units and giving each its own separate P&L is not a unique strategy in any industry and arguably at a time like this gives the Group a better handle on formulating strategy for the future.

Coming in the wake of local competitor Virgin Australia dividing its domestic and international businesses into what are effectively separate companies (something that Qantas is unable to do, thanks to political restrictions set in the Qantas Sale Act), this does also set Qantas up for something similar in the future.

Fuel, foreign exchange and global events hit Emirates' profits, but momentum not slowed

A combination of high oil prices, regional political instability, volatile exchange rates and Emirates’ exposure to the global economic situation has brought the carrier back towards its international peers. Emirates reported a net profit of AED1.5 billion (USD409 million) in FY2011-2012, a dramatic 72.1% drop on the previous year’s result.

Even with the stiff headwinds pushing against it during the year, the carrier continued undaunted with its growth strategy. In FY2011-2012, Emirates took delivery of 22 new widebody aircraft and added 11 new destinations – a record number of new routes for the airline in a single financial year. It flew 34 million passengers at an 80% passenger load factor and increased its overall passenger traffic (revenue passenger kilometres) by just under 10%. Emirates now connects 122 destinations on six continents from its hub in Dubai.

Overall, revenue at the airline reached AED61.5 billion (USD16.7 billion), an increase of 16.5% from the previous year. Passenger revenue climbed 18.2% year-on-year, to AED49 billion (USD13 billion) due to the overall expansion of passenger numbers and flying, as well as higher fares.

Etihad Airways gets springboard into Northern Europe with 2.9% stake in Aer Lingus

The United Kingdom is emerging as an end-game country for the Middle East triumvirate: Emirates has firmly planted itself across the country, Qatar Airways is cosying up to British Airways and Etihad Airways’ 2.9% stake in Aer Lingus has the potential to give it a springboard into the UK, codesharing on Aer Lingus’ wide Ireland-UK network.

The purchase is a minor investment at Aer Lingus’ present share price of under EUR1, but it represents an opening gambit for a further stake, as well as to develop a partnership and codeshare arrangements. Etihad has developed large virtual networks and has bought into carriers, but the Aer Lingus deal could come to make the UK/Ireland the highest strategic saturation point for the Middle East network carriers. In that view, Etihad’s stake was as much strategic as it was defensive. For Aer Lingus there is also a possibly warm feeling, as British Airways recharges its Ireland services, post-bmi acquisition.

flydubai edging towards profitability, making it the fourth profitable carrier in the UAE

flydubai looks like it is set to join sister carrier Emirates in the black this year, according to CEO Ghaith al Ghaith. While it is too early for the carrier to provide an estimated figure, Mr Al Ghaith, talking to Gulf News, said flydubai expects to make a profit in what is just its third full year of operations. However, the CEO expects a "difficult year with the increase in oil prices".

The Middle East continues powerfully on thanks to the Gulf carriers, despite some setbacks

The Gulf carriers continued to go from strength to strength in 2011; Etihad made its first (narrow) profit and Emirates again returned the strongest result of any airline globally, even though it was substantially affected by increased fuel prices.

The three major sixth freedom hubs in the Middle East – Abu Dhabi, Doha and Dubai – added 7.7 million passengers between them in 2011, continuing strong growth, despite the regional disruptions. Much of this is testament to the strength of the home carriers, the industry-aligned development policies pursued at each airport and the vision of local governments to transform their cities into major aviation centres. (The contrast with European governments is extreme, as they meanwhile continue to see the sector as a taxation target, to the great detriment of the industry there.)

Middle East regional carriers have profitable outlook for 2012

IATA’s latest 2012 industry forecast has airlines in the Middle East as the big winners, with the annual profit forecast for the region's airlines revised from USD300 million to USD500 million. It does come with a caveat though: a spike in oil prices could turn the forecast profit into a USD200 million loss for the region’s airlines.

In 2011, airlines in the Middle East reported a combined annual profit of approximately USD1 billion, according to IATA’s estimate. Despite the regional disruptions and spiralling price of oil, passengers in the region kept flying and Middle Eastern carriers increasingly developed their links with the rest of the world.

As they have been for years, financial results for Middle Eastern carriers were unevenly spread across the region.