Business | Aviation

Industry’s growth to be fuelled by the five national airlines

The aviation industry contributes $22 billion to Dubai’s GDP while it also contributes about 15 per cent to the UAE’s GDP

  • By Saifur Rahman and Shweta Jain, Business Editor and Senior Reporter
  • Published: 16:22 December 25, 2012
  • Gulf News

Emirates airlines
  • Image Credit: Megan Hirons Mahon/Gulf News Archive
  • An Emirates aircraft takes off. Emirates has grown rapidly in 2012, with the launch of 15 new destinations.

Dubai:

The eventful year 2012 will be remembered in the history of the UAE’s aviation industry for a number of developments — the first being Etihad Airway’s acquisition of stakes in a number of airlines.

The nine-year-old has become profitable — for the first time in history — while most global carriers have been struggling. The airline currently has a fleet of 67 aircraft, flying to 86 destinations, serving more than 10 million passengers this year with more than 10,000 employees.

The UAE flag carrier picked up a 40 per cent stake in Air Seychelles, within a few months after acquiring a 29 per cent equity in Airberlin for just $105 million in December 2011 — followed by a 10 per cent stake in Virgin Australia and a 3 per cent stake in Aer Lingus later in 2012.

“Today, we have codeshares in place with 41 partners, expanding our network of destinations to 327 major cities — more than any other Middle Eastern airline,” James Hogan, President and Chief Executive Officer of Etihad Airways, told Gulf News in a recent interview. “Our equity stakes are not about seeking control; they are about cementing partnership — partnership that will deliver growth in a constrained and challenged global landscape. They are about us putting skin in the game, betting on the success of our commercial relationships.

“This year, those partnerships will deliver something in the region of 20 per cent of our total revenues.”

Side by side, Emirates, the biggest carrier of international passengers, continued to deliver strong results. Although the airline’s net profit for the financial year ended March 31 declined 72.1 per cent to Dh1.5 billion ($409 million), down from Dh5.38 billion due to high oil prices, the airline matched the entire year’s profits during the next half year — when the airline’s net profit crossed Dh1.7 billion ($464 million) up 104 per cent from Dh836 million ($228 million) reported during the first half year of the previous year.

By the end of the financial year, Emirates had carried 34 million passengers. That was a strong comeback by the Dubai-based airline, underlining its resilience, backed by the attractiveness of its hub city Dubai — both as a business and leisure destination.

“Emirates remained focused on its growth and global expansion despite on-going fluctuating exchange rates and ever lingering high fuel prices which accounted for 39 per cent of our expenditures, down 2 percentage points from last year,” Shaikh Ahmad Bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Airline and Group, said in a statement last month. “The instability in the market over the past six months has put Emirates to the test, and once again we have risen to the challenge, our results speak for themselves.”

Emirates’ has grown rapidly in 2012, with the launch of 15 new destinations including Rio de Janeiro and Buenos Aires on January 3, 2012 and includes Dublin, Dallas Fort Worth, Seattle, Lusaka, Harare, Ho Chi Minh City, Barcelona, Lisbon, Erbil, Washington DC, Adelaide, Lyon and Phuket.

“The airline industry still faces many challenges — the price of fuel will continue to be a major issue with airlines needing to become more efficient and eliminate unnecessary costs. However, when fuel represents more than 40 per cent of our operating costs, it’s not as straightforward as it might sound,” said an Emirates spokesperson.

In 2012, Emirates has also strengthened its ties with Down Under. On September 6, Emirates and Australian carrier Qantas announced a partnership which will see Qantas move its hub for European flights from Singapore to Dubai and enter an extensive commercial relationship with Emirates.

On the marketing side, the airline has also launched a new ten-year campaign titled ‘Hello Tomorrow’ replacing its decade-old tagline ‘Keep Discovering’ theme. The new campaign focuses more on people and cultures — reflecting the fact that the airline creates a major bridge connecting various cultures and societies.

Towards the end of the year, Dubai International Airport, which has begun testing its third concourse — Concourse A, that will increase its passenger capacity to 75 million passengers, up from 60 million, has also surpassed Hong Kong in traffic to become the world’s third biggest airport hub for international passengers, after London Heathrow and Paris Charles de Gaulle. By the year end, Dubai International is poised to handle more than 57 million passengers while projections for 2013 has been raised to more than 66 million.

While FlyDubai – Dubai’s budget airline expands network to connect more cities to Dubai – Air Arabia, the region’s first no-frills airline continues its growth and profitability. Flydubai currently has a fleet of 23 brand new Boeing 737-800 NG aircraft and operates to 51 destinations, while Air Arabia has added over 10 new routes this year to its network, bringing the total network to 81.

“Since the beginning of 2012, Air Arabia continued to focus on its route expansion strategy. This demonstrates the enormous appeal for its value-for-money services to an ever growing range of destinations,” Adel Ali, Chief Executive Officer of Air Arabia, told Gulf News.

“As the airline explores further opportunities for the low-cost model in the region, fleet expansion becomes one of the top priorities. This year, it has taken delivery of six new aircraft from Airbus, bringing the total operational fleet to reach 32. This enables the airline to combine superb value for money fares with operational excellence,” Ali says. 

 Aviation industry’s contribution

 The aviation industry contributes about $22 billion or 28 per cent to Dubai’s gross domestic product (GDP) while it also contributes about 15 per cent to the UAE’s GDP, according to Oxford Business Group.

“The Gulf area has prospered from big thinking on aviation. In the UAE, for example, a study by Oxford Economics recently concluded that aviation supports some 15 per cent of GDP and 14 per cent of total employment,” Tony Tyler, Director-General and Chief Executive of the International Air Transport Association (IATA), told a gathering of Middle East’s aviation leaders in Algeria last month.

And it is growing.

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