Middle Eastern airlines unlikely to keep up growth

Professor Andrew Delios has compared Emirates, Etihad and Qatar (known as the ME3) with Singapore Airlines (SIA has lost market share and needs new strategy; May 26).

He noted that the ME3 airlines have posted five consecutive years of strong growth, and concluded that they are competitors to fear.

I disagree. Their growth is, in fact, slowing.

First, the drop in oil prices since 2014 has reduced ME3's customers' spending power, thereby cutting demand for air travel, especially among business-class travellers.

Second, terror attacks in the region have prompted many passengers to avoid airports in the Middle East.

This has resulted in capacity utilisation for the Middle Eastern airlines to drop to just 73 per cent, according to the latest March figures - the lowest since 2006.

Third, travel restrictions introduced by the Trump administration, including a ban on electronic devices in the cabin, the reduction of entry visas to the United States and increased security vetting, have caused a fall in demand for the airlines' American routes.

Emirates has had to cut its flights to America by a fifth. As an airline that operates on a hub and spoke model, this means a fall on all the connected routes.

Emirates' profits for last year fell by 82 per cent. Etihad has yet to report its results, but they are expected to be grim reading.

Qatar is still growing because its government is able to support it.

SIA does not have this advantage, but I believe it will be prudent enough to choose the appropriate path, which is adaptable and less risky, yet consistent with its strength and offers potential for it to reap benefits.

Francis Cheng

A version of this article appeared in the print edition of The Straits Times on May 29, 2017, with the headline 'Middle Eastern airlines unlikely to keep up growth'. Print Edition | Subscribe