The dramatic slowdown of Emirates Airline’s growth appears to reflect a wider trend among Middle Eastern and African carriers last year, as revenue passenger kilometers (RPKs) stalled throughout the region during the period and profits dipped dramatically due largely to higher oil prices. Fuel expenses rose 22 percent over the course of the company’s last financial year, accounting for 32.3 percent of operating costs.
The Middle East’s leading airline saw its profit margin narrow to a wafer-thin 0.9 percent on net profits of $237 million, while its fleet size increased by just two aircraft during the annual period ending March 31. Emirates inducted seven A380s and six Boeing 777-300ERs during the year ending March 31, while it phased out a total of 11 aircraft. The airline's next 777 doesn’t come due for delivery until 2020, when Boeing’s first 777X joins the fleet.
During the 12 months ending January 31, traffic measured in RPKs fell 0.8 percent in the whole of the Middle East, while global industry traffic grew 4.6 percent. “While the rest of the world is growing steadily or rapidly, the Middle East has stalled,” said analyst Peter Harbison, executive chairman of the Sydney-based Center for Aviation (CAPA), in his opening address at the April 29 CAPA Middle East and Africa Aviation Summit.
CAPA’s database showed that Emirates’s growth in the number of “system seats,” or seat capacity, tapered from more than 12 percent year-over-year in 2015 to 3 percent in 2017 and only 2.6 percent last year.
At Abu Dhabi-based Etihad, the number of seats declined by 2.5 percent, largely as a result of structural losses totaling over $1 billion in each of the last three financial years, Harbison said. Since Etihad accounted for 85 percent of the seat capacity at Abu Dhabi International Airport, its change in fortunes also reflected that of Abu Dhabi, he implied. “Of the ‘Big Three,’ only Qatar Airways, constrained by a blockade, has proceeded with its growth,” he said. “[Seat] capacity was up 6.8 percent year-on-year in 2018.”
Harbison said Saudi Arabian Airlines’ growth had previously been self-limiting. “But more recently, expansion, domestically and internationally, is occurring as the government strategy changes,” he said.
African airlines suffered constraints due to limited investment. CAPA data shows only 1,707 aircraft in the continental fleet and the order total stands at only 263, a number considered insufficient for fleet replacement, let alone expansion. North Africa, in isolation, accounts for a particular and aggravated case of the malaise.
Abdul Wahab Teffaha, secretary general of the Beirut-based Arab Air Carriers Organization, revealed startling information underscoring the importance of aviation to Arab economies. Based on data from 2017 and 2018, he concluded that globally, aviation accounts for 65.5 million jobs, or 2 percent of the total workforce, whereas it accounts for 6 million jobs in the Arab world or around 5 percent of jobs.
Globally, aviation contributes $2.7 trillion, or 3.6 percent of total GDP, while the Arab world’s aviation contribution was $164 billion, or 7.8 percent of GDP in 2017.