Busy summer season offers Emirates and Etihad a chance to boost revenue

Airlines in the Middle East are grappling with a drop in profit as overcapacity in the industry weighs on the earnings of many carriers. Roland Magunia for The National

UAE airlines may get some respite from the downward pressure on fares as demand picks up this summer.

But rivals from Europe are able to offer lower rates on some popular routes because they have less capacity.

In July, for instance, Emirates and Etihad are more expensive to travel to London Heathrow on than British Airways.

The pick-up in prices comes at a time when airlines in the Middle East are grappling with a drop in profit as overcapacity in the industry weighs on the earnings of many carriers.

“Given that it’s the popular summer period, this is how Emirates and Etihad can attempt to rein in some much-needed revenue and better margins as a result,” said Saj Ahmad, the chief analyst at London-based Strategic­Aero Research.

Emirates’ profit margin dropped to 1.5 per cent during the 2016-17 financial year, compared to 8.4 per cent a year earlier, partly on cheaper airfares.

Return airfares on Emirates economy class to London Heathrow, for instance, start at Dh2,470 in July, and Dh2,600 on Etihad from Abu Dhabi to the same place, same month.

On British Airways return fares from Dubai to London Heathrow start at Dh2,320 during July and from Abu Dhabi they start at Dh2,350.

This is a change from last year, when Middle Eastern carriers were promoting much lower air fares compared with their international rivals to keep seats filled. In December, research by The National found that economy class passengers booking to fly from London Heathrow in February to Abu Dhabi on Etihad would have had to pay just £316.57 (Dh1,476) one way, while anyone travelling to Dubai on Emirates would have been charged £403.57 (Dh1,874). By comparison, a similar flight on British Airways on the same day from Heathrow to Dubai was priced at £1,350 (Dh6,268) and a similar flight on Virgin was retailing at £1,299 (Dh6,032).

“The airlines will price their tickets to reflect their costs and also the strength of demand that they see across all their markets,” said Peter Morris, the chief economist at Flight Ascend Consultancy in London. “If British Airways offers cheaper fares to London from Dubai, it can be partly driven by their lower service frequency compared with the wide range of timings and destinations in the UK that Emirates offer.”

The range of services and amenities are also factored into an airline ticket price.

Both Emirates and Etihad are able to charge more on the same routes because of their sup­erior cabin and airport products, Mr Ahmad said.

The level of service offered by the big three Arabian Gulf carriers as well as their ability to offer numerous long and short-haul connections through their regional hubs has allowed them to compete on quality as well as price.

“Capacity on key routes, such as those to London, often command a premium despite fares being more competitive because customers demand flex­ibility and more flight options,” Mr Ahmad said. “I don’t think the affordable days are over at all.”

Emirates did not rule out cheaper fares being made available on some routes during summer.

“Like all airlines, Emirates offers a variety of fares throughout the year depending on changing market dynamics,” according to an Emirates spokeswoman. “From time to time we introduce special prices to specific destinations, and also post attractive fares when booked ahead [online].”

Cheaper airfares were on sale for various destinations until May 29 on Etihad for travel between May 10 and September 30 in economy class.

“We manage our pricing by route, based on a range of factors such as directional seasonal demand and market conditions, and there is usually a range of conditions attached to the fare, such as the ability to refund tickets, change dates, or avail special promotions,” said an Etihad spokeswoman.

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