Etihad Airways will launch its new all-economy service next week to six cities in the Middle East and the Indian sub-continent to fend off increased competition from budget airlines.
The airline has selected cities that feature heavy demand for economy services, but low demand for premium, business class or first class tickets, such as Alexandria, Colombo, Damascus, Thiruvananthapuram, Calicut and Peshawar.
It has converted several of its A320 aircraft, the smallest jet in its fleet, by taking out business class seats, opening up room for an additional 42 economy seats. Eventually, the airline expects to operate 10 all-economy planes, or 20 per cent of its anticipated A320 fleet for these services.
Budget airlines are considered a relatively new phenomenon in the Middle East but make up a third of all traffic in mature markets such as Europe and the US.
Analysts saw Etihad’s new service as a defensive measure to protect its home market from other competition. For example, one of its first destinations for the all-economy service is Alexandria, home to Air Arabia Egypt, which operates up to three budget flights a day into Abu Dhabi.
“This segment is being addressed aggressively by neighbouring flydubai, based in Dubai and, a few kilometres further along the road in the UAE, the highly successful Sharjah-based Air Arabia,” the Centre for Asia-Pacific Aviation said in a report. “Other low cost airlines from outside the UAE are also targeting the UAE markets.”
While the UAE’s long haul airlines, Emirates and Etihad, increasingly face budget rivals, they are also encountering growing competition from other Gulf airlines that seek to siphon traffic from the UAE’s five million residents onto their own networks.
Every day, Qatar Airways, Oman Air, and Gulf Air operate 31 flights a day from Abu Dhabi and Dubai to their respective hubs in Doha, Muscat and Manama, according to Innovata, the flight data firm.
Much of this capacity serves the demand for travel between these points for leisure and business traffic.
But these foreign airlines are also hoping to draw traffic to points further afield via their long-haul networks.
Tim Coombs, an analyst with Aviation Economics in London, said: “Clearly, the long-haul ambitions of each of these carriers rely to some extent on their short haul feed as well.
"Airlines are taking a proactive role in looking at the intra-Middle East market for this."
Qatar Airways, in particular, offers the most number of flights between Dubai and any destination, with 16 flights a day, according to Innovata.
In Abu Dhabi, Qatar Airways’ 10 flights a day between the UAE capital and Doha are greater than any daily service offered by Etihad Airways to any destination.
That translates to 44,900 seats on offer from Qatar Airways each month between Abu Dhabi and Doha, compared with 31,000 monthly seats offered from Etihad.
Alistair Rivers, the regional sales director at Innovata, said: “It is quite interesting to see the other Gulf carriers trying to grab traffic away from Etihad and Emirates. It is all about competing hubs, and all trying to feed from the biggest pot, which is Dubai.”
igale@thenational.ae
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Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
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Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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Company name: Yeepeey
Started: Soft launch in November, 2020
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Based: Dubai
Industry: E-grocery
Initial investment: $150,000
Future plan: Raise $1.5m and enter Saudi Arabia next year
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Innotech Profile
Date started: 2013
Founder/CEO: Othman Al Mandhari
Based: Muscat, Oman
Sector: Additive manufacturing, 3D printing technologies
Size: 15 full-time employees
Stage: Seed stage and seeking Series A round of financing
Investors: Oman Technology Fund from 2017 to 2019, exited through an agreement with a new investor to secure new funding that it under negotiation right now.
