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Airline fares for flights out of Lebanon have surged as foreign nationals and visitors seek to leave amid fears of an all-out war between Hezbollah and Israel.
Beirut's main airport was packed on Sunday night with travellers seeking last-minute tickets after the US, France, the UK and other governments urged their citizens to leave.
Air France, Lufthansa, Royal Jordanian and Transavia have cancelled flights in recent days as militant group Hezbollah and Israel traded missile salvos, most recently on Saturday night when 30 to 50 projectiles were launched at Galilee before Israel bombed southern Lebanon on Sunday and Monday morning.
Demand for tickets is 20 times the capacity in the market
Baraka Travel,
a Lebanese agency
The increase in tension is a result of the assassinations of Hamas leader Ismail Haniyeh in Tehran and Hezbollah commander Fouad Shukr in Beirut last week.
As foreign nationals, including visitors and people working for embassies and international companies, sought to leave Beirut, they found outbound airline tickets in short supply.
Emirates, Etihad, Flydubai and Turkish Airlines are among the airlines still flying out of Beirut.
An online search showed the next available ticket from Beirut to Dubai with Flydubai – which flies twice daily – is on Tuesday and costs $1,360 for the journey of three hours and 45 minutes. A one way flight on Monday morning with Emirates from Beirut to Dubai started from $760.
Etihad's next available flight from Beirut to Abu Dhabi is on Monday, August 12, with prices starting from $1,090.
Flightcatchers, a British travel agency, said Turkish Airlines was the only major carrier operating flights to Europe, with all others suspended services until August 15. Lebanon's Middle East Airlines suspended direct flights to UK until at least August 6, he said.
A ticket with Turkish Airlines on Monday – there was only one seat left on Sunday night – to the UK cost $1,700. Usually, it is about $510. The next available seat to London was on August 11 for $1,320.
“Prices will increase when there is high seat demand and little availability,” a representative said.
Baraka Travel, a Lebanese agency, said that demand for flights out of the country was “extremely high” and that prices had risen “dramatically”.
“This is because many foreign carriers have cancelled their tickets, including Air France, Lufthansa, Royal Jordanian, Transavia,” a representative told The National.
He said that the demand for tickets was “very high”, about “20 times the capacity in the market”.
“If tickets were available for $250, automatically they will be around $600 to $700 because of the pressure of demand,” he said.
He added that economy class tickets were the first ones to sell out, so only more expensive classes are available.
Packed airport
On Monday, Beirut airport was packed with travelers, both foreigners and Lebanese from the diaspora, who are cutting their trips short due to foreign embassies urging their citizens to leave.
Ali, 44, a Lebanese-Canadian, told The National he had to shorten his trip with his wife and three children because of the escalating security situation and the threat of imminent war.
“We had to pay an extra $8,500 for our family’s tickets,” he said. “And we’ll have to stay in Amman on the way to Canada for two days because there were no other options.”
Wafia Ahmed, a 33-year-old British-Lebanese citizen, told The National she was originally supposed to stay in Lebanon until August 23. However, after the UK embassy advised its citizens to leave, she decided to book the first available flight to London.
But Ms Ahmed said she wasn’t too worried for herself. She spent her summer in Tyre, in south Lebanon, a city not far from the border clashes. “Although we could hear and see the bombings, it wasn’t unsafe... if that makes sense. I spent most of my time on the beach,” she explained.
What concerns her more is the fate of her partner, who is not a British citizen. “What if things escalate here and he gets stuck? That thought alone is breaking my heart,” she stressed.
'Taking a risk by staying'
Others have chosen to stay.
Reem Homsi, an American from Texas visiting family in Lebanon, said that ticket prices “immediately” surged after the lethal strike on the Beirut suburb of Dahieh last Tuesday. Before the attack, she said that flights to the US cost between $1,300 and $2,000.
“After Tuesday, prices went up to about $3,000 for a 36-hour flight, with many overnight layovers and airport switches,” she told The National.
The only option to Austin, she said, was $11,000. “There were no flights tomorrow [Tuesday],” she added. She feels she is “taking a risk” by staying, even as most Lebanese continue their daily lives.
For now, as she anticipates “some big changes in the next couple of days or weeks”.
One UAE resident on holiday in her native Lebanon said fellow residents had been told by their employers in the Emirates to return as soon as possible.
“To be honest, Lebanese stay in Lebanon and are not willing to cut their holidays and go back as we’re used to it,” said the woman.
“However, some companies are urging people to come back sooner which is why people are rescheduling.”
Empty flights to Beirut
Jordan is a major transit point for flights to and from Beirut.
Khader Salem, head of Travel Harmony, a travel agency in Amman, said that prices of one-way flights from Beirut to Amman, on both Royal Jordan and Middle East Airlines, had risen by 50 per cent to 60 per cent.
“There is high yield now. The lower fare booking classes are not being made available,” said Mr Salem.
He cautioned that higher prices were to be expected in times of high-demand, and that the two airlines had scaled down the number of their flights on the Beirut-Amman route.
Flights are also being operated on an ad hoc basis because of the political uncertainty, he said.
The first available booking on Royal Jordanian flight from Beirut is on Friday, for $224 a ticket, aboard a Boeing 787 aircraft. Usually Royal Jordanian operates two flights to Beirut a day, on smaller aircraft. But over the last two weeks the number of flights was reduced to one a day, on the larger Boeing 787.
On Middle East Airlines, the first available flight from Beirut to Amman is also on Friday, for $210. The airline will be operating two flights between the two cities on that day, Mr Salem said.
The flights on the opposite direction, from Amman to Beirut, are mostly vacant. But on Saturday, a family was on board one flight to Beirut to attend a wedding, he said.
Thomas Harding in London and Khaled Yacoub Oweis in Amman contributed to this report
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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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