There are challenging times ahead for the aviation industry if airlines panic and drop their prices too low, a senior Gulf airline revenue manager warns. "We have to stop overreacting to the global economic downturn, because if we do the results will be harder to recover from," Dieter Westermann, a senior revenue manager at Qatar Airways, told airline experts yesterday on the sidelines of the Revenue Management Summit in Dubai.
He said Qatar Airways was keeping a close eye on how the competition reacted to the market changes. "Price always depends on the demand in the market and if demand drops so will prices, but the key is not to overreact," he stressed. He recalled what happened eight years ago, when budget airlines began to dominate the international scene. "At that time, every airline carrier in the world wanted a budget equivalent, and that really hurt revenues in the long run because costs plunged so fast in such a short period."
Qatar Airways is in the process of closing the gap between its revenue management and pricing departments. "This will help facilitate the communication between these two areas, so pricing would be based closer to market needs at this current time," said Mr Westermann. So far, airlines in the region are claiming that occupancy levels remain high. "Despite current market conditions, and against an industry backdrop that remains extremely challenging, Etihad's performance during this year has been impressive," said Iain Burns, the vice president of corporate communications at Etihad Airways.
"Our forward bookings across the airline's global network remain strong and we continue to experience double-digit passenger growth. "We regularly review all aspects of our service, including pricing, and offer air ticket fare rates and promotions according to market conditions and demands." Mr Burns did not mention if prices would drop. In the US, signs of a slowdown in demand are already evident as passenger traffic on American and Southwest airlines slipped last month and overall demand declined.
Almost 1.6 million fewer passengers boarded both airlines last month, down about 10 per cent from the same period last year, the carriers reported. "This is very normal and we have seen it before," said Jalil Mekouar, the executive vice president of the research consultants Jones Lang LaSalle in the Middle East and North Africa. "When people don't earn enough money or lose their jobs, one of the first [things] they choose is to travel less."
Last week, Emirates airline said that slowing passenger demand could be cause for concern as it headed into the second half of its fiscal year. The Dubai-based airline further predicted that passenger-load factors, or the percentage of seats filled per plane, would be up to two per cent lower than forecast this year. abakr@thenational.ae
