Julian Moxon / London
Middle East carriers continued their steep rise in 2005 despite the soaring price of fuel, which is causing many to revise their profit forecasts and rethink near-term cost strategies.
After another year of record profits for the group, up 5% on 2004, Emirates admits 2005 was a “tough year” because of rising fuel costs and increasing competition from other airlines in the region. Chief executive HH Sheik Ahmed bin Saeed Al-Maktoum says pressure from fuel costs “continuously dampened our robust new income production”.
While Emirates returned its 18th consecutive year of profits, the proportion of costs due to fuel rose from 21.4% to 27.2% during 2005, forcing the airline to increase ticket surcharges.
At Gulf Air, chief executive James Hogen says fuel prices are the airline’s “most pressing problem”. He adds that a range of options are being considered to counter the extra $212 million the carrier will spend on fuel this year. “Revenue growth simply cannot keep pace with oil price rises. Globally, it is clear that the industry will have to take increasingly stringent measures to address fuel costs,” he says.
The airline’s change to a two-hub strategy following the Abu Dhabi government’s pull-out as a shareholder resulted in 24% passenger growth at Bahrain in the first three months of the year and 20% at Muscat. Qatar Airways chief executive Akbar Al Baker says the airline is “not yet profitable”, and with a fuel bill around $60 million more than budgeted in the current year, coupled with stronger competition, he is not optimistic about posting figures in the black this year either. The carrier had revenues of $1.04 billion in the year ended March 2005 and expects to add $500 million to that in 2006. The airline has grown by 40% since 2000 and now serves 66 destinations.
Royal Jordanian chief executive Samer Majali cautioned in March that fuel costs would double compared with those of two years ago. Profits were nevertheless up 25%, to $30.6 million, a third more than forecast, while revenues reached $545 million, an increase of 12%. The airline is continuing to expand and is preparing for oneworld alliance membership.
Etihad Airways added almost a new route a month over the last year, ending 2005 with 30 destinations across Asia, Europe and the Middle East and with plans to increase this to 70 by 2010. The airline is coy about passenger figures, saying only that it currently carries 1.2 million a year and expects this to rise to 3 million “in the future”. ■
Source: Airline Business
