Complex Made Simple

What are GCC carriers doing to increase their revenues?

The cat is officially out of the bag. Following more than a decade of prosperity, GCC carriers are facing hard times and the scramble is now openly on for top players to gain customers, reduce cost, and increase revenues. The ideas put forward have surely followed intense board meetings at the highest levels, but some ideas seriously need to be digested with a grain of salt.

“Profits for all airlines in the Middle East are forecast to more than halve, from $1.1bn in 2016 to $400m this year, according to IATA, the global airline trade association. The region’s carriers will make an average $1.78 per passenger in 2017, compared with a global average of $7.69,” announced a recent Financial Times report.

What seems to be the trouble?

Clipped wings

Emirates, the biggest carrier in the Middle East, saw its profits decline for the first time in half a decade last May, when earnings fell 82 per cent. In its annual report, it blamed a number of reasons, including Brexit, immigration, terror attacks in Brussels, Nice, Berlin, Paris, London, and a coup in neighbouring Turkey.  It said that the US measures relating to entry requirements, enhanced security vetting procedures, and restrictions on personal electronic devices in aircraft cabins impacted revenues negatively.

“Aviation and travel are notoriously vulnerable to social, economic, and political events, as well as the ever-changing expectations of consumers. For us, this year has been a particularly testing one,” the report said.

Read: Emirates-Etihad merger: will they or won’t they

Etihad saw expansions plans in Europe crash with Alitalia and Air Berlin both filing for bankruptcy protection, following Etihad’s review of its acquisition strategy. It reported $1.87 billion in net losses for 2016.

Qatar Airways, one of the region’s rising stars, was suddenly boycotted by the GCC as part of an air and sea embargo last June, following claims that the country was lax in its fight against terror.

Bright ideas on the tarmac

Emirates recently announced a codesharing agreement with flydubai hoping to both consolidate and expand its operations, but running the risk of irking some of its loyal clientele, who might feel betrayed when the level of service between the premier airline and its low cost counterpart suddenly drops.

On the operational side, Emirates began offering travellers the chance to use its private lounge and, together with its Abu Dhabi counterpart Etihad, engaged in economy seat bidding, giving flyers the opportunity to pick their preferred seat at a price or pay-per-access,  just as low-cost airlines do to increase their bottom line.

Read: Will flydubai deal save Emirates Airline’s plummeting profits?

Etihad took one further step last June in what could only be seen as a desperate measure. It basically offered those finicky passengers the opportunity to bid a price and have an empty seat near them on the plane. In June, it also revealed plans to charge for chauffeur services, which were previously included for business and first-class customers.

More recently in October, Etihad said that flyers from the UAE can save money on air tickets, if they skip checking baggage and carry on board hand luggage only, with an extra 7-kg complimentary allowed. There is some common sense in this, as Etihad travellers don’t check in baggage on certain flights quite often.

“Passenger feedback and travel habits show that many of Etihad Airways’ customers, especially those travelling for business, weekend getaways or day trips, don’t require checked baggage,” said Etihad Airways Executive Vice President for Commercial, Mohammad Al Bulooki.

Watch: Emirates places Dubai at the center of global travel

Only flights between Abu Dhabi, Bahrain and Kuwait until March 31, 2018 are in integrated in the new scheme.

Finally in September, Eithad announced that “people in the UAE, KSA and Egypt planning their travel and holidays with Eithad now have the option of paying via monthly installments when booking flights directly through”

The airline became the first in the region to offer fully automated online installment plans, thanks to a partnership with PayFort, an online payment service.

“The initiative is designed to allow families and those on a budget book flights to their dream destination with convenient, payment plans tailored to their requirements,” said an Etihad statement.

Plans range from three to 60 months, with 17 participating banks doing this with Etihad.

Etihad Airways Vice President Digital Strategy and Innovation Justin Warby said: “We understand travel can be a significant expense, especially for families and those on a tight budget, so this new initiative is a great way for people to book and enjoy their travel without having to worry about paying in one large sum.”

Read: Air travel takes off, but pilot recruitment stalls