The global aviation sector's recovery is being led by airports and aircraft lessors, as these business models proved to be relatively more resilient to the Covid-19-driven downturn, while airlines remain the most challenged sub-sector with a full recovery projected to take years, according to Fitch Ratings.
The recovery of pre-pandemic airport traffic largely depends on the split between domestic and international travel, widely varying based on country and geography, and the role airports have in their areas, the ratings agency said.
Airports in regions where domestic travel is dominant, such as the US and the Asia-Pacific, are projected to recover faster compared to those dependent on international travel such as Europe, the Middle East and Africa, Fitch said.
"The pandemic has resulted in the worst event-driven crisis in aviation history ... the downturn materially affected the financial and credit metrics of airlines, aircraft lessors and airports, as well as the performance of aircraft and engine asset-backed securities," it said.
Aviation was among the industries hardest-hit by the pandemic ― with a domino effect on other major verticals such as tourism, hospitality and supply chains ― but it is gradually recovering.
But while 2021 was not marked by the prolonged lockdowns seen in 2020, border closures, quarantine measures and other travel restrictions still in place to stem the spread of Covid-19 and its variants have continued to hamper the aviation industry's fragile recovery.
Last week, the S&P Supercomposite Airlines Industry Index closed 6.1 per cent higher, marking the first back-to-back weekly gains for airline stocks since early October and potentially indicating the beginning of a long-overdue recovery.
Pressure on airline profitability has also eased since the fourth quarter of 2021 and is set to continue to do so as passenger traffic recovers and cargo demand strengthens, the International Air Transport Association said last week. Airlines losses are expected to drop to $11.6 billion from $51.8bn in 2021, Iata said last October.
Oil prices also play a major role in aviation's recovery, with Fitch expecting the industry to adjust to higher fuel prices over time, assuming they remain elevated. While airlines remained profitable in 2013 and 2014 at a time when jet fuel prices were higher than they are now, the near-term outlook projects that fuel prices may drive weaker margins and cash flows in 2022 compared to prior expectations.
The airline industry took on significant debt as operators sought to maintain liquidity throughout the pandemic, which Fitch said will take several years to reduce before carriers return to pre-pandemic credit metrics.
"Airlines are sensitive to further travel restrictions but the impact on the [credit] ratings largely depends on the duration and severity of the restriction. Longer-lasting travel restrictions could delay our expectations for airline credit metrics to return to levels that support the current ratings over the next one to two years and could drive negative actions," Fitch said.
"Along with managing higher debt levels, airlines are dealing with higher fuel prices, labour inflation and continued uncertainty with the virus that will limit near-term upgrades."
Investment-grade rated aircraft lessors, meanwhile, are less sensitive to further travel restrictions thanks to stronger balance sheets, continued access to capital markets, low operating cash burn and meaningful customer and geographic diversification, Fitch said.
Airlines are sensitive to further travel restrictions but the impact on the [credit] ratings largely depends on the duration and severity of the restriction
Fitch Ratings
"Remedial steps taken by airlines and government support mechanisms implemented since the pandemic should reduce lease defaults and deferrals," Fitch said, supporting its improving sub-sector outlook for lessors.
Fitch acknowledged that airline recoveries have been slower than expected. But it has seen strong indications of renewed demand for air travel, supported by a healthy rise in bookings on the back of news around loosening border restrictions in certain areas globally.
"The underlying level of demand gives us confidence that airline recoveries should be sustainable even if the pace of the recovery has not been in line with our initial forecast," it said.
Government support and receptive capital markets also allowed airlines to build substantial cash balances, allowing them to escape the worst of the risks.
Region-wise, the financial performance of airports in the Asia-Pacific is improving and would possibly continue amid higher vaccination rates. In Emea, airports were able to use significant financial flexibility through the peak of the pandemic shutdowns, which included deferring capital expenditure, reducing operational costs and cancelling dividends.
Fitch sees "sufficient risks and uncertainties that widespread upgrades are less likely in the near-term".
Tips to avoid getting scammed
1) Beware of cheques presented late on Thursday
2) Visit an RTA centre to change registration only after receiving payment
3) Be aware of people asking to test drive the car alone
4) Try not to close the sale at night
5) Don't be rushed into a sale
6) Call 901 if you see any suspicious behaviour
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Specs
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Game Of Thrones Season Seven: A Bluffers Guide
Want to sound on message about the biggest show on television without actually watching it? Best not to get locked into the labyrinthine tales of revenge and royalty: as Isaac Hempstead Wright put it, all you really need to know from now on is that there’s going to be a huge fight between humans and the armies of undead White Walkers.
The season ended with a dragon captured by the Night King blowing apart the huge wall of ice that separates the human world from its less appealing counterpart. Not that some of the humans in Westeros have been particularly appealing, either.
Anyway, the White Walkers are now free to cause any kind of havoc they wish, and as Liam Cunningham told us: “Westeros may be zombie land after the Night King has finished.” If the various human factions don’t put aside their differences in season 8, we could be looking at The Walking Dead: The Medieval Years.
INFO
Everton 0
Arsenal 0
Man of the Match: Djibril Sidibe (Everton)
Company profile
Company: Verity
Date started: May 2021
Founders: Kamal Al-Samarrai, Dina Shoman and Omar Al Sharif
Based: Dubai
Sector: FinTech
Size: four team members
Stage: Intially bootstrapped but recently closed its first pre-seed round of $800,000
Investors: Wamda, VentureSouq, Beyond Capital and regional angel investors
The specs: 2018 GMC Terrain
Price, base / as tested: Dh94,600 / Dh159,700
Engine: 2.0-litre turbocharged four-cylinder
Power: 252hp @ 5,500rpm
Torque: 353Nm @ 2,500rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.4L / 100km
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
EXPATS
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UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
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Other ways to buy used products in the UAE
UAE insurance firm Al Wathba National Insurance Company (AWNIC) last year launched an e-commerce website with a facility enabling users to buy car wrecks.
Bidders and potential buyers register on the online salvage car auction portal to view vehicles, review condition reports, or arrange physical surveys, and then start bidding for motors they plan to restore or harvest for parts.
Physical salvage car auctions are a common method for insurers around the world to move on heavily damaged vehicles, but AWNIC is one of the few UAE insurers to offer such services online.
For cars and less sizeable items such as bicycles and furniture, Dubizzle is arguably the best-known marketplace for pre-loved.
Founded in 2005, in recent years it has been joined by a plethora of Facebook community pages for shifting used goods, including Abu Dhabi Marketplace, Flea Market UAE and Arabian Ranches Souq Market while sites such as The Luxury Closet and Riot deal largely in second-hand fashion.
At the high-end of the pre-used spectrum, resellers such as Timepiece360.ae, WatchBox Middle East and Watches Market Dubai deal in authenticated second-hand luxury timepieces from brands such as Rolex, Hublot and Tag Heuer, with a warranty.
Sholto Byrnes on Myanmar politics
