UAE airlines may get some respite from the downward pressure on fares as demand picks up this summer.
But rivals from Europe are able to offer lower rates on some popular routes because they have less capacity.
In July, for instance, Emirates and Etihad are more expensive to travel to London Heathrow on than British Airways.
The pick-up in prices comes at a time when airlines in the Middle East are grappling with a drop in profit as overcapacity in the industry weighs on the earnings of many carriers.
“Given that it’s the popular summer period, this is how Emirates and Etihad can attempt to rein in some much-needed revenue and better margins as a result,” said Saj Ahmad, the chief analyst at London-based StrategicAero Research.
Emirates’ profit margin dropped to 1.5 per cent during the 2016-17 financial year, compared to 8.4 per cent a year earlier, partly on cheaper airfares.
Return airfares on Emirates economy class to London Heathrow, for instance, start at Dh2,470 in July, and Dh2,600 on Etihad from Abu Dhabi to the same place, same month.
On British Airways return fares from Dubai to London Heathrow start at Dh2,320 during July and from Abu Dhabi they start at Dh2,350.
This is a change from last year, when Middle Eastern carriers were promoting much lower air fares compared with their international rivals to keep seats filled. In December, research by The National found that economy class passengers booking to fly from London Heathrow in February to Abu Dhabi on Etihad would have had to pay just £316.57 (Dh1,476) one way, while anyone travelling to Dubai on Emirates would have been charged £403.57 (Dh1,874). By comparison, a similar flight on British Airways on the same day from Heathrow to Dubai was priced at £1,350 (Dh6,268) and a similar flight on Virgin was retailing at £1,299 (Dh6,032).
“The airlines will price their tickets to reflect their costs and also the strength of demand that they see across all their markets,” said Peter Morris, the chief economist at Flight Ascend Consultancy in London. “If British Airways offers cheaper fares to London from Dubai, it can be partly driven by their lower service frequency compared with the wide range of timings and destinations in the UK that Emirates offer.”
The range of services and amenities are also factored into an airline ticket price.
Both Emirates and Etihad are able to charge more on the same routes because of their superior cabin and airport products, Mr Ahmad said.
The level of service offered by the big three Arabian Gulf carriers as well as their ability to offer numerous long and short-haul connections through their regional hubs has allowed them to compete on quality as well as price.
“Capacity on key routes, such as those to London, often command a premium despite fares being more competitive because customers demand flexibility and more flight options,” Mr Ahmad said. “I don’t think the affordable days are over at all.”
Emirates did not rule out cheaper fares being made available on some routes during summer.
“Like all airlines, Emirates offers a variety of fares throughout the year depending on changing market dynamics,” according to an Emirates spokeswoman. “From time to time we introduce special prices to specific destinations, and also post attractive fares when booked ahead [online].”
Cheaper airfares were on sale for various destinations until May 29 on Etihad for travel between May 10 and September 30 in economy class.
“We manage our pricing by route, based on a range of factors such as directional seasonal demand and market conditions, and there is usually a range of conditions attached to the fare, such as the ability to refund tickets, change dates, or avail special promotions,” said an Etihad spokeswoman.
ssahoo@thenational.ae
Follow The National's Business section on Twitter
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Kat Wightman's tips on how to create zones in large spaces
- Area carpets or rugs are the easiest way to segregate spaces while also unifying them.
- Lighting can help define areas. Try pendant lighting over dining tables, and side and floor lamps in living areas.
- Keep the colour palette the same in a room, but combine different tones and textures in different zone. A common accent colour dotted throughout the space brings it together.
- Don’t be afraid to use furniture to break up the space. For example, if you have a sofa placed in the middle of the room, a console unit behind it will give good punctuation.
- Use a considered collection of prints and artworks that work together to form a cohesive journey.
Most%20ODI%20hundreds
%3Cp%3E49%20-%20Sachin%20Tendulkar%2C%20India%0D%3Cbr%3E47%20-%20Virat%20Kohli%2C%20India%0D%3Cbr%3E31%20-%20Rohit%20Sharma%2C%20India%0D%3Cbr%3E30%20-%20Ricky%20Ponting%2C%20Australia%2FICC%0D%3Cbr%3E28%20-%20Sanath%20Jayasuriya%2C%20Sri%20Lanka%2FAsia%0D%3Cbr%3E27%20-%20Hashim%20Amla%2C%20South%20Africa%0D%3Cbr%3E25%20-%20AB%20de%20Villiers%2C%20South%20Africa%2FAfrica%0D%3Cbr%3E25%20-%20Chris%20Gayle%2C%20West%20Indies%2FICC%0D%3Cbr%3E25%20-%20Kumar%20Sangakkara%2C%20Sri%20Lanka%2FICC%2FAsia%0D%3Cbr%3E22%20-%20Sourav%20Ganguly%2C%20India%2FAsia%0D%3Cbr%3E22%20-%20Tillakaratne%20Dilshan%2C%20Sri%20Lanka%0D%3C%2Fp%3E%0A
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
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.
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.”
