SINGAPORE // A group representing the airline industry cut profit expectations for Middle East and North African carriers for this year from US$700 million (Dh2.57 billion) down to $100m as high oil prices, natural disasters and political unrest take their toll.
The volatile trading conditions expected for this year will add new hardships for airlines in the Middle East and North Africa (Mena) region. They lost a collective $1bn between 2007 and 2009 during the global downturn and returned to profit only last year, according to the International Air Transport Association (IATA).
The group issued its highly watched economic forecast in Singapore yesterday during its annual gathering. "Political unrest in parts of the region is hurting demand," said Giovanni Bisignani, the IATA chief executive, adding that high fuel costs would weaken demand in key markets.
In March, IATA predicted that the $600bn global airline industry would earn $8.6bn of profits this year. But yesterday IATA reduced the earnings forecast by more than half, to $4bn, because of worsening business conditions for the industry. That reflects a razor-thin profit margin of 0.6 per cent for an industry that for the past decade has been on perpetual alert over disruptions including health scares, natural disasters and volatile economic cycles.
"That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance," said Mr Bisignani. The challenging conditions have led several Middle Eastern airlines, including Etihad Airways and Emirates Airline, to issue summer promotions to stimulate demand among Gulf residents.
"At the moment it is really tough," said Tim Clark, the president of Emirates Airline, the largest carrier in the Middle East.
"There is a distinct softening of the European markets. We have the difficulties in the regional markets [due to unrest], and there are issues with Asian markets, in particular with Japan, which has suffered quite a lot," Mr Clark said. "Taken together, there are difficulties out there, but I am hoping the summer will be strong."
Current conditions will make it difficult for Emirates to reproduce the $1.5bn of profit it made last year, he said.
Etihad Airways, which began flying in 2003 and aims to reach its financial break-even point this year, is "pushing hard to meet second-quarter objectives", said its chief executive, James Hogan. "We met our first-quarter targets, but Middle East traffic has been down."
The rising cost of jet fuel is the main worry for airlines, which have struggled to pass along the increased costs to passengers. IATA expects the average oil price for this year to be $110 per barrel, up from a forecast of $96 per barrel made in March. And for every $1 of increase in the average oil price, airlines around the world face an additional costs of $1.6bn, the industry body said.
Airlines in the Asia-Pacific region will enjoy the highest profitability this year, at $2.1bn, according to the forecast. North American carriers are on track to earn $1.2bn, followed by European airlines, with $500m of profits and $100m expected for Latin American airlines. African airlines are forecast to post a loss of $100m.
The large Gulf airlines will continue to win market share on long-haul markets by transiting passenger through their hubs, IATA said. But while the region's airlines will enjoy a 14.6 per cent rise in demand, that gain will fall short of the 15.5 per cent of capacity they are adding this year.
The annual IATA gathering brings together more than 700 executives representing 230 airlines accounting for 93 per cent of all scheduled international air traffic.
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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Liverpool v Manchester City, Sunday, 8.30pm UAE
Russia's Muslim Heartlands
Dominic Rubin, Oxford
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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
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Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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Padmaavat
Director: Sanjay Leela Bhansali
Starring: Ranveer Singh, Deepika Padukone, Shahid Kapoor, Jim Sarbh
3.5/5
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
US tops drug cost charts
The study of 13 essential drugs showed costs in the United States were about 300 per cent higher than the global average, followed by Germany at 126 per cent and 122 per cent in the UAE.
Thailand, Kenya and Malaysia were rated as nations with the lowest costs, about 90 per cent cheaper.
In the case of insulin, diabetic patients in the US paid five and a half times the global average, while in the UAE the costs are about 50 per cent higher than the median price of branded and generic drugs.
Some of the costliest drugs worldwide include Lipitor for high cholesterol.
The study’s price index placed the US at an exorbitant 2,170 per cent higher for Lipitor than the average global price and the UAE at the eighth spot globally with costs 252 per cent higher.
High blood pressure medication Zestril was also more than 2,680 per cent higher in the US and the UAE price was 187 per cent higher than the global price.
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Zakat definitions
Zakat: an Arabic word meaning ‘to cleanse’ or ‘purification’.
Nisab: the minimum amount that a Muslim must have before being obliged to pay zakat. Traditionally, the nisab threshold was 87.48 grams of gold, or 612.36 grams of silver. The monetary value of the nisab therefore varies by current prices and currencies.
Zakat Al Mal: the ‘cleansing’ of wealth, as one of the five pillars of Islam; a spiritual duty for all Muslims meeting the ‘nisab’ wealth criteria in a lunar year, to pay 2.5 per cent of their wealth in alms to the deserving and needy.
Zakat Al Fitr: a donation to charity given during Ramadan, before Eid Al Fitr, in the form of food. Every adult Muslim who possesses food in excess of the needs of themselves and their family must pay two qadahs (an old measure just over 2 kilograms) of flour, wheat, barley or rice from each person in a household, as a minimum.
'My Son'
Director: Christian Carion
Starring: James McAvoy, Claire Foy, Tom Cullen, Gary Lewis
Rating: 2/5
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Formula One top 10 drivers' standings after Japan
1. Lewis Hamilton, Mercedes 306
2. Sebastian Vettel, Ferrari 247
3. Valtteri Bottas, Mercedes 234
4. Daniel Ricciardo, Red Bull 192
5. Kimi Raikkonen, Ferrari 148
6. Max Verstappen, Red Bull 111
7. Sergio Perez, Force India 82
8. Esteban Ocon, Force India 65
9. Carlos Sainz Jr, Toro Rosso 48
10. Nico Hulkenberg, Renault 34
