Emirates has seen a significant drop in its global business since the start of the unrest last month in North Africa and the Middle East.
The Dubai-based carrier's president, Tim Clark, told reporters in Washington DC today that Emirates' system-wide load factor has been averaging 75% in recent weeks, compared to a typical 81% to 82% during this time of the year.
"The effect on the seat factor as a result of the unrest in the Arab world has been measureable the last six weeks," Clark says.
Emirates is the largest airline in the Middle East and is one of the largest carriers in all the markets which have witnessed political instability in recent weeks, including Egypt, Tunisia and Yemen.
Clark did not quantify the financial impact but acknowledges the instability in the region will dent Emirate's financials for its current fiscal year, which ends on 31 March 2011. "It's a pity because it's been a very strong year for us," he says.
However, Emirates remains profitable. Clark points out that every year there is typically "two traumas" to work around. This fiscal year has been no different with the ash cloud crisis in Europe impacting revenues at the beginning of the year and now the instability in the Middle East and North Africa having an impact in the final quarter. In April Emirates estimated the European flight disruption caused by the ash crisis was costing the carrier $10 million per day.
Clark sees the current crisis "lasting for a couple of months" but expects there will no longer be any impact on Emirates by the beginning of the new fiscal year in early April. He says even if demand remains depressed in April in some markets the carrier by then will have responded by adjusting capacity across its network to match the new demand picture.
Emirates has already reduced capacity in several of the affected markets including Egypt and Tunisia. But Clark says it takes six weeks to two months to absorb what has happened, fully analyse the impact and reallocate capacity.
"In April we'll be in good shape," he says.
Clark says several other markets have sufficient demand to absorb additional capacity. He points out that Emirates overall has "a robust network" and always uses the diversity of its network to work around crises in certain markets or regions.
The current crisis began in Tunisia in mid-January and quickly spread to Egypt and Yemen. Clark says there also has been recent instability in some other African countries which has impacted demand. Some other Middle Eastern countries such as Jordan and Lebanon have also been impacted as passengers are concerned the unrest could spread to those areas.
Clark says Emirates in particular carries a lot of Chinese tourists to the region and this traffic has completely "disappeared". He says business travel to the affected countries also has dried up.
However, he is not concerned at all about the prospect of the unrest spreading to Emirates' home country. "I'd be very, very surprised if anything happened like this in the UAE," Clark says.
At the beginning of November Emirates posted a net profit of Dhs3.4 billion ($925 million) for the first half of its fiscal year, more than quadruple its first half net profit from the prior year. Before the instability in North Africa and the Middle East emerged last month, Emirates was also enjoying a solid second half. Clark points out the instability also coincided with a rise in fuel prices, providing a double whammy.
But he says despite the lower load factors the crisis has not impacted yields. "The yield has remained fairly constant," he says.
Source: Air Transport Intelligence news
