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Gulf carriers carriers ride out local unrest headwinds

Middle East airlines are feeling some pain from the political unrest in the region, but the impact has been minimal so far on the network carriers.

Emirates reported net profits of Dh5.4 billion ($1.5 billion) for the year ending 31 March 2011, contributing the lion's share of a 43% increase in group profits to Dh5.9 billion. The Dubai carrier remains unperturbed by the challenges of high fuel costs and continuing unrest as it targets further growth for the 12 months ahead after bolstering profits.

"We face the year ahead with optimism," says chairman and chief executive Sheikh Ahmed bin Saeed Al Maktoum, noting that the carrier is targeting a further improvement in its performance this year.

He points to the airline's flexibility over the past 12 months in swiftly adjusting its flight schedules as required. "I think it's good when you have a moveable asset. You can shift it around, as we have last year," says Al Maktoum. "It's much easier to deal with than oil prices."


Emirates costs rose 23% last year to Dh48.9 billion. This included a 41% jump in its fuel costs over the year and an additional fuel price hit of around Dh1 billion over the last four months. The carrier though saw yields improve 8.5% and passenger load factors hit a new high of 80% as airline revenues grew by a quarter to reach Dh54.4 billion.

Local rival Etihad Airways posted positive earnings in the first quarter for the first time, and reiterates that it will break even this year.

The Abu Dhabi-based carrier's revenues increased by 21% to $770 million. The unrest led to a drop in load factor, from 75.1% to 72.7%, but Etihad nevertheless points out that passenger numbers rose by 10.6% and passenger revenues by 15%.

"The unrest has clearly resulted in lower traffic into those markets," says chief executive James Hogan.

While the airline is still aiming to break even for 2011, and become profitable in 2012, Hogan warns that fuel prices "will be a major challenge" this year.

The picture was not so rosy at Air Arabia, the Sharjah, UAE-based airline which operates low-cost services throughout the Middle East and North Africa.

Although its first quarter turnover rose by 6% to Dh513 million, profit declined 12% to Dh44.2 million. Passenger numbers increased by 11% to 1.2 million, and load factor by six percentage points to 85%.

"Our results are in line with our expectations, given the region's uncertainty that has adversely affected the sector," says chairman Sheikh Abdullah Bin Mohammad Al Thani.

The airline predicts growth from expanding into markets in Europe, Africa and Asia. This will be achieved through new direct routes and further establishment of local hubs, to add to those already in Morocco and Egypt. However, there has been no further news on plans unveiled last summer to establish Air Arabia Jordan in Amman.

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