Gulf airlines swap butlers for bargains
Sean Cronin | Arab News - Thu, Jul 6th 2017 12:02 PM
Gulf airlines swap butlers for bargains
DUBAI: Etihad and Emirates once tempted travelers with flying butlers and luxurious premium cabins, but fierce fare competition has forced the pair to look at how to appeal to budget-conscious economy passengers.
It is a new phenomenon for the airlines, who in the past have been able to shrug off cheaper fares from European rivals because of the strength of their service and the comfort of their cabins.
Now they are targeting economy passengers with promotions focused more on cost than comfort as overcapacity in the global aviation industry forces fares lower.
“There is a recognition of the need to compete on price as well as generating additional revenue from economy,” said John Strickland, a London-based aviation industry consultant. “Although that can be a bit more challenging to keep the exclusivity for those who are paying higher fares.”
The harsh competitive environment has been made worse by a bitter political standoff between Qatar and some of its Gulf neighbors.
The row has upended air travel in the region in the middle of the busy summer season when tens of thousands of travelers fly out as schools break up and temperatures rise.
The price of global air travel was about 10 percent cheaper in the first quarter of 2017 than a year ago after adjusting for inflation, according to data from the International Air Transport Association (IATA).
That has hurt airlines based in countries with dollar pegs because of the continued strength of the greenback, which has helped many rival European carriers offer more competitive fares.
IATA says that in seasonally adjusted terms, international traffic through the Middle East has been tracking sideways since the start of the year.
As the competitive environment heats up, Gulf carriers are being forced to take a closer look at their cost structures to fend off fare-slashing by rivals.
That process started with thousands of job cuts this year and now airlines from the region are looking at how to squeeze more revenue from economy passengers.
It is unfamiliar territory for Emirates, an airline that is perhaps more associated with unbridled commercial success than any of its rivals after delivering successive years of profit for decades.
In better times, the comfortable Emirates flying experience was enough for many passengers to pay more.
But aggressive fare discounting by competitors, a slowing economy at home and regional instability have hit the airline hard.
Emirates President Tim Clark did not sugarcoat the challenges facing the carrier when he was interviewed by the Financial Times in early June.
“We’ve got to tough it out,” he said. “The business model is essentially a sound business model, but at the moment it’s challenged. For no reasons of our own, purely from geopolitical and socio-economic reasons.”
Etihad, the Abu Dhabi-based carrier that offers a flying butler service for its most expensive “suites,” also wants to boost economy passenger revenue.
The airline said in June it also planned to make a series of changes to its ground and inflight services aimed at offering “increased value.”
The cost-saving measures included giving economy class passengers paid access to its premium lounges.
Mohammed Al-Bulooki, executive vice president commercial for Etihad Airways, said the changes would “ensure fares remain as low and as competitive as possible.”
Earlier, Etihad said it would offer free stopovers in Abu Dhabi during the summer period.
While regional carriers are buffeted by economic turbulence there is at least some expectation of an increase in passenger demand later this year.
IATA predicts passenger demand among Middle East airlines will rise by about 7 percent in 2017 — but that is only just ahead of expected capacity growth of 6.9 percent.
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