Emirates, Etihad facing layoffs

The two largest airline carriers in the Emirates, Emirates Airlines and Abu-Dhabi based Etihad Airlines, are facing layoffs and budget cuts as a result of lower demand.

News reports in the past few days show the struggles of the national airlines, and Etihad in particular, which officials say is experiencing “natural attrition.”  A Reuters report on Dec. 19 cited lower demand for “high-margin premium cabins” available from these carriers and suggests Gulf travelers are tightening their purse strings.

There's also talk about international competition, with European and U.S. carriers suggesting the Gulf airlines have, to date, operated on major state subsidies.

“Threats are emerging to the success story of the Gulf carriers,” representatives of the International Air Transport Association said in a December 8 statement.

Spokespersons for Qatar Airways, on the other hand, have suggested that with new routes and aircraft, the carrier is not subject to the same pressures to make workers redundant and otherwise decrease budget costs.

As for Etihad, spokespersons told Forbes that the airline is getting proactive about cost control “against a backdrop of weakened global economic conditions.”

“(Restructuring will require) a measured reduction of headcount in some parts of the business," Etihad reps said in a statement to Khaleej Times on Dec. 20.

Some of the problems that Emirates and Etihad are facing seem directly related to Gulf Cooperation Council (GCC) carriers and how they compete.

Bigger market factors also seem to be in play, however.

“China is putting a lot of pressure on other carriers,” author and business management expert Gary Patterson told Gulf News Journal. “They have so much capacity; they're putting pressure on the price of every airline.”

Patterson is the head of FiscalDoctor, a Georgia-based company that helps business leaders create sustainable profitable growth.

He said due to China's expansive airline infrastructure, Chinese carriers are able to offer discounts partially based on routing passengers out to different airports that may not be directly in their flight trajectories.

“Everyone should continue to look over their shoulder to see who's coming behind trying to take over their markets,” Patterson said.

He also suggested this type of negative pressure isn't really anything new in the industry.

“Periodically, most industries go through a major expansion and add a lot of capacity,” Patterson said. “That this is happening in the airline industry again -- we always get to the point of too much capacity.”

Criticism from some former executives and other quarters might hold an additional clue to some of the problems that the airlines face.

“They are still trying to mask the problems with the old “high class lifestyle” public discourse, while their company is falling apart from the inside.” Tom Burgess, former senior vice president of Emirates Group IT, wrote in a blog post dated December 24. “The Emirates Group is in disarray. Profits are down, group headcount is far in excess of what can be afforded and staff morale was low even before the redundancy programs commenced. For a number of years, everyone has seen the need for serious change, but all we have observed at the top has been a serious case of paralysis. The situation is now so bad that someone from outside of the group has been brought in to sort out the mess.”