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.”
