ABU DHABI // Emirates has cut airfares to 16 destinations in response to the falling price of oil, the Dubai-based airline said yesterday. From today, business- and economy-class tickets issued in the UAE to certain cities in India, Europe, the Middle East and South East Asia are reduced by seven to 35 per cent.
Emirates said in a written statement that the fare reduction, which follows a period of price increases in response to high oil prices this year, was motivated by recently lower fuel costs. World benchmark oil prices in New York fell US$2.72 to US$69.46 a barrel in trading early yesterday, down 52.7 per cent from July's record high of US$147. A spokesman for the airline said the reducing fares was a long-term measure, not a temporary promotion.
Adnan Kazim, senior vice president for commercial operations in the Gulf, Middle East and Iran, said in a written statement: "Demand for Emirates' flights has remained robust, but we are glad to be able to introduce further fare revisions in tandem with the lowering fuel prices. "We believe that our latest round of revisions would be welcomed by our customers, particularly in light of the increasingly challenging economic climate."
Riyas Kunnath, of Salem Travel Agency in Abu Dhabi, said airline passengers were increasingly price sensitive during the worldwide economic crisis. Travellers were choosing to fly with budget carriers where possible and cancelling trips to visit friends and relations if ticket prices did not fall within their budgets, he said. Even business-class passengers were increasingly selective, favouring promotions whenever possible.
It was too early to speculate whether Emirates' fare reduction will result in more passengers, he said. Tim Clark, the president of Emirates, recently indicated that slowing demand for seats was more of a worry than high oil prices. Emirates has said the percentage of seats filled per plane would be as much as two per cent lower than forecast this year. Mr Clark said in an earlier interview that there was some "fluidity" in air-traffic markets in Europe, the US, and Asia, but called the dampening of demand "manageable".
Traffic on the region's carriers rose 4.3 per cent in August, said Giovanni Bisignani, the director general and chief executive of the International Air Transport Association, which represents about 230 airlines comprising 93 per cent of scheduled international air traffic. Traffic rose 5.3 per cent in July and 10.6 per cent in the first six months of the year. Speaking yesterday at the annual general meeting of the Arab Air Carriers Organization, Mr Bisignani said: "The region's fleet is set to double to 1,300 aircraft over the next decade as we enter a period of global economic uncertainty. The challenge of matching capacity to demand will be difficult."
He said profits of Middle East carriers will fall from US$300 million in 2007 to US$200 million this year. "Only a handful of carriers will be profitable, while the majority bleed red ink," he said. Abu Dhabi-based Etihad Airways said yesterday that it had no immediate plans to reduce fares. "Etihad seeks to offer competitive ticket fares and promotions according to market conditions and demand in each of the markets it serves," said Leo Seaton, the airline's spokesman.
Despite the recent lower price of oil, the current fuel surcharge still recovers only part of oil's impact on Etihad's bottom line, analysts say. Etihad's fuel bill is about 40 per cent of its total operating costs, compared with 20 per cent in 2006. Emirates' fare reductions apply to Amman, Bangkok, Chennai, Cochin, Colombo, Damascus, Delhi, Frankfurt, Hong Kong, Hyderabad, Kozhikode, Mumbai, Munich, Paris, Thiruvananthapuram and Zurich.
For example, a 25 per cent reduction applies to economy-class flights to Delhi from Dubai. A return fare that cost Dh1,800 before the measure now costs about Dh1,350. Meanwhile, a 20 per cent reduction has been applied to economy-class flights to Bangkok, meaning a ticket that had cost Dh3,180 now is about Dh2,570. Emirates operates flights to 101 cities. On Oct 26 the airline will start non-stop services between Dubai and Los Angeles, three times a week.