x Abu Dhabi, UAETuesday 25 July 2017

Companies cut down on business travel

Airlines saw a 13.8 per cent drop in the number of first and business class travellers, Iata says in a report.

The business class hall in Dubai, pictured here, may be quieter in coming months.
The business class hall in Dubai, pictured here, may be quieter in coming months.

Companies slashed Middle East business travel in September in the face of tougher financial conditions, according to a new report. Further evidence that the global financial crisis was spreading into the Gulf was demonstrated by the latest announcement by the International Air Transport Association (Iata), which said Middle-Eastern airlines saw first class and business class travel fall by 13.8 per cent, compared with the same period last year. Iata warned of a further "substantial decline" in premium travel last month, given that business confidence fell even further. The air travel drop is a sharp reversal from double-digit growth over the past four years, a result of the economic boom spurred by high oil prices. "Traffic had been booming at a rate of 20 per cent a year up to August," Iata said in the report. The fall in business travel gathered pace reflecting the severity of the economic downturn." Earlier this year Iata forecast profits for the 35 airlines based in the Middle East to drop by a third to US$200 million (Dh734m) this year while airlines worldwide were seen losing a combined $5.2 billion due to high oil prices. The new report said business class travel between the Middle East and Europe dipped 7 per cent in September while premium travel to the Far East fell even further, by 18.2 per cent. The region's airlines serving Africa also suffered, with a 10 per cent fall in tickets compared with a year ago. Globally, the fall in premium ticket sales accelerated to 8 per cent in September, following a 1.5 per cent fall the month before. "The sharp fall in business travel coincided with a steep decline in the confidence of manufacturing businesses in Europe, Japan and the US," Iata said. A series of corporate bankruptcies, particularly in the financial sector with the fall of Lehman Brothers, contributed to the decline, the report noted. Economy class travellers also thinned in September, dropping 4 per cent following a 0.1 per cent drop a month earlier. Gulf carriers, which placed huge aircraft orders and only recently recovered from heavy fuel bills due to record oil prices, are beginning to see the effects of the global economic downturn. Etihad, Qatar Airways and Emirates rely mostly on "sixth-freedom traffic", which allows airlines to carry passengers from one foreign country to another via their hubs. "Sixth-freedom traffic over the Middle East also seems to have declined," Iata said. Etihad, whose third-quarter passenger numbers jumped 38.4 per cent, said forward bookings to February remained strong in all classes, although there has been a slight slowdown in sales from customers based in the UK. A spokesman from Gulf Air in Bahrain said: "Our load factors are still high, the network is still strong, but we are feeling pressure on yields." Meanwhile Emirates, the largest Gulf carrier, said passenger numbers for the year were shaping up to be a few percentage points lower than first forecasted. "The challenge now is what is going to happen to the global economy," Tim Clark, the president of Emirates, said last month. "There is some fluidity in the [air traffic] markets, not just in Europe or the US, but also in Asia and in West Asia, such as Pakistan, Sri Lanka and other places." igale@thenational.ae