x Abu Dhabi, UAEThursday 27 July 2017

Airlines shed dead weight as Middle East industry faces US$200m loss

The humble footrest has been sacrificed by Emirates Airline as part of a drive for fuel efficiency in times of recession.

An Emirates Airline plane at the Dubai airport.
An Emirates Airline plane at the Dubai airport.

ABU DHABI // The humble footrest has been sacrificed by Emirates Airline as part of a drive for fuel efficiency as the airline industry struggles with the effects of the global credit crisis. Despite the cost of oil tumbling from highs of US$140 to almost $33 a barrel, conditions have not improved as passenger numbers dwindle amid fears of recession. Many airlines are locked into fuel contracts agreed when prices were peaking.

Industry analysts have already warned of a $200 million (Dh735m) loss for Middle East airlines next year. "The footrests are rather heavy and we conducted the trial to see what passenger feedback would be if they were removed," said Andrew Parker, a spokesman for the airline. "There were no adverse comments. Their removal increases leg space and provides more room." "Fuel efficiency has been high on Emirates' agenda for many years. Footrests can be removed very easily and without diminishing the customer experience. Because of the impact on weight and therefore fuel burn we are progressively removing them."

Etihad has also introduced fuel-efficiency measures that the company says will save Dh73m (US$19.9m) this year. "Fuel is now Etihad's largest single cost and accounts for between 35 and 40 per cent of the airline's annual expenditure," said Richard Hill, Etihad Airways' executive vice president of operations. "With the high price of aviation fuel and against a deteriorating global economic backdrop, it is increasingly important that Etihad does all it can to control its cost base."

Efficiency initiatives include replacing metal cutlery with plastic knives and forks and switching to a lighter type of paper for the inflight magazine. "It might not sound like much, but you only have to reduce the weight per passenger by a tiny amount, and it can make significant energy savings," said Leo Seaton, a spokesman at Etihad. Reports in September that Emirates planned to scrap its inflight magazine Open Skies were dismissed, but the company is preparing to try out a new digital version of the magazine which can be read on passengers' television screens.

"There will always be reading material on our flights but we are looking at the possibility of providing that in a digital format," Mr Seaton said. Passenger luggage allowances have also come under the spotlight. In October Emirates overhauled its luggage allowances for travellers, which led to cuts on limits for economy passengers on some routes. An Emirates spokeswoman said the reason for baggage allowances change was "to update, streamline and simplify the policy to make it more understandable for both staff and passengers".

"Although the policy revision reduced baggage allowances for passengers on some routes, we would like to stress that Emirates' allowances are in line with International Air Transport Association's standard, are comparable to other airlines for international flights, and are in fact more generous in many cases," said the spokeswoman. In April Etihad reissued guidelines to passengers underlining that economy class ticket-holders were entitled to 20kgs in checked baggage.

Mr Seaton said that this was not a response to the tough trading conditions or efforts to cut aircraft weights, but part of a co-ordination of luggage limits across the company. Airlines have attempted to protect themselves from the volatility of oil prices by buying contracts for jet fuels on the futures market, a strategy known as hedging. The practice helps stabilise costs when fuel prices soar, but if oil prices fall the airline can be left holding fuel contracts which are priced far higher that the market rate.

As oil prices have fallen back from their summer highs, several airlines have been left holding expensive fuel futures contracts. Earlier this month Emirates said that while fuel prices were hovering at around $43 a barrel, it had hedged fuel earlier at a price of $70 to $80 a barrel. Maurice Flanagan, the executive vice chairman of Emirates Airline and Group, has said full-year profit up to April 2009 were expected to bounce back and hit $500 million.

Emirates is just one of several airlines to be burnt by fuel hedging. In November, Cathay Pacific issued a warning to investors of potential hedging losses totalling about $360 million, while Air China said losses from hedged positions had tripled to $454 million in the third quarter. chamilton@thenational.ae