Emirates, the largest long-haul airline in the world, and Etihad Airway based in Abu Dhabi are preparing to make job cuts, while a strong U.S. dollar is pressuring earnings.
The needed cutbacks indicate how the rapid expansion of airlines in the Gulf Cooperation Council over the last few years have begun to slow down against an economic backdrop that is more and more challenging.
Emirates, based in Dubai is expected to make job cuts in finance, accounting, IT as well as other departments within the head office, said sources who are familiar with the situation.
Etihad on Sunday announced that it would make job cuts mostly through what it called natural attrition and did not say the number of jobs that would be affected.
Etihad and Emirates employ 26,000 and 103,000 respectively show each of their websites.
While oil prices being lower have lowered operating costs, demand for premium cabins that are higher margin has softened due to the tightening of travel budgets across the Middle East.
Traffic from East to West, an important route for carriers in the Gulf, has diminished as well following a wave of attacks by militants in Turkey and Europe over the last 12 months.
Emirates, which posted a 75% drop in profit for the half year November 9, suspended flights October 30 to Abuja in Nigeria and signaled that additional flights to locations in Africa might be dropped as well.
Tim Clark the president at Emirates said that trading conditions around the world have become very difficult.
Etihad stopped its flights to Larnaca a destination in Cyprus and will be suspending its flights to Brazil’s Sao Paulo in March of 2017.
The International Air Transport Association or IATA represents over 265 airlines around the world and said that threats have emerged to the Gulf carriers’ success story.
IATA has estimated that carriers in the Middle East will earn $300 million in profit during 2017 in comparison to more than $900 million that has been forecasted for 2016.
That slowdown might come as somewhat of a reprieve for U.S. and European carriers that have accused carriers in the Gulf of receiving state subsidies making it unfair as those monies allowed the carriers to increase capacity on their key routes.
Those allegations have been vehemently rejected by the airlines in the Gulf.