Profitability of the airlines based in the United Arab Emirates, one of the two large hubs for aviation in the Middle East, is expected to drop in 2017, said the International Air Transport Association or IATA on Tuesday.
IATA’s CEO and director general Alexandre de Juniac said that UAE carriers will experience a year that will likely be below that of 2016. He made those comments in Abu Dhabi on Tuesday adding that long haul, low cost service could soon begin to take hold across the region.
IATA has said previously that airlines in the Middle East would likely see profits drop from $900 million in 2016 to just over $300 million during 2017, in part because of the high capacity and the limited growth in demand.
UAE is home to the largest long haul airline in the world Emirates, as well as the quickly growing Etihad Airways and both Air Arabia and flydubai two low cost carriers.
Carriers in the UAE have often times been some of the region’s most profitable.
Profit for six months was down 75% at Emirates and Tim Clark the president of the airline said a week ago that while declines in yield had stopped, it was still going to be a difficult year.
Air Arabia and flydubai posted lower profit for the full year for 2016. Etihad has yet to report results, but said it was reviewing its business.
Gulf region airlines for many years were the benefactors of high oil prices which helped to spur on spending by governments and growth across the region.
However, demanded softened and budgets for travel were tightened after over two years of lower oil prices, currency fluctuations and exposure to markets that were weaker.
Etihad and Emirates are each reviewing workforces, while Emirates agreed to delay its delivery from Airbus of 12 jets during the upcoming two years.
Both the airlines have hundreds of planes in their fleets and hundreds more on order with Boeing and Airbus and neither signaled they would ask for addition delays in the deliveries.
However, growth in the long-haul low cost airlines such as Norwegian Air Shuttle has been predicted to grow and will pressure the established carriers offering trans-Atlantic flights as it will use single-aisle planes that are longer range to fly between less expensive smaller local airports.
Growth of that sector of the industry is beginning to accelerate across both Asia and Europe and likely will develop in market such as the Middle East, said de Juniac.