Arab rift deepens woes for Gulf airlines

Thursday, 8 June 2017 00:00 - - {{hitsCtrl.values.hits}}

Reuters: A bust-up between Arab powers has dealt a blow to supercarriers already hurt by low oil prices and laptop bans, exposing the sensitivity of Gulf hubs to regional uncertainty and creating openings for rival airlines – at least in the short term.

The unexpected closure of most surrounding airspace to Qatar’s airline and restrictions on travel for its nationals left passengers stranded and forced its high-profile Chief Executive to bail out of a meeting of airline bosses in Mexico.

“It completely surprised all of us,” Alexandre de Juniac, head of the International Air Transport Association, said after overseeing the meeting of around 200 airlines.

Saudi Arabia, Egypt, UAE and Bahrain severed diplomatic ties with Qatar on Monday over its alleged support for militants. Transport links closed.

Plunged into a diplomatic row for the second time in three years, Qatar Airways was forced to reroute dozen of flights through Iranian airspace as the world’s second-richest nation per capita found itself almost boxed in by no-fly restrictions.

It was a dramatic reversal for the once unstoppable carrier, which has splashed tens of billions of dollars on jetliners and clashed with US rivals over its breakneck expansion.

“The whole business model is based on being a hub. They have invested in the airport, invested in state-of-the-art aircraft. They are losing a key source of (traffic) feed from major local markets,” British aviation consultant John Strickland said.

“With the overflight ban, it is not only a headache to reroute some of the operation, but it will make flights longer due to more circuitous routes. It adds time and cost and disrupts the schedule in terms of making connections.”

Shift to other carriers

Some demand may shift to other carriers, he said. IATA delegates said European carriers and Turkish Airlines could benefit, as well as UAE heavyweights Emirates and Etihad.

Disarray between Gulf allies left the region’s wider aviation growth looking vulnerable in the eyes of some industry watchers and laid bare political complexities underpinning the diversification from oil into an East-West transit point.

“It has been a reality that they have adapted to and lived with. That said, there has always been a significant concern that this (Gulf aviation) is, if not on a knife-edge, then on a fairly narrow plane,” said Peter Harbison, a former Australian aviation trade negotiator and chairman of consultancy CAPA.