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High fuel costs to trigger airline failures: IATA o More sector consolidation expected this year and next: Industry association chief

RIO DE JANEIRO: Soaring jet fuel prices driven by conflict in the Middle East are likely to push more airlines into bankruptcy and spur more sector consolidation this year and next, the head of the global airline body said on Saturday. Global airlines are grappling with higher fuel costs driven by the US and Israel’s war with Iran, which has choked jet fuel supplies and disrupted key air corridors, forcing costly detours. Budget carriers have been among the hardest hit, lacking higher margin revenue streams such as premium cabins, high-paying travelers and credit card loyalty programmes. The strain is already showing: US budget airline Spirit Airlines collapsed last month, and it will not be the last, said Willie Walsh, director general of the International Air Transport Association (IATA), the industry’s main trade body. “Unfortunately, I think there will be some carriers that will find this high fuel price very difficult to cope with,” Walsh told Reuters at IATA’s annual summit in Rio de Janeiro, adding he expects some airlines to go out of business and others to be acquired by larger carriers. Airlines are also expected to protect margins by cutting unprofitable routes, while fares, which have surged since the outbreak of the Iran war, are unlikely to come down soon, Walsh said. Even so, the pressure does not spell the end of the low-cost airline model, which continues to thrive outside the United States, where the big three carriers, United Airlines, Delta Air Lines and American Airlines, are squeezing out budget competitors, Walsh said. “I don’t see that the low-cost model is broken; in fact, quite the opposite,” he said, highlighting Ryanair’s strong performance in Europe as an example. There is one blockbuster deal Walsh does not see happening: United Airlines CEO Scott Kirby’s audacious proposal to buy arch rival American Airlines and create a US aviation behemoth. The idea, which surfaced earlier this year, failed to get done despite Kirby raising it with President Donald Trump. “I don’t think that’s going to happen. I think the regulatory hurdles would be very significant. I don’t know whether that was a genuine effort to pursue consolidation or Scott just trying to stir up some media,” Walsh said. The Iran conflict has upended traffic flows through Middle Eastern hubs such as Dubai, Doha and Abu Dhabi, creating acute challenges for Gulf carriers including Emirates, Qatar Airways and Etihad. Walsh said he did not think the conflict would do permanent damage to the Gulf as an aviation hub given its strategic geographic importance and the value of the popular Gulf carriers, which account for 14% of global capacity.

People walk through the venue during the International Air Transport Association Annual General Meeting in Rio de Janeiro. – REUTERSPIC

reliant on Western engines and avionics. “Probably 10 to 15 years from now, people won’t just talk about Airbus and Boeing. It’ll be: Airbus, Boeing, Comac,” he said. As airlines come under financial strain and climate policies lose momentum in the US under Trump, industry leaders have grown more cautious about meeting a 2050 net zero emissions target. Walsh said IATA is not ready to abandon the goal. “I certainly believe it’s more challenging to achieve net zero in 2050 because we’ve not made the progress that we had expected to see on the development of sustainable fuels.” – Reuters people wishing to do staycations”, he said. Some hotels, including Burj Al Arab, have temporarily closed for renovations as business slowed. Others have cut staff or salaries, particularly hotels in downtown Dubai, which are dependent on business tourism. An employee at one Dubai hotel, who spoke on condition of anonymity, said his salary had been cut by up to 40 per cent during and after the war, before it returned to normal in recent weeks. Another employee at a hotel in neighbouring Abu Dhabi said he was put on unpaid leave for two months but that he is set to return to work soon with his salary restored. Talks to end the war have dragged on for two months and sporadic strikes still punctuate life in the Gulf, straining tourism. Yet Robinson remains hopeful. “If we see some form of resolution in the next month or so... I think you’ll see tourists come back faster than everyone anticipates,” he said. – AFP

“That capacity cannot be replaced by airlines from other regions around the world.” “Once things settle down, I would expect the Gulf carriers to regain their important position in the market.” Adding to the strain is the slow pace of aircraft deliveries from Boeing and Airbus, along with engine delays from GE Aerospace and Pratt & Whitney, a unit of RTX, limiting airlines’ ability to expand fleets and improve efficiency. Walsh said the industry is increasingly frustrated by the delays, particularly as engine makers post strong profits while airlines struggle.

He estimates supply chain disruption cost airlines about US$11 billion last year. “We’re disappointed that they’re not moving faster. We’re disappointed that they’re not sharing the pain that the airline industry is sharing,” he said. Aircraft and engine makers have said that much of the delays are out of their control, stemming from post-pandemic supply chain disruptions and political trade disputes. Walsh said competition will eventually emerge from China, where Comac is developing aircraft to rival Boeing and Airbus, though it still faces certification hurdles in Europe and the United States and remains

Dubai luxury hotels woo staycationers as tourists flee DUBAI: Once reserved for wealthy travellers, Dubai’s top-notch hotels have become almost exclusively reliant on residents, drawn in by dizzying staycation offers as war drives tourists away. But the pool-side area was filled with people, he said, who came to the Palm to enjoy a slice of luxury that had long been unattainable. hotels are mostly relying on local guests, said Michael Robinson, the general manager of the Anantara The Palm Dubai Resort.

With its overwater villas, artificial lagoons and Thai-inspired decor, the luxury hotel is packed with Dubai residents, who get special discounts of up to 50 percent. On Fridays and Saturdays, hotel occupancy sits between 70 and 90 per cent, he said. Sunday through to Thursday, it has an average occupancy of around 20 to 30 per cent. This new clientele has offered hotels a lifeline, allowing Anantara The Palm to remain “cash positive” without resorting to layoffs. But staycations are not enough on the long term. “Your staycation business is essentially one to two nights and that’s it ... Whereas previously, the international market, they might come for one week,“ Robinson said. Should tourists stay away come July, when schools are closed and many families return home for the summer, “there won’t be as many

“Luxury in Dubai has become affordable for residents, before it was just for the rich, very rich people,“ he said. With 19.5 million yearly tourists, Dubai is among the region’s top destinations and was long seen as a playground for the world’s rich and famous. Its 827 hotels – including 173 five-star establishments – boasted an average occupancy rate of more than 80 per cent. But the war, which was triggered by US-Israeli strikes on Iran on Feb 28, shattered the Gulf’s image as a haven of stability, with Tehran directing its fury at the oil-rich region. The United Arab Emirates bore the brunt of Iran’s missiles and drones, which hit hotels, including on the Palm, as well as its landmark Burj Al Arab resort. Since a shaky ceasefire came into effect on April 8 some tourists have trickled in, but

On the Palm, an artificial island that has become synonymous with Dubai opulence, five-star hotels are busy on weekends and holidays once more, despite having been deserted by tourists. The clientele is driven by hotels offering residents-only deals that have become a lifeline for Dubai’s luxury tourism. “I had never been in a hotel on the Palm because the prices were crazy,“ said Fadi Iskandarani, a doctor in his sixties who just spent his first weekend at a luxury resort on the tree-shaped island. The Lebanese national, who has lived in Dubai for five years, decided to opt for a staycation after he saw that a hotel on the Palm had slashed its rates by a factor of four. The hotel was not packed, with some floors closed because there were not enough guests.