As the Persian Gulf carriers grapple with the impact of terrorism on global traffic flows and a low oil price that’s crimped local travel, the full extent of the pressures facing them were revealed after Etihad Airways recorded a $1.87 billion annual loss.
A $808 million hit from the reduced value of stakes in so called equity partners including struggling Air Berlin Plc and Italy’s Alitalia SpA, which filed for bankruptcy in Ma, wwas taken by the airways and the Abu Dhabi-based Etihad booked a $1.06 billion charge from writing down the value of aircraft which resulted in the 2016 loss.
Earlier, reporting its first annual profit decline in May for five years was the Dubai-based Emirates, the biggest Gulf carrier and the world’s largest long-haul airline, which started the earnings reversal.
“This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017,” Ray Gammell, interim chief executive officer of Etihad Aviation Group, said in a statement.
More than 20 percent of Etihad Air’s overall revenue of $8.36 billion and almost 40 percent of its passenger revenue was denoted by the loss. The hit from partners includes only the impact of commercial ties rather than losses there and the company, which had a profit of $103 million a year earlier, didn’t publish full group numbers.
After President Donald Trump’s administration imposed restrictions on using electronic devices in the cabins of U.S.-bound planes departing Mideast hub and sought to restrict travel to America by people from a number of Muslim-majority nations, pressure on Gulf carriers has mounted further this year.
Etihad, the third-biggest Gulf carrier, said last month it will scrap flights to San Francisco in October citing lower-than-anticipated fares even while the curbs watered down after being blocked in court and the laptops ban removed. 25 weekly flights to the U.S. had earlier bene eliminated by Emirates.
Terror attacks in Europe and the Mediterranean, Britain’s vote to leave the European Union and an immigration crisis linked to conflicts in the Middle East, as well U.S. travel policies, were among a run of “destabilizing events” that had punctuated last year, Emirates said in its earnings release.
The Doha-based carrier has been left battling a slump in travel after four Arab countries imposed a blockade on its government-owner last month while Qatar Airways, the Gulf No. 2, reported a 22 percent gain in earnings for the year through March. While others taking long and costly detours to avoid closed airspace, the airline has scrapped 125 daily flights.
As well as assessing its minority holdings following an exit from Switzerland’s Darwin Airline last week, Etihad is continuing to implement group-wide changes as part of a strategic review, Gammell said. Following the exit of Australian James Hogan, who hatched the investment strategy to catch up with Emirates and Qatar Air, the group is also continuing its search for a permanent CEO.
(Adapted from Bloomberg)