Turbulence ahead for aviation
Security, geopolitical and market issues will need careful navigation, Ellen Read writes.
As Emirates ponders adding a second Auckland-Dubai direct flight, the airline’s president warns of turbulent times ahead for global aviation.
Sir Tim Clark said Emirates was working on the feasibility of another Auckland-Dubai flight, either non-stop or via Asia.
‘‘Frankly I would prefer it if we could do another nonstop. We’re looking at it now to see where it would work.’’
The potential addition comes at the expense of several transTasman flights that Emirates will pass over to alliance partner Qantas from March.
Since Dubai-governmentowned Emirates began flying the trans-Tasman route, more carriers have entered the market and ticket prices have dropped dramatically.
‘‘It became problematical for us to continue on that basis,’’ Clark said. ‘‘A pity really because of the strength of the brand.’’
The moves reflected the changing market, Clark said in Sydney this week where he met with Qantas chief executive Alan Joyce to sign a five-year extension of their alliance, pending regulatory approval.
During the visit, he confirmed that Emirates would continue its sponsorship of America’s Cup holders Team New Zealand.
Clark has been part of Emirates’ senior management team since the airline launched in 1985. He became the airline’s president in 2003.
Before Emirates, he planned routes for Bahrain’s Gulf Air and the now-defunct British Caledonian Airways.
Looking more widely at the global aviation sector, Clark described it as patchy.
‘‘I don’t think it’s a good place at the moment.
‘‘There are issues with security, we’re also talking about geopolitics in our part of the world, [and] in the European theatre you’ve got the Brexit thing going on.
‘‘Everywhere we look we can see problems, whereas 10 years ago and before that when the world was moving ahead at such a pace everywhere was booming. Now it really isn’t.’’
Depreciation of currencies in Africa, geopolitical effects, and oil price volatility all require careful management, Clark said.
‘‘I’m not saying it’s all bad, the markets continue to grow, but they’re very price sensitive.’’
Looking five years ahead, Clark expected to see increased demand for cheap flights, but rationalisation among the lowcost airlines offering them.
‘‘You’re seeing it already where people are moving in to Air Berlin and fighting to get that.’’
Insolvent Air Berlin will stop flying this month and numerous carriers are vying to snap it up, including Britain’s Easyjet.
‘‘I think some of the legacy carriers in this part of the world – not Qantas – but further north, are going to be under challenge because there’s a huge growth in production from the Chinese carriers,’’ Clark said.
‘‘That is going to be something quite interesting to watch over the next five years as they push into the Western markets and as they try and get more into the US if they can and, of course, down here [Australia and New Zealand].’’
‘‘We’ll see how that all works out but I don’t see equilibrium or a flat line. I can see trouble coming.’’
Clark cited Singapore Airlines, which recently announced its first-ever loss, and Cathay as examples of struggling airlines.
‘‘These were the great and the good. They’re all having difficulties.’’
Growth in production capacity in most markets, yields heading south, difficulties in currency repatriation in Africa, parts of the Arab world and some South American countries, compounded issues, he said.
North Atlantic carriers were also facing increased competition from low-cost, long-haul carriers such as Norwegian Air.
‘‘If they increase the size of the market by hitting the incipient demand, then theoretically it shouldn’t be a problem for the legacy carriers.
‘‘But the moment the market share [of the legacy carriers and the alliance partners] starts to come under threat then it will be very interesting times.’’
The good news in all this comes for passengers as competition drives prices down.
And they may fall lower for Emirates’ passengers as Clark discussed a future that may involve more types of economy class to compete with low-cost carriers.
The airline would be unlikely to go so far as to charge passengers for food, but paying a low fare and then adding extras such as bags was being considered for some routes.
Oceania remained a strong market for Emirates, Clark said, adding he didn’t see problems downunder.
The airline flew more of its giant Airbus A380s to Australia and New Zealand than most of its other markets.
‘‘Who would every have thought that Christchurch would see a 380?’’
Commenting on Air New Zealand, Clark said it had innovative product design and was performing well financially despite having a lot more airlines flying into New Zealand.
Disclosure: Fairfax travelled to Sydney courtesy of Qantas and Emirates.
"We'll see how that all works out but I don't see equilibrium or flat line. I can see trouble coming." Sir Tim Clark, president of Emirates airline.