Emirates airline faces ‘double whammy’ on fuel, dollar – Clark

SYDNEY (Reuters) – The president of Emirates airline said the rare combination of higher fuel prices and a stronger dollar, which usually move in opposite directions, represented a "double whammy" for the group and this would have to be managed.

"We have very strong summer bookings at higher prices," Tim Clark said during a briefing on the sidelines of an aviation industry meeting in Sydney, adding that the airline was monitoring trends for any sign that higher ticket prices were leading to a drop in demand.

Global airlines body IATA on Monday downgraded its profit forecast for the industry, citing higher oil and labour costs, although it also said yields, a proxy for air fares, were expected to rise by 3.2 percent this year.

IATA has warned that rising fares as airlines seek to make up for higher costs could temper growth in air passenger demand.

Asked if he saw any sign that this point had been reached, Clark said no because the airline had managed to raise prices for the summer without hurting bookings. "The velocity of growth (in bookings) exceeds what we had seen last year," he said.

To combat higher oil prices, airlines are locking in fuel hedges, lowering capacity, raising fares and retiring older jets, industry executives at the Sydney meeting said.

Clark also said its US business had returned to growth after being hit by restrictions on electronics devices last year. He said "Fifth Freedom" routes, which allow an airline to fly between foreign countries as a part of services to and from its home country, were not central to the business of Emirates airline.

The United States last month agreed a deal with the United Arab Emirates and in January with Qatar to resolve claims from the three largest US carriers that Gulf airlines had received unfair government subsidies.

UAE, as Qatar did in January, told the United States in a letter that the two UAE airlines have no current plans to add additional Fifth Freedom flights. Some in the United States have suggested that the deal stops the Gulf carriers adding Fifth Freedoms flights, but Clark said the agreement does not rule out such flights.

Clark also said he expected to make a decision soon on engines for the carrier's latest order of A380 super jumbos. The planes are due for delivery from 2020.

The General Electric and Pratt & Whitney Engine Alliance venture powers most Emirates A380s, but it lost out to competitor Rolls-Royce on the latest deliveries.

Clark said the Rolls-Royce Trent 900 engines on its A380s has shown good performance on maintenance since being introduced to the Emirates fleet 1415 months ago. However, Emirates has delayed some A380 deliveries to allow for fix to a fan blade problem.