ABU DHABI // The humble footrest has been sacrificed by Emirates Airline as part of a drive for fuel efficiency as the airline industry struggles with the effects of the global credit crisis.
Despite the cost of oil tumbling from highs of US$140 to almost $33 a barrel, conditions have not improved as passenger numbers dwindle amid fears of recession. Many airlines are locked into fuel contracts agreed when prices were peaking.
Industry analysts have already warned of a $200 million (Dh735m) loss for Middle East airlines next year.
"The footrests are rather heavy and we conducted the trial to see what passenger feedback would be if they were removed," said Andrew Parker, a spokesman for the airline.
"There were no adverse comments. Their removal increases leg space and provides more room."
"Fuel efficiency has been high on Emirates' agenda for many years. Footrests can be removed very easily and without diminishing the customer experience. Because of the impact on weight and therefore fuel burn we are progressively removing them."
Etihad has also introduced fuel-efficiency measures that the company says will save Dh73m (US$19.9m) this year.
"Fuel is now Etihad's largest single cost and accounts for between 35 and 40 per cent of the airline's annual expenditure," said Richard Hill, Etihad Airways' executive vice president of operations.
"With the high price of aviation fuel and against a deteriorating global economic backdrop, it is increasingly important that Etihad does all it can to control its cost base."
Efficiency initiatives include replacing metal cutlery with plastic knives and forks and switching to a lighter type of paper for the inflight magazine.
"It might not sound like much, but you only have to reduce the weight per passenger by a tiny amount, and it can make significant energy savings," said Leo Seaton, a spokesman at Etihad.
Reports in September that Emirates planned to scrap its inflight magazine Open Skies were dismissed, but the company is preparing to try out a new digital version of the magazine which can be read on passengers' television screens.
"There will always be reading material on our flights but we are looking at the possibility of providing that in a digital format," Mr Seaton said.
Passenger luggage allowances have also come under the spotlight.
In October Emirates overhauled its luggage allowances for travellers, which led to cuts on limits for economy passengers on some routes.
An Emirates spokeswoman said the reason for baggage allowances change was "to update, streamline and simplify the policy to make it more understandable for both staff and passengers".
"Although the policy revision reduced baggage allowances for passengers on some routes, we would like to stress that Emirates' allowances are in line with International Air Transport Association's standard, are comparable to other airlines for international flights, and are in fact more generous in many cases," said the spokeswoman.
In April Etihad reissued guidelines to passengers underlining that economy class ticket-holders were entitled to 20kgs in checked baggage.
Mr Seaton said that this was not a response to the tough trading conditions or efforts to cut aircraft weights, but part of a co-ordination of luggage limits across the company.
Airlines have attempted to protect themselves from the volatility of oil prices by buying contracts for jet fuels on the futures market, a strategy known as hedging.
The practice helps stabilise costs when fuel prices soar, but if oil prices fall the airline can be left holding fuel contracts which are priced far higher that the market rate.
As oil prices have fallen back from their summer highs, several airlines have been left holding expensive fuel futures contracts.
Earlier this month Emirates said that while fuel prices were hovering at around $43 a barrel, it had hedged fuel earlier at a price of $70 to $80 a barrel.
Maurice Flanagan, the executive vice chairman of Emirates Airline and Group, has said full-year profit up to April 2009 were expected to bounce back and hit $500 million.
Emirates is just one of several airlines to be burnt by fuel hedging.
In November, Cathay Pacific issued a warning to investors of potential hedging losses totalling about $360 million, while Air China said losses from hedged positions had tripled to $454 million in the third quarter.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
