If you hear a loud whistling sound at midnight tonight, it could well be a collective sigh of relief from the world's airline managers now that the roller-coaster ride of 2008 has come to an end.
A bipolar economy wreaked havoc on the world's airlines, which posted a collective loss this year of more than US$5 billion (Dh 18.35bn).
With coffers full of petrodollars because of record-high oil prices, the fast-rising Gulf airlines expanded routes and fleets. Their rivals in Europe and the US, though, were forced to lay off pilots and ground aircraft to pay for the rising cost of jet fuel and, eventually, a slowing economy.
"One airline executive told me it was a year of two halves - first half good, second half bad," says Nicholas Ionides, an editor of Flight International in Singapore. "There were several years of quite strong growth on traffic, and that had to end at some point."
For much of the year, it seemed Gulf airlines were still operating in idyllic conditions, boosted by the unique characteristics of operating a long-haul airline in the Middle East. The region has enjoyed four years of passenger traffic growth above 10 per cent a year, thanks to the opening of once closed regional markets and intra-regional travel spurred by the economic boom.
These carriers also benefited from being located en route to some of the world's major destinations, causing them to launch aggressive bids to capture traffic from long-haul European and Asian airlines. A quick look at a world atlas shows the Gulf is halfway between the UK and Australia, dubbed the all-important "Kangaroo Route" among airlines.
The boom in air traffic also brought new players to Middle Eastern skies. Air Bahrain in Manama began service in February, while investors in Kuwait announced they would form a new airline, Wataniya Airways, with plans to launch early next year.
Also in February, the Dubai Government sought to replicate the success of Sharjah's Air Arabia with its own budget airline as a sister carrier to its full-service giant, Emirates Airline. Air Arabia, meanwhile, used cash from its successful initial public offering to establish more hubs throughout the region.
At a time when most airlines were considering cancelling existing aircraft orders, Abu Dhabi's Etihad Airways placed the year's biggest order for 100 narrow-bodied and wide-bodied aircraft from Boeing and Airbus at the Farnborough Air Show in July. The airline also got options on another 105 aircraft worth a potential $43bn at list prices.
At the same air show, the new Dubai budget carrier unveiled itself as FlyDubai and ordered 54 Boeing 737 single-aisled aircraft, worth $4bn.
But oil, the perennial wild card in the airline industry, continued to keep airline managers guessing.
The price of a barrel of crude oil broke $100 in January, and then in April began a quick ascent, reaching $147 in July.
The fear of even higher prices led airlines to buy long-term fuel contracts - called fuel hedging - to lock in prices. Airlines were unable to pass on the fuel costs - which accounted for more than 40 per cent of operating costs, up from just 10 per cent a few years ago - to passengers.
In June, one airline official at an industry gathering in Istanbul said: "At these current oil prices, no airline is making money."
In the first half of the year, Emirates Airline, the most transparent of the big Gulf airlines regarding its financial details, locked in prices at $70 to $80 per barrel of crude oil.
But as many airlines took steps to protect themselves from escalating oil prices, the cost of fuel plummeted in line with the ailing global economy.
Crude dropped below $100 in September and now trades at about $40 a barrel - some $107 off its record high in July.
"It was a complex year," says Adel Ali, the chief executive of Air Arabia. "With everything you planned for, something else happened." In January, the Sharjah carrier had opened a second hub in Nepal, only to pull out six months later because of political instability, it said.
Global economic insecurity would further depress airline profits. By summer's end, the implosion of Lehman Brothers and the bailout of several US financial firms marked the start of a downturn that would spread quickly.
In September, Middle East companies cut their business travel budgets in the face of tough financial conditions, with first and business-class tickets falling 13.8 per cent, according to the International Air Transport Association (IATA).
However, oil's sharp decline did not help reduce costs for airlines such as Emirates, which had fuel contracts in place at prices above the spot market. The Dubai airline reported that first-half profits ending in October fell 88 per cent, to $73 million.
Pataal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
COMPANY%20PROFILE
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Origin
Dan Brown
Doubleday
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
How Sputnik V works
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
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.”
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
Jawan
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What can you do?
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
You can report an incident to HR or an immediate supervisor
You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
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Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
UAE currency: the story behind the money in your pockets
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
