ABU DHABI: The profitability of airlines based in the UAE, the Middle East’s main aviation hub, is likely to fall this year amid limited growth in demand, the head of the International Air Transport Association (IATA) said on Tuesday.
“The UAE carriers will have a year that is probably below 2016,” Alexandre de Juniac, director-general and chief executive of the IATA, told reporters in Abu Dhabi.
Low-cost carriers that offer long-haul services, as seen in Europe, could also soon start to take hold in the region, he said.
IATA said in December that Middle East airlines are likely to see profits fall to $300 million in 2017 from $900 million last year in part due to high capacity and limited demand growth, but did not give specifics on UAE carriers at that time.
Half-year profit fell 75 percent at Emirates and Tim Clark, the airline’s president, said last week that while yield declines had halted it was still a tough year.
Air Arabia and flydubai reported lower full-year profit for 2016, while Etihad has not yet reported its results but has said it is reviewing its business.
Airlines in the Gulf benefited for years from high oil prices that spurred government spending and regional growth. But demand has softened and travel budgets have tightened after more than two years of depressed oil prices, exposure to weaker markets and currency fluctuations.
Emirates and Etihad are both reviewing their workforces, while Emirates has agreed with Airbus to delay the delivery of 12 A380 jets over the next two years.
Both airlines have hundreds of aircraft on order from Airbus and Boeing and neither has signaled further delays to deliveries.
De Juniac told Reuters that airlines across the world need to “manage their assets cleverly.”
“There is a lot of capacity so it explains why the yield is declining and many companies are suffering,” he said, but added that he “would not advise” airlines on how to define their capacity.
The growth of low cost airlines that fly long haul, like Norwegian Air Shuttle, is expected to continue to pressure established transatlantic carriers as these newcomers expand using longer-range single-aisle aircraft to fly between smaller, cheaper local airports.
Growth of low cost, long haul is “starting to accelerate” in Europe and Asia and is likely to eventually develop in other markets such as the Middle East, de Juniac said.
UAE airlines’ profits may decline this year: IATA
UAE airlines’ profits may decline this year: IATA
Closing Bell: Saudi benchmark index closes lower at 10,540
RIYADH: Saudi equities ended Wednesday’s session lower, with the Tadawul All Share Index falling 55.13 points, or 0.52 percent, to close at 10,540.72.
The sell-off was mirrored across other indices, with the MSCI Tadawul 30 Index retreating 5.79 points, or 0.41 percent, to close at 1,393.32, while the parallel market Nomu slipped 74.56 points, or 0.32 percent, to 23,193.21.
Market breadth remained firmly negative, as decliners outpaced advancers, with 207 stocks ending the session lower against just 51 gainers on the main market.
Trading activity moderated compared to recent sessions, with volumes reaching 123.5 million shares, while total traded value stood at SR2.72 billion ($725.2 million).
On the sectoral and stock level, Al Moammar Information Systems Co. led the gainers after surging 9.96 percent to close at SR172.30, extending its rally following a series of contract announcements tied to data center and IT infrastructure projects.
Al Masar Al Shamil Education Co. climbed 4.89 percent to SR27.48, while Naqi Water Co. advanced 3.36 percent to SR58.50. Al Yamamah Steel Industries Co. and Al-Jouf Agricultural Development Co. also posted solid gains, rising 3 percent and 2.86 percent, respectively.
Losses, however, were concentrated in industrial names. Saudi Kayan Petrochemical Co. fell 3.67 percent to SR4.73, while Makkah Construction and Development Co. slid 3.44 percent to SR80.
Saudi Tadawul Group Holding Co. retreated 3.28 percent to SR147.50, weighed down by broader market weakness, and Saudi Cable Co. declined 3.18 percent to SR143.
Alkhaleej Training and Education Co. rounded out the top losers, shedding just over 3 percent.
On the announcement front, BinDawood Holding announced the signing of a share purchase agreement to acquire 51 percent of Wonder Bakery LLC in the UAE for 96.9 million dirhams, marking a strategic expansion of its food manufacturing footprint beyond Saudi Arabia.
The acquisition, which remains subject to regulatory approvals, is expected to support the group’s regional growth ambitions and strengthen supply chain integration.
BinDawood shares closed at SR4.68, up 0.43 percent, reflecting a positive market reaction to the overseas expansion move.
Meanwhile, Al Moammar Information Systems disclosed the contract sign-off for the renewal of IT systems support licenses with the Saudi Central Bank, valued at SR114.4 million, inclusive of VAT.
The 36-month contract is expected to have a positive financial impact starting from fourth quarter of 2025, reinforcing MIS’s position as a key technology partner for critical government institutions. The stock surged to the session’s limit making it the top gainer.
In a separate disclosure, Maharah Human Resources confirmed the completion of the sale of its entire stake in Care Shield Holding Co. through its subsidiary, Growth Avenue Investments, for a total consideration of SR434.3 million.
The transaction involved the transfer of 41.36 percent of Care Shield’s share capital to Dallah Healthcare, with Maharah receiving the full cash proceeds.
Despite the strategic divestment, Maharah shares closed lower, ending the session at SR6.12, down 1.29 percent.
