Gulf rift deepens airlines' woes

 Gulf rift deepens airlines woes

By Reuters

Published: Wed 7 Jun 2017, 8:00 PM

Last updated: Wed 7 Jun 2017, 10:29 PM

A row between Arab powers has dealt a blow to supercarriers already hurt by low oil prices and laptop bans, exposing the sensitivity of Gulf hubs to regional uncertainty and creating openings for rival airlines - at least in the short term.
The unexpected closure of most surrounding airspace to Qatar's airline and restrictions on travel for its nationals left passengers stranded and forced its high-profile chief executive to bail out of a meeting of airline bosses in Mexico.
"It completely surprised all of us," Alexandre de Juniac, head of the International Air Transport Association (Iata), said after overseeing the meeting of around 200 airlines.
Saudi Arabia, Egypt, the UAE and Bahrain severed diplomatic ties with Qatar on Monday over its alleged support for militants.
Plunged into a diplomatic row for the second time in three years, Qatar Airways was forced to reroute dozen of flights through Iranian airspace as the world's second-richest nation per capita found itself almost boxed in by no-fly restrictions.
It was a dramatic reversal for the once unstoppable carrier, which has splashed tens of billions of dollars on jetliners and clashed with US rivals over its breakneck expansion.
"The whole business model is based on being a hub. They have invested in the airport, invested in state-of-the-art aircraft. They are losing a key source of (traffic) feed from major local markets," British aviation consultant John Strickland said.
"With the overflight ban, it is not only a headache to reroute some of the operation, but it will make flights longer due to more circuitous routes. It adds time and cost and disrupts the schedule in terms of making connections."
Shift to other carriers
Some demand may shift to other carriers, he said. Iata delegates said European carriers and Turkish Airlines could benefit, as well as UAE heavyweights Emirates and Etihad.
Disarray between Gulf allies left the region's wider aviation growth looking vulnerable in the eyes of some industry watchers and laid bare political complexities underpinning the diversification from oil into an East-West transit point.
Iata, whose members include national carriers of all the affected states, was reluctant to wade publicly into the row.
"Nations all over the world can close their borders and close or open their (airspace). But we would like the normal connectivity to be re-established, the sooner the better," de Juniac said.
While air travel between nations is governed by bilateral pacts, the right to overfly another country for civil transport is enshrined in international law through a 1944 transit accord. However, Saudi Arabia is not a member of the treaty, which calls for disputes to be settled through negotiation before exercising the right to close airspace for limited reasons.
The decision to isolate Doha came as Qatar Airways CEO Akbar Al Baker mingled with Iata members late on Sunday in Cancun. He left overnight by business jet, delegates said.
The move sent aviation officials from Montreal to Geneva and the Gulf scrambling to understand the ban and find routings through fragmented airspace, a step akin to threading a needle.
Iata said last week Gulf airlines had already seen traffic curtailed in April by US and UK bans on electronics in cabins of flights from some Middle East and North African nations. "I think one can read too much into a short-term event," said Aengus Kelly, chief executive of Aercap, one of the world's largest leasing companies and aircraft owners. "Global travel is resilient. We have been through so much in the last decade: Russia, Brazil, eurozone crisis, Turkey."
"Having said that, a lot of capacity has been going into the Gulf region. Some carriers in the Gulf recognised about a year and a half ago that there wasn't an endless growth model of 15 per cent a year."
That could have consequences for the timing of deliveries of dozens of wide-body jets on order from Airbus and Boeing.

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