* UAE airlines already under pressure
* Low cost long haul model could enter Middle East
* IATA warns too much capacity globally
(Adds IATA comments on industry capacity)
By Alexander Cornwell
ABU DHABI, March 14 The profitability of
airlines based in the United Arab Emirates, the Middle East's
main aviation hub, is likely to fall this year amid limited
growth in demand, the head of IATA said on Tuesday.
The UAE is home to Emirates, which flies more
passengers long haul than any other airline, as well as rapidly
expanding Etihad Airways and low cost carriers flydubai and Air
"The UAE carriers will have a year that is probably below
2016," Alexandre de Juniac, director general and chief executive
of the International Air Transport Association (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 the
airline's President Tim Clark 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 signalled further delays to
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
The growth of low-cost airlines that fly long haul, like
Norwegian Air Shuttle, is expected to continue to
pressure established trans-Atlantic 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.
(Editing by Jason Neely and Susan Fenton)