Emirates eyes changes amid “gathering storm” of low-cost long-haul rivals

Flight attendant presents Emirates cabin at the International Tourism Trade Fair ITB in Berlin, Germany on Wednesday. (REUTERS/Fabrizio Bensch)
Updated 09 March 2017
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Emirates eyes changes amid “gathering storm” of low-cost long-haul rivals

BERLIN: Emirates, the world’s largest long-haul airline, is stripping out costs from its business as it adapts to weaker markets and a stronger dollar and the rise of low-cost long-haul rivals, the carrier’s president said on Thursday.
Changing economic conditions are forcing state-backed Gulf airlines, who have moved into many foreign markets from Asia to South America in recent years, to revise their business models and slow their once rampant growth in capacity.
“We are subject to market changes like everybody else is,” President Tim Clark told journalists in Berlin on the sidelines of the ITB travel fair.
One of the changes is the rise of lower-cost long-haul travel, he said, describing it as a “gathering storm.”
Norwegian Air Shuttle is putting pressure on established transatlantic carriers with its expansion using longer-range single-aisle aircraft to fly between smaller, cheaper local airports, while flag carriers like Lufthansa, Air France and British Airways-owned IAG are all working on low-cost long-haul projects.
“The way people travel, their decisions for traveling, the amount of money they’re prepared to pay, new entrants coming to market, long-range single aisles, it’s all changing,” Clark said.
More carriers are looking at using new, more efficient longer-range single-aisle planes for routes where they can be cheaper to operate while being easier to fill than widebody planes, whereas Emirates has an exclusively wide-body fleet.
Clark, who has been with Emirates since 1985, said he couldn’t see that changing, but added: “Maybe others coming behind me will take a different view.”
He declined to provide details or say when any new strategy would be announced but said job cuts were “not in our nature.” “It’s not a revolution, it’s an adjustment,” he added.
Emirates said in January a thousand staff had left the company in the previous three months “largely through natural attrition.”
“We are attending to the business in terms of examining, streamlining and stripping out costs,” Clark said, adding that Emirates is one of the “lowest cost operators in the international market.”
A potential order for Boeing 787 or Airbus A350 jets that Emirates has long been debating, is part of the ongoing reassessment, he said.
A decision on whether to introduce a premium economy class had also not yet been taken. “I can’t at this moment say premium economy is the right way to go,” he said, adding that Emirates wanted to be sure it wouldn’t lose business class passengers to premium economy.
That seemed to contradict comments he made in December that premium economy would be rolled out “within the next year to 18 months.”
The Dubai-based carrier has previously said it’s looking for ways to boost ancillary revenue including introducing fees to pre-select economy seats and allowing passengers to buy entry to its lounges.
Meanwhile, he said that Emirates did not want to speed up deliveries of its final 25 Airbus A380s, due from 2021, because it doesn’t have the space to deploy them at Dubai airport.
Emirates saw profits drop 75 percent in the first half of its current financial year and Clark said the year had been “tough.” Yield decline remains an issue, but the decline has not worsened, he said.


Turkish lira hits record low, down 20 pct against dollar this year

Updated 29 min 9 sec ago
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Turkish lira hits record low, down 20 pct against dollar this year

ISTANBUL: The Turkish lira tumbled more than 5 percent on Wednesday before recovering some ground, the latest drop in a sell-off that reflects growing investor alarm over the direction of monetary policy under President Tayyip Erdogan.
The decline, exacerbated by stop-loss selling by Japanese retail investors overnight, brings the lira’s losses to more than 20 percent so far this year and puts it on track for its worst monthly performance since the 2008 financial crisis.
The sell-off has also increased expectations that the central bank may be forced to call an extraordinary meeting to raise interest rates before its next scheduled policy-setting meeting on June 7, as it has done in previous years.
“We expect the MPC to hold an interim meeting over the coming days to raise interest rates by at least 200bp,” Jason Tuvey of Capital Economics said in a note to clients.
“If policymakers refrain from tightening monetary policy, the risk of a disorderly adjustment and a sharp economic downturn (possibly recession) will mount.”
The lira was at 4.8500 at 0855 GMT from its close of 4.6746 on Tuesday. It earlier touched a record low of 4.9290. It also fell against the Japanese yen, amid talk Japanese retail investors were selling the lira as it hit stop-loss levels.
“We are bearish on the lira and always have been given its very weak external balances and with macroeconomic policy moving in the wrong direction as well,” said Kiran Kowshik, emerging markets forex strategist at UniCredit.
A self-described “enemy of interest rates,” Erdogan wants borrowing costs lowered to spur credit growth and construction, and he said last week he would seek greater control over monetary policy after elections set for June 24.
Economy officials told Reuters the government’s economic management team met at the start of this week to discuss potential measures, including possible steps by the central bank. Deputy Prime Minister Mehmet Simsek and Central Bank Governor Murat Cetinkaya attended the meeting.
Ratings agencies sounded alarm about monetary policy. S&P Global senior sovereign analyst Frank Gill told Reuters government finances could deteriorate rapidly if authorities failed to stem pressure on the currency and government borrowing costs .
Investors want to see decisive rate increases to rein in double-digit inflation, and Erdogan’s comments have reinforced long-standing worries about the central bank’s ability to do that.
Borsa Istanbul Group, the Istanbul stock exchange company, said in a statement on Wednesday it had converted its foreign currency assets into lira, aside from its short-term needs, in a step to support the Turkish currency.
The lira’s weakness was exacerbated by dollar gains against a basket of currencies, with investors awaiting the minutes of the Federal Reserve’s last policy meeting for hints on the pace of monetary tightening.
The yield on the benchmark 10-year bond rose to 15.30 percent at the opening from a last trade of 14.92 percent on Tuesday.
The main BIST 100 share index fell 0.22 percent to 103,105 points on Tuesday.