Virgin Atlantic says goodbye to Dubai as competition gets too fierce

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Dubai is likely to have been an unprofitable route for Virgin for some time, according to aviation expert Jason Rabinowitz. (Shutterstock)
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Analysts said Virgin was too small a player in the market to compete. (Shutterstock)
Updated 28 June 2018
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Virgin Atlantic says goodbye to Dubai as competition gets too fierce

  • Having operated flights from Heathrow to Dubai for more than a decade, Virgin Atlantic said it was “no longer economically viable” to operate the route.
  • With Dubai’s flagship airline Emirates operating numerous daily flights to London’s Heathrow as well as serving six other UK airports, Virgin Atlantic was poorly positioned to compete, experts said.

LONDON: Increasingly tough competition on London-Dubai flights pushed Virgin Atlantic out of the market, underscoring the dominance of Emirates on the prized route.
Having operated flights from Heathrow to Dubai for more than a decade, Virgin Atlantic said it was “no longer economically viable” to operate the route.
With Dubai’s flagship airline Emirates operating numerous daily flights to London’s Heathrow as well as serving six other UK airports, Virgin Atlantic was poorly positioned to compete, experts said.
“London to Dubai is served not only by Emirates, but also by British Airways. Both offering several flights per day, thus, there is obviously sufficient offer,” said Tobias Ruckerl, CEO and consultant at Advanced Aviation Consulting. BA operates regular flights from its London Heathrow hub.
“Virgin is a smaller player in this market and obviously they cannot stand the competition any more,” he said.
“Dubai probably has not been a profitable route for Virgin Atlantic in some time,” added US-based aviation expert Jason Rabinowitz.
“Emirates now has up to 10 daily flights to the London area, with nearly 5,000 seats offered each day each way. Virgin, on the other hand, offered a single flight.
“Even if Virgin could compete on price, and it probably cannot, there is simply too much competition on the London-Dubai route to keep it up,” he said.
Virgin Atlantic cited “external factors” behind its decision to cancel the route, in a statement issued late Wednesday.
“It’s never an easy decision to withdraw a route, and we’d like to thank our customers and dedicated team in Dubai for their loyalty over the last 12 years,” said Shai Weiss, chief commercial officer for Virgin Atlantic. The airline will continue to fly to Dubai until March 31 next year.
It is the second airline this year to ditch flights between the emirate and the UK capital, with Royal Brunei Airlines announcing last month that it would no longer fly from Brunei to London via Dubai.
Direct non-stop Brunei-London flights are to launch later this year.
Last year, Australia’s airline Qantas announced plans to return its transit hub from Dubai to Singapore.
While such developments have raised concerns that transit traffic and tourist numbers traveling via the Gulf airport could be negatively affected, most analysts have said that the strength of Emirates airline will maintain Dubai’s global predominance.
“As long as Emirates remains the powerful airline it is, I don’t see Dubai being in any sort of risk of losing its status as a major transit hub,” said Rabinowitz.
“While some airlines have opted to start ultra long-haul flights, offering non-stop routes where previously they stopped in Dubai, that is still a very small niche for airlines. The few other airlines that do stop at Dubai are insignificant when compared to the massive Emirates operation,” he said.
Andrew Charlton, managing director at Switzerland-based Aviation Advocacy was similarly upbeat. “No destination likes to see airlines leave, but in the scheme of things it is part of the parry and thrust of commercial aviation and should be seen in that context, not as a major statement on the health of Dubai or of aviation in the market.”
Emirates has further strengthened its presence in the UK this year, with the launch of its new daily service between Dubai and Stansted airport — located on the outskirts of the capital — this month.
The Middle Eastern airline is also set to launch a new service to Edinburgh later this year. It already flies to Glasgow, Newcastle, Manchester, Birmingham and London Gatwick and Heathrow.
Passenger traffic at Dubai International reached 7.6 million in April, relatively flat compared to the same month the previous year.
Year-to-date, traffic reached 30.35 million passengers, up 0.8 percent on the same time period last year, according to Dubai Airports data.
Dubai remained the third busiest airport in 2017, with passenger traffic rising by 5.5 percent last year, according to the Airports Council International. It is the world’s busiest airport in terms of international passengers.


Iran looms large over OPEC summit

Updated 22 September 2018
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Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”