A lesson in economics as UAE schools get competitive

The cost of a child’s education from preschool to university in the UAE has been estimated at around $255,000. (Shutterstock)
Updated 25 August 2018
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A lesson in economics as UAE schools get competitive

  • chools in the UAE could find themselves in a price-and-quality battle to attract students
  • A flood of new schools across the UAE means parents have more choice yet are seeking value

ABU DHABI: Schools in the UAE could find themselves in a price-and-quality battle to attract students as competition within the nation’s education sector hots up.
After years of near-constant growth and an infrastructure boom in the field of education, a flood of new schools across the UAE means parents have more choice yet are seeking value as salaries become squeezed in a tougher economic environment.
While education analysts do not see a so-called “expat exodus” leading to empty spaces in UAE classrooms, they believe rising living costs and uncertainty in the job market mean schools will have to carefully consider their price structure and show they can continually drive up standards if they are to survive. As the sector becomes increasingly competitive, some schools are taking heed by turning down the option of raising tuition fees.
Mahboob Murshed, managing director at Alpen Capital (ME), said: “The UAE education sector — which has in the past seen a phase of robust growth in student enrolment coupled with an expansion of infrastructure — is now entering a phase of transition.
“For the first time, there are concerns of oversupply as demand struggles to catch up with supply, with the entry of a large number of new schools in the past few years. The competition among private players has intensified over the years with new schools offering incentives and discounts to attract students.
“The increased competition has ensured a greater focus on quality of education, with players focusing on continuous improvement to enhance their ratings.
Any drop in enrolment numbers has a direct impact on profitability of schools and newer entrants are at a greater risk as compared to older and more established schools. We expect to see consolidation in the sector and only those with a high-quality offering in their price segment will be able to maintain and enhance their profitability.”
While concerns have been raised that tougher economic times mean that some expats will leave the UAE, with a resulting impact on school numbers, WorldOmeter — one of the world’s leading sources on global population growth — estimates that the UAE’s population will continue to expand at a net rate of 1.5 percent.
But according to Mansoor Ahmed, director for health care, education and public-private partnerships at Colliers International, the potential client base for schools is only one factor in whether they thrive or stagnate. He feels providers need to look at “the composition of the population,” which is becoming more mid-income than high-income, and make “affordability” their focus.
“The government in Dubai has already taken a step in this regard, by freezing private school fees in 2018/19, while the private sector is also moving in this direction by introducing more and more affordable schools,” he said. “Dubai is expected to maintain its status as one of most buoyant private school market in the world.”
However, he emphasized that studies have shown the cost of private education in the UAE is still the second highest in the world — behind only Hong Kong — with parents spending an average of 365,025 dirhams ($99,378) to send their child to school. Meanwhile, the cost of a child’s education from preschool to university in the UAE has been estimated at around $255,749 — and that excludes the cost of books, school trips, and uniforms, which could add another 40 percent to that figure where leading schools are concerned.
“In Dubai, based on 2015/16 data, almost 57.5 percent of students pay tuition fees of less than 20,000 dirhams per annum, whereas a large number of schools that have opened in the last few years, especially branded international schools, were catering to the premium end of the market,” said Ahmed.
“However, as the education market is maturing in the UAE and in Dubai, parents are becoming more and more careful in selecting a school for their children, as being expensive does not guarantee better quality. This hypothesis is also supported by the KHDA School Inspection Report which does not show a one-to-one correlation between tuition fees and a school’s ranking, as there are a number of schools charging affordable and/or mid-level tuition fees and still being ranked as ‘outstanding’ or ‘very good’.”
Ahmed said that while schools in Dubai are allowed to increase tuition fees based on the Education Cost Index (ECI) released by the Dubai Statistics Center — which, in 2017, enabled eligible schools to raise fees by between 2.4 percent and 4.8 percent — some schools decided not to do this for the 2017/18 academic year.
He said this decision was based on their desire “to attract and retain students in their schools as a result of a slowdown in economic activities,” which reduced the enrollment growth rate from 6.4 percent between 2011/12 to 2015/16 to only 3.13 percent in 2016/17.
“There is also increased competition, with the opening of around 10 new schools in 2017, following a record 15 new schools in 2016,” Ahmed added. “In fact, a number of schools in Dubai — especially this year — are offering incentives such as scholarships founder’s discounts, and sibling discounts to attract and retain students.”


Crisis at India's Jet worsens as it grounds planes, faces strike

The debt-laden carrier has delayed payments to banks, suppliers, pilots and lessors. (Reuters)
Updated 26 min 14 sec ago
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Crisis at India's Jet worsens as it grounds planes, faces strike

  • More than 20,000 people are employed in the company
  • The company had to stop more than 50% of their aircraft due to insufficient funds

MUMBAI: India's Jet Airways was fighting multiple crises Wednesday after grounding six planes, leaving it with only a third of its fleet flying, while pilots have threatened to walk out and a major shareholder is reportedly looking to offload its huge stake.

The problems at India's number-two carrier come as other airlines struggle to turn a profit despite the sector rapidly expanding in the country over recent years.

Jet, which employs more than 20,000 people, is gasping under debts of more than $1 billion and has now been forced to ground a total of 78 of its 119 aircraft after failing to pay lenders and aircraft lessors.

In a statement late Tuesday announcing its latest grounding, the firm it said it was "actively engaging" with lenders to secure fresh liquidity and wanted to "minimise disruption".

But with hundreds of customers left stranded, Jet's social media accounts have been flooded with often suddenly stranded passengers demanding information, new flight tickets and refunds.

"@jetairways We book our flights in advance so that we save on travel cost and you are sending cancellation (message) now?", read one irate tweet on Wednesday.

"I have sent a DM (direct message) regarding my ticket details. Please respond!", said Sachin Deshpande, according to his Twitter profile a design engineer.

Another, Ankit Maloo, wrote: "Received an email for all together cancellation of flight days before departure without any prior intimation or communication over phone!"

The firm is also facing pressure from its many pilots who have not been paid on time, with unions threatening they will walk off the job if salaries do not arrive soon.

"Pilots will stop flying jet planes from 1st April 2019 if the company does not disburse due salaries and take concrete decisions," a spokesperson for the National Aviator's Guild, a pilots union, told AFP.

India's aviation regulator on Tuesday warned Jet Airways to ensure that staffers facing stress are not forced to operate flights.

Meanwhile, Bloomberg reported that Etihad Airways of the United Arab Emirates has offered to sell its 24 percent stake in Jet to State Bank of India (SBI).

A collapse would deal a blow to Prime Minister Narendra Modi's pragmatic pro-business reputation ahead of elections starting on April 11.

India's passenger numbers have rocketed six-fold over the past decade with its middle-class taking advantage of better connectivity and cheaper flights.

The country's aviation sector is projected to become the world's third-largest by 2025.

But like other carries, Mumbai-based Jet has been badly hit by fluctuating global crude prices, a weak rupee and fierce competition from budget rivals.

Alarm bells for Jet first rang in August when it failed to report its quarterly earnings or pay its staff, including pilots, on time. It then later reported a loss of $85 million.

In February, it secured a $1.19 billion bailout from lenders including SBI to bridge a funding gap, but the crisis has since deepened.

"Jet Airways is rapidly reaching a point of no return and running out of assets to keep itself afloat," Devesh Agarwal, editor of the Bangalore Aviation website, told AFP.

"The only solution is equity expansion by diluting its stakes but Jet is just trying to cut losses and running out of options," Agarwal said.

Shares in Jet Airways were down more than five percent on Wednesday.