Gulf airlines swap butlers for bargains

The Gulf airlines previously hit the headlines for their luxurious offerings, but are increasingly focusing on luring more budget-focused passengers. (Emirates)
Updated 06 July 2017

Gulf airlines swap butlers for bargains

DUBAI: Etihad and Emirates once tempted travelers with flying butlers and luxurious premium cabins, but fierce fare competition has forced the pair to look at how to appeal to budget-conscious economy passengers.
It is a new phenomenon for the airlines, who in the past have been able to shrug off cheaper fares from European rivals because of the strength of their service and the comfort of their cabins.
Now they are targeting economy passengers with promotions focused more on cost than comfort as overcapacity in the global aviation industry forces fares lower.
“There is a recognition of the need to compete on price as well as generating additional revenue from economy,” said John Strickland, a London-based aviation industry consultant. “Although that can be a bit more challenging to keep the exclusivity for those who are paying higher fares.”
The harsh competitive environment has been made worse by a bitter political standoff between Qatar and some of its Gulf neighbors.
The row has upended air travel in the region in the middle of the busy summer season when tens of thousands of travelers fly out as schools break up and temperatures rise.
The price of global air travel was about 10 percent cheaper in the first quarter of 2017 than a year ago after adjusting for inflation, according to data from the International Air Transport Association (IATA).
That has hurt airlines based in countries with dollar pegs because of the continued strength of the greenback, which has helped many rival European carriers offer more competitive fares.
IATA says that in seasonally adjusted terms, international traffic through the Middle East has been tracking sideways since the start of the year.
As the competitive environment heats up, Gulf carriers are being forced to take a closer look at their cost structures to fend off fare-slashing by rivals.
That process started with thousands of job cuts this year and now airlines from the region are looking at how to squeeze more revenue from economy passengers.
It is unfamiliar territory for Emirates, an airline that is perhaps more associated with unbridled commercial success than any of its rivals after delivering successive years of profit for decades.
In better times, the comfortable Emirates flying experience was enough for many passengers to pay more.
But aggressive fare discounting by competitors, a slowing economy at home and regional instability have hit the airline hard.
Emirates President Tim Clark did not sugarcoat the challenges facing the carrier when he was interviewed by the Financial Times in early June.
“We’ve got to tough it out,” he said. “The business model is essentially a sound business model, but at the moment it’s challenged. For no reasons of our own, purely from geopolitical and socio-economic reasons.”
Etihad, the Abu Dhabi-based carrier that offers a flying butler service for its most expensive “suites,” also wants to boost economy passenger revenue.
The airline said in June it also planned to make a series of changes to its ground and inflight services aimed at offering “increased value.”
The cost-saving measures included giving economy class passengers paid access to its premium lounges.
Mohammed Al-Bulooki, executive vice president commercial for Etihad Airways, said the changes would “ensure fares remain as low and as competitive as possible.”
Earlier, Etihad said it would offer free stopovers in Abu Dhabi during the summer period.
While regional carriers are buffeted by economic turbulence there is at least some expectation of an increase in passenger demand later this year.
IATA predicts passenger demand among Middle East airlines will rise by about 7 percent in 2017 — but that is only just ahead of expected capacity growth of 6.9 percent.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 9 sec ago

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.