Emirates-Etihad merger makes sense but will never fly – analysts

Emirates President Tim Clark said recently the Dubai airline was open to cooperation with Abu Dhabi-based Etihad. (Reuters)
Updated 02 November 2017

Emirates-Etihad merger makes sense but will never fly – analysts

LONDON: Plunging profits and mounting competitive pressure have turned up the heat on Gulf airlines, with Emirates President Tim Clark saying recently the Dubai flag carrier was open to cooperation with Abu Dhabi’s Etihad.
But what about a full-scale merger to cut costs and turn their fortunes around?
In an interview with Arab News, veteran analyst Tim Coombs, managing director of UK-based independent consultancy Aviation Economics, said politics would get in the way, even though on many levels “it makes commercial sense.”
“As long as any potential future losses don’t become too great, it’s hard to see what is going to drive consolidation,” said Coombs.
He added that Emirates is Dubai’s major brand, and the model was all about having Emirates as the “lightning rod” for other tourism, from hotels to shopping malls.
“All that infrastructure has been built around Emirates,” he said.
Dubai, Abu Dhabi and Qatar have built what analysts describe as “superconnector” hubs and tempted passengers with attractive fares, luxury travel and stopovers at destinations that have been built up as tourist venues. But now there is a chill wind as Emirates, Etihad and Qatar Airways grapple with overcapacity, security concerns, and the fallout from low oil prices, which have hit regional business and dented the bottom line.
Emirates, the oldest and largest of the Gulf airlines, posted its first full-year profit decline for five years in May, as earnings crashed more than 80 percent. Etihad’s losses in 2016 hit $1.9 billion, which included about $800 million of impairment charges related to its equity stakes in other struggling carriers, some of which are worthless.
Emirates President Tim Clark told Reuters on Oct. 11 that his airline was open to cooperation with Etihad in areas including procurement — but any merger would be up to the owners.
Coombs said: “Airlines have been here before, such as buying fuel jointly together, although such things are not enough to turn round a loss-making airline. To make aircraft procurement work you need to be ordering the same aircraft, and they aren’t.”
Emirates declined to comment when contacted by Arab News; Etihad did not respond to ­inquiries.
Gulf airlines are having to make difficult commercial decisions after years of growth, and Coombs said staff cuts were already underway. One problem was that the three airlines have got large order books and were continuing to receive new aircraft — but it is hard to cut routes when new aircraft are being delivered, said Coombs.
“If the situation remains the same, they may be going back to the manufacturers and looking to defer future orders,” he added.
Observers said another issue was the new airport in Istanbul that opens next year, and becomes fully functional as a hub in 2019.
“The Turkish Airlines model is to become another ‘superconnector’,” said Coombs.
“Turkey will be lobbying for exactly the same connecting traffic as the Gulf carriers are doing, effectively putting a fourth player into the market, adding to the squeeze.”
Chris Tarry, an airlines analyst at UK consultancy CTAIRA, told Arab News: “It’s not called the Istanbul Grand Airport for nothing. So yes, there will be more competition.
Istanbul is already one of the great circling routes for a lot of the connecting traffic.
“They have a wide catchment area in Europe and I expect Turkish Airlines will put in orders for wide-bodied aircraft as there are space constraints at Ataturk, and that will enable them to broaden their network.”
Tarry was not certain about a merger between Etihad and Emirates. “That is up to the ruling families in the final analysis. Would it mean one of the brands being dropped? These are difficult issues.”
Qatar Airways is profitable enough but under the cosh after a dispute with other Gulf Cooperation Council members led to the airline being shut out of destinations in Bahrain, Egypt, Saudi Arabia and the UAE by an embargo imposed in June. That was the equivalent of 20 percent of Qatar Airways’ seating capacity, said experts.
Profits for all the airlines in the Middle East are forecast to more than halve from $1.1 billion in 2016 to $400 million this year, according to Iata, the global airline trade association, quoted in The Financial Times.
All three Gulf carriers have been forced to discount fares in an effort to retain market share.
Tarry has no doubt the hubs will survive. “Even when it comes to stopovers, the airlines will do what they are doing already and cut fares to encourage passengers to break their flights.”
That means a flight with a stopover in the Gulf will often be cheaper than going point-to-point — for example traveling straight from Europe to the Far East.
Tarry believes there is plenty of headroom for the Gulf states to expand their own offerings for tourists to travel point-to-point to the Middle East.
Meanwhile, the carriers are adjusting their business models to cope with a much tougher trading environment. Emirates has agreed a tie-up with low-cost sister airline Flydubai, in a deal in which the pair will align their systems at Dubai International Airport.
And airport expansion plans are afoot at Dubai World Central and Abu Dhabi’s Midfield Terminal, as the emirates look to extract efficiencies to sustain growth — allowing them to navigate their way through the current turbulent conditions.


A Jordan startup delivers eco-friendly alternative to dry cleaning

Updated 05 December 2019

A Jordan startup delivers eco-friendly alternative to dry cleaning

  • Products used by WashyWash are non-carcinogenic and environmentally neutral
  • Amman-based laundry service aims to relocate to a larger facility in mid-2020

AMMAN: A persistent sinus problem prompted a Jordanian entrepreneur to launch an eco-friendly dry-cleaning service that could help end the widespread use of a dangerous chemical.

“Dry cleaning” is somewhat of a misnomer because it is not really dry. It is true that no water is involved in the process, but the main cleaning agent is perchloroethylene (PERC), a chemical that experts consider likely to cause cancer, as well as brain and nervous system damage.

Kamel Almani, 33, knew little of these dangers when he began suffering from sinus irritation while working as regional sales director at Eon Aligner, a medical equipment startup he co-founded.

The problem would disappear when he went on vacation, so he assumed it was stress related.

However, when Mazen Darwish, a chemical engineer, revealed he wanted to start an eco-laundry and warned about toxic chemicals used in conventional dry cleaning, Almani had an epiphany.

“He began to tell me how PERC affects the respiratory system, and I suddenly realized that it was the suits I wore for work — and which I would get dry cleaned — that were the cause of my sinus problems,” said Almani, co-founder of Amman-based WashyWash.

“That was the eureka moment. We immediately wanted to launch the business.”

WashyWash began operations in early 2018 with five staff, including the three co-founders: Almani, Darwish and Kayed Qunibi. The business now has 19 employees and became cash flow-positive in July this year.

“We’re very happy to achieve that in under two years,” Almani said.

The service uses EcoClean products that are certified as toxin-free, are biodegradable and cause no air, water or soil pollution.

Customers place orders through an app built in-house by the company’s technology team.

WashyWash collects customers’ dirty clothes, and cleans, irons and returns them. Services range from the standard wash-and-fold to specialized dry cleaning for garments and cleaning of carpets, curtains, duvets and leather goods.

“For wet cleaning, we use environmentally friendly detergents that are biodegradable, so the wastewater doesn’t contain any toxic chemicals,” Almani said.

For dry cleaning, WashyWash uses a modified hydrocarbon manufactured by Germany’s Seitz, whose product is non-carcinogenic and environmentally neutral.

A specialized company collects the waste and disposes of it safely.

The company has big ambitions, planning to expand its domestic operations and go international. Its Amman site can process about 1,000 items daily, but WashyWash will relocate to larger premises in mid-2020, which should treble its capacity.

“We’ve built a front-end app, a back-end system and a driver app along with a full facility management system. We plan to franchise that and have received interest from many countries,” Almani said.

“People visiting Amman used our service, loved it, and wanted an opportunity to launch in their countries.”

WashyWash has received financial backing from angel investors and is targeting major European cities initially.

“An eco-friendly, on-demand dry-cleaning app isn’t available worldwide, so good markets might be London, Paris or Frankfurt,” Almani said.

 

• The Middle East Exchange is one of the Mohammed bin Rashid Al-Maktoum Global Initiatives that was launched to reflect the vision of the UAE prime minister and ruler of Dubai in the field of humanitarian
and global development, to explore the possibility of changing the status of the Arab region. The initiative offers the press a series of articles on issues affecting Arab societies.