Airlines face higher fuel bills as they avoid Iran, Iraq amid tensions

Independent aviation consultant John Strickland said longer journey times will throw off schedules and add to flights’ operating costs. (AFP)
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Updated 10 January 2020

Airlines face higher fuel bills as they avoid Iran, Iraq amid tensions

  • Virgin Atlantic Mumbai flight times will be ‘slightly longer than expected’

DUBAI: Airlines are facing higher fuel bills as they reroute flights to avoid airspace over Iran and Iraq due to recent heightened tension between Washington and Tehran, adding further financial pressure to an industry already contending with the prolonged grounding of Boeing’s 737 MAX jets.

Germany’s Lufthansa AG, Air France-KLM, Singapore Airlines and Malaysia Airlines have redirected flights from airspace in the region after Iranian forces fired missiles at military bases housing US troops in Iraq. A Ukraine jetliner also crashed in Tehran, although the cause is not yet known.

“Avoiding Iraqi/Iranian air space is a double headache for airlines,” independent aviation consultant John Strickland said by email, noting longer journey times that would throw off schedules and add to operating costs.

Mark Zee, founder of OPSGROUP, which monitors global aerospace for risks that it shares with industry members, said rerouting to avoid Iranian and Iraqi airspace could add around 40 minutes to trips from Europe to Asia.

Australia’s Qantas Airways said such a detour would add 50 minutes to its Perth to London flight time, forcing it to reduce passenger numbers — and therefore revenue — in order to carry more jet fuel.

Virgin Atlantic also said its flight times to and from Mumbai would be “slightly longer than expected.”

Based on data from Flightradar24 and feedback from airline members, Zee said carriers are largely redirecting flights over parts of Saudi Arabia and Egypt.

The US Federal Aviation Administration (FAA) has barred US carriers from airspace over Iran, the Gulf of Oman and the waters between Iran and Saudi Arabia, citing “heightened military activities and increased political tensions in the Middle East.”

Tensions in the region surged after a US drone strike killed a top Iranian military commander in Iraq last week, compounding industry challenges at a time when carriers are already reeling from stiff competition, increased regulations and fallout from the 737 MAX fleet’s global grounding.

In a piece of good news for the industry, oil futures fell nearly 4 percent on Wednesday, retreating from an earlier four-month high, on a de-escalation of rhetoric from Washington and Tehran, and a realization that Iran’s rocket attack did not damage oil facilities.

In December, global airlines reduced their forecast for industry-wide profits in 2019 under the weight of trade tensions, but were expecting a rebound in 2020.

Etihad Airlines, Qatar Airways and Emirates Airline are still using the airspace, which remains open.

“The Gulf carriers in total will have a headache, as they need to pass Iran to get to Europe,” Bernstein analyst Daniel Roeska said, adding that airlines flying from India to Europe would also suffer. 


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.