Emirates Debates Lower Airfares On Dropping Oil Prices

Posted by: : Paul EbelingPosted on: January 25, 2015 Emirates Debates Lower Airfares On Dropping Oil Prices
 

Emirates Debates Lower Airfares On Dropping Oil Prices

Emirates has been studying the impact of lower Crude Oil prices since November and is likely to introduce new prices in April.

Dubai’s flagship airline, Emirates, is studying whether to cut the fuel surcharge it passes on to customers to reflect recent drops in Crude Oil prices, its president said in The National, an Abu Dhabi-based newspaper.

Tim Clark also said the falling prices, Crude Oil is now about 60% cheaper than it was at its June high, would be “a huge boost” to the airline’s Y 2014 earnings. That should offset disruption from runway work at its home airport and a decline in business with Russia, he said.

Emirates has been studying the impact of lower Crude Oil prices since November and is likely to introduce new prices in April. The new prices will take into account the Emirates fuel surcharge and other factors.

“The Oil price fall has given us the opportunity to review our whole pricing structure,” Tim Clark said at the World Economic Forum in Davos.

Emirates is the 2nd of the 3 major Gulf-based airlines to announce possible price cuts. Earlier this month, the CEO of Qatar Airways said it would reduce its fuel surcharge, without saying when or by how much.

While considering what benefit it can pass on to consumers, Emirates will maintain the margins needed for investment in expansion and to meet profit levels, Mr. Clark said.

The Dubai-based carrier reported a profit of Dhs1.9-B ($517.3-M) in the 6 months to 30 September, with fuel accounting for 38% of Emirates’ operating costs in the period.

The 11.8% rise came despite an expected loss of around Dhs1-B of revenue caused by disruption during the upgrading and refurbishing of the 2 runways at Dubai International Airport between May and July.

Declining traffic on its Russian services could also affect full-year earnings, with the airline reducing capacity to Moscow and St. Petersburg, Mr. Clark was quoted as saying.

The Russian Ruble has almost halved Vs USD since July as Crude Oil prices fell and the West imposed sanctions on Russia over its role in violence in Ukraine.

Travel to Dubai by Russian tourists has dropped steeply, with 1 tour operator in the emirate recording an 80% fall in numbers.

The carrier had nothing to add to Mr. Clark’s comments, Emirates said in an emailed statement.

Have a terrific week.

HeffX-LTN

Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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