UAE airlines face multiple and growing challenges

Significance

The renewed dispute with US competitors adds to the increasingly strong headwinds faced by airlines in the United Arab Emirates (UAE) after a decade of rapid growth. Higher fuel prices, a strong dollar and weaker demand are also squeezing profits, while overcapacity and new competition are forcing a more radical restructuring.

Impacts

• Etihad’s ongoing losses will continue to fuel speculation over a merger with Emirates.
• The impact of the Iran crisis may lead to further dissonance between Abu Dhabi and Dubai over aviation policy.
• Growing competition with Turkish Airlines is adding to already complicated relations between the two countries.
• The tourism bump expected from Dubai’s hosting of the World Expo in 2020 will provide at least some temporary relief.
• The positive long-term outlook for passenger traffic from Asia will also be reassuring.