2019 Outlook: Aviation market to expand at a slower rate this year

Etihad Airways enjoyed a period of steady growth in the first and second quarters of 2018.

However, as the global market softened, this growth began to slow down towards the end of the year, particularly in the fourth quarter. This is of course not unique to Etihad and is reflective of the situation across most of the industry. We predict that this trend will continue for at least the first quarter of 2019.

We have built cautious assumptions into what we predict for development in 2019 and this is a forecast of cautious growth in international travel and for the international market, which will increase.

Our analysis shows this market shift. The International Air Transport Association (IATA) and the IMF have a slightly different approach but they have also cut their growth forecast, so I think in 2019, we will have a market that is expanding at a lower rate, but still in positive growth range. This should not impact Etihad greatly as we have already made and implemented some key decisions to reflect this trend.

The regional market has been relatively flat and shrinking over the last couple of years. Next year, we predict a totally flat market in the region. This means you will not see the significant growth pattern enjoyed some years back. There has been a lot of air traffic capacity pushed into this market in the past few years and there is a huge supply of capacity provided by all the main operators here. If there is one thing we know for certain, it’s that you will most likely always find a seat on your desired flight.

The regional market has been relatively flat and sinking over the last couple of years

When it comes to tourism, with Abu Dhabi being the key focus, we at Etihad believe that the capital is still in the starting phase of building and promoting its world class attractions internationally. Abu Dhabi and Dubai are completely different markets. Abu Dhabi has a slightly different approach, with different target customer segments and, in turn, the UAE’s capital is building its brand in a distinctive manner.

Although both emirates have the beaches and year-round sunshine, Abu Dhabi positions itself as an all-around leisure destination, built around major aspects of culture appealing to the mid to high-end traveller, and choosing to showcase its Emirati heritage. We enjoy close cooperation with the Department of Transport and The Department of Culture and Tourism. We all understand that as key Abu Dhabi stakeholders, we must invest in Abu Dhabi, and Etihad as a major enabler of travel and tourism to the emirate, has been doing so since its inception and will continue to do so.

Challenges abound, naturally. In certain markets, Abu Dhabi is a well-known brand and in some markets it isn’t. We still have some way to go in order to build the Abu Dhabi brand globally. There is huge potential as Abu Dhabi is a fantastic product, depending on how you bundle it, package it, distribute it, in the right channels and at the right time. That said, the global perception and awareness of Abu Dhabi as a leisure and cultural destination, including for stopovers, has never been higher.

As a major global airline, we are affected by the price of oil. For forward budgeting, rapidly fluctuating oil prices are very challenging. What we saw throughout 2018 were fairly elevated prices in the high seventies. Then, in only a few weeks, oil went from $74 a barrel, to $83, then down to $59 at its lowest.

Currency fluctuations also continue to have a major impact on the industry. The dollar has gained strength compared with many local currencies, including more stable European currencies, which from a revenue perspective hampers us negatively.

We are doing things right by easing visa applicatio

Those are the macro level factors – market growth, oil prices and currency – all beyond our control. We can mitigate risk but we don’t influence these factors. How you mitigate these risks is simply down to how you behave as a company during these fluctuations.

These issues aside, we still see a lot of opportunity – inbound tourism and stopovers, for example, will benefit this market and benefit Etihad. And we are doing things right by easing visa applications and opening our borders for visitors. This is how you stimulate a tourism industry. It’s a very good sign and the region will benefit from that.

Currently, there is great interest in the Middle East, but if you go to Europe, for example, and ask people what they know about the region as a tourist destination, you will get a very mixed response. When you ask first-time visitors to Abu Dhabi about their impressions of the place, 99 percent tell how positively surprised they are. That fact takes us back to the need to build Abu Dhabi as a brand, with the right content. At the end of the day, customers either want to be point-to-point visitors, here for approximately a week or more, or have chosen a stopover. Whatever the choice, you must have given them the reason to stay and, just as importantly, to return.

Robin Kamark, Chief Commercial Officer (CCO) of Etihad Aviation Group

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