Lower Oil Prices Can Help Airlines Post “Unprecedented Profits” – Emirates Head

The airline industry is set to receive a big boost in 2015 thanks to dropping oil prices, the head of Dubai-based Emirates Airline has said.

In his exclusive 2015 Gulf Business Power Letter, Tim Clark, president of Emirates, said that one of the biggest issues the global economy has had to face is that of artificially inflated oil prices.

“With oil prices dropping – for the first time in years – the global economy has been given a fighting chance to get back on a reasonable footing,” he wrote.

His remarks come as oil prices have fallen below $50 per barrel, and are now down almost 60 per cent compared to June 2014, mainly due to increasing supply and sliding demand.

“In 2015, the airline industry is set to reap the benefits of declining oil prices. The industry will also see unprecedented profits, if the prices continue to be at the levels we see today,” wrote Clark.

“Confidence is already returning to the industry and reinvestment in aircraft and infrastructure is underway in many parts of the world – a promising sign for aviation.”

With oil prices on the slide, carriers like Emirates stand to gain the most, agreed Saj Ahmad, chief analyst at StrategicAero Research.com.

“Not just because they operate fuel efficient jets like the 777-300ER, but their big fleet of A380s and 777s helps to lower seat-mile costs per passenger as lower fuel prices means it costs the airline less money to fuel and fly a jet on any given route,” he said.

Ahmad also opined that Emirates is set to become the first major airline in the world to announce record breaking profits that will surpass the $1 billion barrier in May 2015.

“Completed runway works at Dubai International Airport has allowed greater traffic movement and as Emirates continues its non-stop growth, any fuel price reduction will simply bolster their financial performance,” he said.

In its December 2014 report, the International Air Transport Association (IATA) said lower fuel prices are expected to help airlines post a collective global net profit of $25 billion in 2015, up over 25 per cent from an estimated $19.9 billion in 2014.

Tony Tyler, IATA’s director general and CEO said: “Stronger industry performance is good news for all. It’s a highly competitive industry and consumers—travellers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in.

“A healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last.”

According to estimates, jet fuel accounts for between 20 and 50 per cent of an airline’s operating costs, and reports claim many airlines have now begun hedging jet fuel to take advantage of the low prices.

Read all the 2015 Gulf Business Power Letters in the January edition of the magazine.