Etihad says Mid-East rivalry shields passengers from higher fares

The Abu Dhabi-based carrier said regional conflict is only one of many geopolitical issues affecting its operations.

DUBAI – The fierce competition between Middle East airlines means the rising costs of jet fuel will not be passed on to customers just yet, Etihad Airways’ chief executive said.

Fuel prices will have to stay higher for a longer period of time before carriers consider raising ticket prices, Antonoaldo Neves said in an interview.

Oil soared after the US and Israel launched attacks on Iran and remained above US$100 a barrel on Sept 14 as Washington and Tehran wrestle for control over the Strait of Hormuz.

“In the Middle East, because of competition, it’s much harder to pass on prices,” Neves said at the Arabian Travel Market conference in Dubai. “It’s the most competitive market in the world in terms of aviation.”

Analysts expect airfares to remain elevated for longer, putting pressure on carriers’ margins and their bonds.

The war forced Emirates, Qatar Airways and Etihad to temporarily cut back operations and rework their international networks because of suppressed demand and closed airspaces.

Etihad, the national carrier of the United Arab Emirates, is hedged at about 60 per cent until year’s end.

However, the reluctance to raise prices only applies to passenger service. Etihad also has a big cargo business, and Neves said higher prices are passed on “automatically” to those customers.

The Abu Dhabi-based carrier said regional conflict is only one of many geopolitical issues affecting its operations.

The Trump administration is tightening eligibility and raising fees for visas, including the H-1B visas central to the IT staffing and technology industries. At the same time, the US and Canada are slapping tariffs on each other’s products and industries.

“We see more impact in July and August because the student visas in the US and Canada have changed than because of the conflict, so we need to take a wider perspective,” Neves said. BLOOMBERG