UAE's Emirates to suspend most passenger flights, hitting Dubai aviation industry

Dubai — UAE's Emirates, the world's biggest long-haul airline, will suspend most passenger flights as of March 25, operating mainly cargo, as one of Dubai's main economic pillars takes a hit from the outbreak of the coronavirus.

Emirates, which used to fly to over 160 destinations, is implementing a slew of measures, including salary cuts to stay afloat, it said in a statement on Sunday.

"As a global network airline, we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns," Sheikh Ahmed bin Saeed Al Maktoum, chairman and CEO of Emirates Group, said in the statement.

"By Wednesday 25 March, although we will still operate cargo flights which remain busy, Emirates will have temporarily suspended most of its passenger operations. We continue to watch the situation closely, and as soon as things allow, we will reinstate our services."

In an earlier statement, it had said all passenger flights would be suspended as of March 25.

The airline will continue to fly to a limited number of destinations, after receiving requests from governments and customers to support the repatriation of travelers.

"Emirates will continue to operate passenger and cargo flights to the following countries until further notice, as long as borders remain open, and there is demand: the UK, Switzerland, Hong Kong, Thailand, Malaysia, Philippines, Japan, Singapore, South Korea, Australia, South Africa, USA, and Canada."

The partial suspension is a blow to Dubai's economy, which relies on aviation and tourism to fuel its growth.

Until last year, Dubai's airport was the busiest for international travel, handling 86.4 million passengers. The number of passengers was 3.1% lower than in 2018, the first such drop in years due to global market conditions and the grounding of Boeing's 737 Max aircraft.

Dubai International Airport handled 2,514,918 tons of cargo in 2019, a 4.8% decline from 2018.

Jet fuel

The partial suspension of passenger flights is bound to hit jet fuel demand in the UAE, if not globally.

"We estimate jet fuel demand for UAE was at least 180,000 b/d in 2019, accounting for more than 30% of the jet fuel consumption in the Middle East region and more than 2.5% of the global jet fuel demand," according to S&P Global Platts Analytics. The demand does not include refueling aboard of UAE's international flights, it said. "Given the increasing connectivity of UAE's international flights in different regions, we understand the impact of suspending will likely dampen the global jet fuel demand more than that to the ME regional demand."

In Emirate's first half financial results for April-September of 2019, fuel was the largest component of the airline's cost, accounting for 32% of operating costs.

"Emirates Group has a strong balance sheet, and substantial cash liquidity, and we can, and will, with appropriate and timely action, survive through a prolonged period of reduced flight schedules, so that we are adequately prepared for the return to normality," the chairman said.

Emirates, which is the largest operator of the A380 super jumbo planes and Boeing 777, carried 29.6 million passengers between April 1 and September 30 of 2019, down 2% from the year earlier period in 2018. The volume of cargo handled was 1.2 million tons, a 8% drop from a year earlier in 2018.

The airline said it was taking a series of measures to lower costs, including a freeze on all non-essential recruitment and consultancy work, working with suppliers to find cost savings and efficiency, and a temporary reduction of basic salary for the majority of Emirates Group employees for three months, ranging from 25% to 50%.

Ryanair cuts

The jet fuel market has crashed in the past month because of demand destruction as the coronavirus outbreak has spread fast globally.

More and more refiners are blending jet fuel into diesel to cope with the lack of demand.

Earlier this month, the International Air Transport Association sounded the alarm, saying many airlines were under severe cash flow pressure due to extraordinary travel restrictions caused by the coronavirus pandemic.

Last week, Ryanair, the world's largest budget airline, said it had to cancel up to 80% of its flights for April and May, adding that a "full grounding of the fleet cannot be ruled out."

(Updates with Emirates changes.)