Tough times for the travel industry: Emirates' subsidiary dnata feels the squeeze

Published October 11th, 2016 - 08:00 GMT
An uncertain economic outlook and a series of political shocks and terror attacks have dampened travel demand globally in 2016, adding to pressure on airline profits already affected by competition. (File photo)
An uncertain economic outlook and a series of political shocks and terror attacks have dampened travel demand globally in 2016, adding to pressure on airline profits already affected by competition. (File photo)

Emirates Group’s aviation and travel services unit, dnata, says a softening in demand for air travel is weighing on its travel services division that includes a portfolio of international travel agencies.

An uncertain economic outlook and a series of political shocks and terror attacks have dampened demand globally in 2016, adding to pressure on airline profits already affected by competition.

“The travel business, in particular, is finding the conditions tough,” dnata president Gary Chapman told Gulf News in an interview on Monday at the company’s new operations centre for Dubai International.

Dnata is now looking at how it can adjust it business model and “be more efficient,” including looking at job cuts, Chapman said, without providing further details.

On Monday, dnata opened a customer service and operations centre at the Dubai Airport Freezone (Dafza), a part of an ongoing Dh250 million investment to increase dnata’s non-Emirates cargo handling capacity at Dubai International. Dnata will be able to handle 750,000 tonnes of cargo a year once all of the investments are made, Chapman said. It handled 550,000 tonnes in the previous fiscal, up 4.5 per cent year-on-year.

Profit at dnata surpassed Dh1 billion for the first time in the financial year ended March 31, 2016. Chapman said he was “hopeful” of achieving budget this fiscal but did not say if he expected profit growth.

“At the moment, we are actually where we budgeted to be. We are in a pretty good place,” he said. “Now is that going to change and is it going to get a little more difficult? I suspect it will.”

Demand for air travel grew on an average of 5.7 per cent in the eight months to August 30 compared to 6.5 per cent in the same period a year ago, according to data on the International Air Transport Association (IATA) website.

Terror attacks and political uncertainty in Europe and geopolitical tensions in the Middle East and Eastern Europe are weighing on the travel market, Nadejda Popova, travel project manager at Euromonitor, told Gulf News by phone. “There is a lot of rethinking from travellers,” she said.

Chapman said there had been a “strong downturn” in the Middle East corporate travel segment and that there were “storm clouds” over the aviation industry, in part due to uncertainty in Europe. However, dnata’s business in the United Kingdom remains “incredibly robust”, and is in a “good place” despite the uncertainty since the June Brexit vote, he said.

Dnata has made a number of global acquisitions in both its airport and travel divisions in recent years. In June, it purchased a stake in Asian travel firm Destination Asia Group and in May said it had acquired United States ground handler Ground Services International. Dnata is “close to finalising” the acquisition of an unnamed Canadian cargo handler, Chapman said.

By Alexander Cornwell
 

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