U.S. ban on electronics could spell massive losses for region’s airlines. They risk losing their premium class traffic by 15-25%: analysts
The ban, announced on Tuesday, could see the region’s airlines losing their premium class traffic (Transatlantic) by “15-25 per cent”, according to US-based aviation analyst Ernest S Arvai, chief executive of The Arvai Group, reported Gulf News.
While the Middle East airlines are still trying to assess the extent of financial hit they may have to take owing to the sudden gadget ban on US and UK flights, industry experts are already estimating big losses.
A lot of business- and first-class travelers may stop flying on Gulf airlines. “The move would effectively result in the region’s airlines losing passengers to other airlines, hitting the premium classes hardest, where essential revenue is generated,” he told Gulf News in an emailed statement on Wednesday.
The financial impact varies, according to another US-based analyst Addison Schonland, Partner at AirInsight. “Dubai International (DXB) does not report traffic by market. But we do know that [traffic] on DXB-LHR [London Heathrow] route in 2015 was worth 2.7 million passengers. Typically, 12 per cent of the traffic is business. And that 12 per cent generates 75 per cent of profits. If Emirates loses 25 per cent of the business traffic to LHR, profits will be hit in a big way,” he explained. “We will be seeing business travel volumes drop off considerably.”
The US and UK have banned laptops and tablet computers from being taken in carry-on luggage on flights originating from some airports in the Middle East as well as in North Africa.
“Banning electronics from carry-on luggage from 10 Middle Eastern airports, all in countries that are US allies, seems to make no sense. There are 250 international airports serving the US. Banning devices only from these 10 doesn’t seem to make sense when there are 240 other potential routes,” Arvai said.
The banned Middle East carriers include 9 airlines — Emirates, Etihad Airways, Qatar Airways, Royal Jordanian, Saudi Airlines, Kuwait Airways, EgyptAir, Turkish Airlines, Royal Air Maroc — and 10 airports in the region. The ban does not apply to US airlines because there are no non-stop flights to or from those airports.
“And the winners will be EU-based airlines and US-based airlines,” says Schonland.
Agreeing with him, Arvai says: “I would change my preference simply due to the impact of losing a computer that I normally keep tightly controlled. I would need to change from a non-stop to a connecting flight rather than the Emirates and Qatar non-stops to Boston, for instance.”
Travel and tourism would be another casualty to this ban, according to Peter Morris, chief economist at UK-based aviation consultancy Ascend. “It isn’t good for international travel and tourism — another inconvenience of air travel, and a greater inconvenience for people choosing certain routes / airlines rather than others,” he said.
“Also, for some of those non-stop journeys, people will look at the time/cost of choosing another route. So if a passenger is currently travelling DXB-JFK, they may well look at the option of DXB-LHR-JFK in order to keep their electronic with them.”
The length of the ban is crucial too here. In the short term it’s a “massive inconvenience”, says Geneva-based Andrew Charlton, managing director of Aviation Advocacy. “A huge amount of business is going to be lost if the ban stays on for a longer period.
“But the bigger issue is that of people travelling over the Middle East hubs. Passengers would be better of transferring via Europe. They will seek alternative carriers to fly to the US,” Charlton said.
Theft, security risk
A crucial element of the ban is also the fear of device theft and batteries exploding in the aircraft’s bellyhold. “As a business traveler, I would be lost without a laptop on a long international flight, and much more worried about it in checked baggage, given the amount of information I typically keep on my laptop. Since we can no longer lock our luggage, as security need access at all times, this could lead to laptop and potentially identity theft,” Arvai points out.
“Of course, putting laptops and devices with Lithium-ion batteries in the hold isn’t particularly effective either, as the risk of an inadvertent fire is something most safety experts would advise against.”
Ascend’s Morris supports his view. He says: “For non-stop journeys that start / end at the listed airports, travelers are going to be deterred from taking valuable and fragile goods that need to go in the hold. Whether true or not, people have a perception of high risks of theft or damage for such goods, and the insurance / claim process is not one to be entered in to if you can avoid it.”