Long buoyed by high-flying Emirates, Dubai now shares its woes
Emirates Airline
powered Dubai’s rise from desert backwater to teeming Mideast metropolis,
making the city one of the world’s biggest intercontinental hubs and generating
a yearslong economic boom.
But now, the
coronavirus pandemic and the economic devastation it has wrought have forced
the first major downsizing for an airline that has weathered Middle East
conflicts and oil-market shocks. As a result, the state-owned carrier’s woes
are tearing through Dubai’s economy.
The airline’s
parent company, one of Dubai’s biggest employers, has slashed tens of thousands
of jobs from its 100,000-strong workforce after the pandemic halted much of
global air travel, a fall from grace for an airline that long outmuscled
competitors in the U.S. and Europe for landing rights and passengers.
That has in turn
driven an exodus of Dubai-based expatriates linked to the airlines, shrinking
spending at restaurants, bars and even private schools.
“It is extremely
difficult for the hospitality sector, the restaurateurs, the hoteliers, but
they are not alone," Emirates Airline President Tim Clark said in an
interview. “The number of people coming into Dubai has significantly reduced.
Everything has got to go into a deep freeze."
Dubai’s Rock Bottom
Cafe, near an apartment building where Emirates houses hundreds of staff, once
teemed with partyers until the early hours. Now it serves only about 50 people
on the weekends, said Mitendra Sharma, the general manager of the Ramee Group,
which owns the cafe as well as four hotels in Dubai. The group has cut staff
from 1,000 to 300 as its hotels are at 10-15% occupancy, compared with nearly
95% this time last year, he said.
“Emirates was the
driving force for the tourists, and it is cutting jobs and reducing
destinations," Mr. Sharma added. “All industries are affected as a
result."
Dubai’s government
established Emirates in 1985 with $10 million and two leased aircraft from
Pakistan International Airlines. The current ruler, Sheikh Mohammed bin Rashid
Al Maktoum, helped set up the carrier and ordered that it had to “be good, look
good and make money."
The airline soon
became one of the world’s biggest, using a fleet of wide-body jets to ferry
passengers through its Dubai hub. Many travelers began to stop in the city,
driving hotel and shopping mall construction. That helped contribute to a
bubble in the real-estate market and a dramatic collapse during the financial
crisis in 2009.
By building a
global network that served developing markets, Emirates endured the economic
pain in Dubai. It also added to the growing cityscape, building accommodations
to house its staff and expanding into hotel operations. In 2014, Dubai
International overtook London’s Heathrow as the world’s busiest airport for
international travelers, largely driven by Emirates. The city became a playground
for Europeans seeking winter sun and Saudis deprived of entertainment options
in their more conservative kingdom.
The numbers of
pilots, cabin crew and other staff also swelled. “Ladies Night" became
popular with Emirates’ majority-female cabin crew in bars on Tuesdays and
bottomless Friday brunches multiplied across the city’s hotels and restaurants,
fueled in part by aviation professionals.
These same places
are dealing not only with Emirates’s job cuts but coronavirus-related
restrictions—a double whammy that has wrung the life out of some
establishments.
David Cattanach,
the general manager of the Irish Village, a popular bar located near Emirates
training facilities at Dubai International Airport, said it has to contend with
both fewer customers and rules that patrons must keep 6 feet apart. “We won’t break
even until the vaccine comes," he says.
While Dubai
reopened to tourists on July 7 after a three-month closure, travel from its top
feeder markets—India, the U.K., Saudi Arabia, China and Russia—has remained
depressed due to high levels of infections or travel restrictions. The surge in
cases globally means Emirates is now carrying 12% of the passengers it did this
time last year, according to Mr. Clark.
Dubai’s travel and
tourism sector has contracted each month since January, mirroring a decline in
activity across the emirate, according to an index compiled by IHS Market.
Real-estate firm Colliers International predicts Dubai hotels will see
occupancy of just 45% to 50% during 2020. S&P Global Ratings said Saturday
it expects Dubai’s economy will contract by around 11% in 2020, citing the
city-state’s concentration in travel and tourism.
The U.A.E. reported
1,231 new daily coronavirus cases Saturday, a record, taking its total to
97,760 cases and 426 deaths since the pandemic began.
To entice people to
travel, Emirates is committing to covering passengers’ medical expenses if they
are diagnosed with Covid-19.
“That’s been
really, really helpful," said Kabir Mulchandani, who runs the luxury
five-star Five Hotel on Dubai’s palm-shaped island. It saw occupancy among
tourists collapse at the start of the pandemic but is now welcoming more
foreigner travelers.
Emirates passengers
coming to the United Arab Emirates must present a negative Covid-19 test four
days before departure. Dubai doesn’t break out figures on cases, but its
population makes up a third of the nearly 10 million people in the U.A.E.,
which on Sept. 21 surpassed China in total confirmed infections.
Dubai officials
have long wanted the airline to operate without further cash injections from the
state and to remain profitable in its own right. Emirates said it would need a
bailout in March. Officials moved quickly to shore up the airline with $2
billion in equity, the first time the government had provided fresh capital
since its establishment.
The Dubai
government didn’t respond to questions on the bailout or broader impact of
Emirates’ downsizing. The airline declined to comment on cost savings from the
job cuts.
GymNation, a fitness center operator popular with cabin crew, lost members after Emirates job cuts and for a moment considered nixing plans to open a new branch near staff apartments but decided to move ahead, hoping the airline would rehire once the global travel market rebounds, according to CEO Loren Holland.
Comments
Post a Comment