James Hogan: Gulf airlines need up to 2 years to recover from war

• Interview with former CEO of Etihad
• ‘We’re talking more about the reset’
• Calls for airlines to stimulate market

James Hogan is not easily rattled by turbulence.

The former Etihad Airways chief executive, who helped build the Gulf aviation model, has navigated fuel shocks, the Sars epidemic, financial crises, airline restructurings and repeated bouts of regional instability.

So, when Hogan says recovery for the Gulf’s battered airline and tourism businesses is a matter of when – not if – it carries weight.

“This isn’t the only part of the world that’s had a war or conflict,” he tells AGBI. “What you see in any crisis is people will pause, they will shift, but then they come back. Over time, people forget.”

The question, he says, is how long recovery takes. His estimate is between 12 and 24 months once the conflict is resolved.

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The immediate damage has been severe and the UAE, from where Hogan ran Etihad, has been hit hardest. Iranian missile and drone strikes have targeted civilian infrastructure, including airports and tourist landmarks such as Dubai’s Burj Al Arab hotel, dealing a heavy blow to the country’s tourism and aviation industry.

Dubai Airports has reported a 20 percent drop in passenger numbers. Hotel occupancy in the emirate is projected to plunge to 10 percent in the second quarter, from 80 percent in February, according to ratings agency Moody’s.

Even as Emirates Airline posted record annual profits this month, Hogan estimates the Gulf’s three major carriers – Emirates, Etihad and Qatar Airways – cut 5.4 million seats and 18,000 flights from April schedules.

But Hogan, who has been travelling in and out of the region since the conflict began, says conversations in the Gulf have already shifted beyond managing disruption to restoring demand.

“We’re talking more about the reset – how to bring back confidence.”

Geography remains destiny

Hogan, now chairman of consultancy Knighthood Global, recently delivered a presentation in Bangkok in which he asked: “What was damaged?” His answer: “Perception and confidence. Not the brand.”

That perception – amid a fragile ceasefire – is “already being fixed” as airlines restore flight frequencies, he says.

“I think what the crisis demonstrated was the strength of the government in protecting the country… how they’ve built up their own capability. [It’s] formidable.”

Geography, Hogan argues, remains destiny. The Gulf’s location between Europe, Asia and Africa offers connectivity that few regions can rival.

Before the conflict, Dubai, Abu Dhabi and Doha together operated more than 1,400 flights a day, handling roughly 14 percent of international transit traffic, according to Tourism Economics.

“What people forget is you’ve got some huge markets on our doorstep,” Hogan says.

“It’s an opportunity for the airline, the destination, airports, to work together to remind the market [of] the unique strengths of the hubs of Abu Dhabi, Dubai and Doha, and the emerging Saudi hubs.”

‘Don’t complain, compete’

In Hogan’s view, transfer traffic will come back within the year, but destination traffic “will probably take a little bit longer” to return to pre-crisis levels.

“If I was sitting in the chair, I’d be very focused on my capacity map and how I open the markets, how I look at the seasonality, and what am I doing to incentivise,” he says.

“It’s best to get the aircraft back in the air than sitting on the ground. So that means you have to stimulate the market.”

The region is confronting brutal near-term economics. The war is costing the Middle East about $600 million a day in lost visitor spending, according to the World Travel & Tourism Council. Oxford Economics estimates that total losses this year could reach $56 billion.

Tourism is a major pillar of the UAE economy, contributing about 15 percent of GDP, with Dubai at the centre of the sector’s growth.

Executives at Air France-KLM and Lufthansa, alongside lobby groups, have also seized on the crisis to revive a familiar complaint: that Europe has become too dependent on the Gulf carriers that dominate long-haul transfer traffic.

“My answer to that is, don’t complain, compete,” Hogan says.

“At the end of the day, the Gulf carriers, all of them have a great service proposition, have a great product, and it’s very difficult for European airlines to match that.

“I’ve been involved in the region for a long time. I shake my head when people doubt that the Gulf will come back.”