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A billionaire from Dubai has issued a stark warning that airlines might face bankruptcy in a matter of weeks due to the ongoing conflict in the Middle East. This situation is causing major disruptions in the aviation sector, with a noticeable decline in bookings and a sharp rise in fuel prices.
Gediminas Ziemelis, the founder of Avia Solutions Group, remarked that the current crisis mirrors the challenges faced during the Covid pandemic, characterized by grounded aircraft, dwindling demand, and an uncertain path to recovery.
In a conversation with Bloomberg, Ziemelis emphasized the need for readiness against various risks, stating, “We need to be ready for any area, district, jurisdiction and geopolitical risk.”
He further cautioned that if the situation persists beyond a month, we might witness the initial wave of airline bankruptcies on a global scale.
This cautionary note arrives amidst skyrocketing fuel prices, which are exerting considerable strain on airlines already coping with rerouted flights.
Ziemelis said fuel typically accounts for about 25 per cent of an airline’s operating costs. Since the conflict began, oil prices have jumped nearly 50 per cent to around $100 a barrel.
As a result, some airlines are introducing additional surcharges, while others are cutting routes altogether.
There are also growing concerns about the availability of jet fuel.
A plane flying through a plume of smoke after a fire broke out at Dubai International Airport
Dubai has been deserted as the war in the Middle East rages on
Gediminas Ziemelis (pictured) said fuel typically accounts for about 25 per cent of an airline’s operating costs
At the same time, airlines are being forced to reroute flights to avoid large parts of the Middle East, increasing journey times and costs.
Carriers in Europe and Asia have already raised ticket prices and reduced destinations as the war enters its fifth week.
Airlines based in the Middle East have been hit hardest, with thousands of flights cancelled as missile and drone attacks disrupt the region, forcing carriers to evacuate passengers, crews and aircraft.
Companies such as Qatar Airways, Gulf Air, flydubai and Air Arabia are conducting internal reviews to cut costs and preserve cash as they lose millions of dollars in revenue each day.
However, the billionaire pointed to the aviation sector’s recovery after the pandemic as a reminder that crises can also create opportunities.
‘After Covid all companies which survived made extraordinary record profits. So sometimes crisis is opportunity,’ he told Bloomberg.
Meanwhile, bookings are down 63 per cent, average nightly room rates are down 28 and cancellation rates are up 163 per cent in the region.
Flights to Dubai have been pictured with rows of empty seats, as at least five planes parked at airports in the Middle East have been hit by Iran.
Photos and videos shared on social media show rows of vacant seats on planes headed to Dubai, with one caption reading: ‘I’ve never seen an empty Emirates flight.’
Hotspots like Dubai have been reduced to ghost towns since the conflict intensified, with influencers and expats scrambling to leave as Iran pounds the Gulf.
Once a tax-free haven attracting social media stars and countless Brits seeking warm weather and crime-free streets, Dubai’s carefully crafted image has been shattered and some residents believe it is ‘finished’.
Thousands have fled the war-torn city, vowing to never return as the Islamic Republic sends barrages of missiles and suicide drones at glitzy skyscrapers and glamorous five star hotels, even striking the world famous Fairmont hotel on Palm Jumeirah.
Other neighbouring hotspots have also been affected, with hotel bookings in Cyprus down 40 percent as the war rages on.
The US and Israel launched attacks on Iran just as Cyprus’s tourism industry was reopening after winter.
Then, on March 2, as Iran launched a series of counter-strikes, a drone struck a British naval base on the island, triggering a wave of tourist cancellations.
Daily cancellation rates for short-term rentals in Cyprus shot up from around 15 per cent before the conflict to as high as 100 per cent in the days after, according to data from US-based AirDNA, which tracks such bookings.
That figure has since dropped, but remained around 45 per cent by March 21. Greece and Turkey saw slight rises in cancellation rates, too.
Flights to Dubai have been pictured with rows of empty seats, as at least five planes parked at airports in the Middle East have been hit by Iran
And oil prices are soaring, with the latest blow following Donald Trump’s failure to outline a clear path to ending the Iran war during an address on Wednesday.
Trump’s speech provided no certainty as he claimed the war was a resounding success but admitted that the US would remain engaged for at least another two to three weeks.
Brent crude oil prices jumped nearly 5 percent to $105 per barrel amid fears the US was no closer to eliminating Iran’s stranglehold on the Strait of Hormuz.
Futures tied to the Dow dropped 1 percent, the S&P 500 fell 1.1 percent and the Nasdaq slid 1.4 percent.
Japan’s Nikkei plummeted 1.9 percent, the first major index to trade after US markets close and a closely watched early signal for investors.