Tuesday 30 / April / 2024
Muscat: Companies across Oman are grounding their staff as corporate travel from the Sultanate has its wings clipped by austerity. Airlines serving the Sultanate and travel agents have both reported a drop in bookings from business travellers, both in economy and premium class, another sign that low oil prices continue to impact the country’s economy.
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However, if the corporate bookings dip continues it may prove to be good for the general passenger, with airlines saying more offers would be one tactic to tempt back fliers.
A top official from Oman Air, the national carrier of Oman, said many companies are trimming their travel requirements to cope with the falling oil prices leading to the fall in the corporate bookings.
“Many companies are trimming their travel requirement to cope with the falling oil prices. This has impacted Oman Air as well since there has been a dip in the corporate bookings, which constitute an important sale segment for any airline. Our sales and marketing expert teams are always monitoring the market and work on offering a suitable solution, be it with the General Sales Agents or corporate accounts directly.” Says Jamal Al Azki, country manager, Oman, Oman Air.
An official from the UAE-based airline serving Oman said that low oil prices are acting as ‘a double-edged sword’.
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Double-edged sword
“Just like the rest of the industry, they are now saving lots of money on fuel. But low oil prices are acting as “a double-edged sword,” said Tim Clark, president of Emirates, now the world’s largest airlines in terms of international traffic.
“Bookings from companies involved in the energy sector—Emirates’ most important corporate customers—virtually disappeared with the collapse in crude oil prices,” he added.
Rajan Jayaraman, District Sales Manager-Oman, Kuwait Airways, also noted that corporate bookings were down.
“If the situation continues, we may be forced to slash prices and announce offers to maintain the budget which will be hit by dip in corporate bookings.
“After June or July the picture will be clear. We may come up with attractive prices and other packages to woo customers. Our business has to run.”
And Sami Muctar, Country Manager - Oman, Ethiopian Airlines, said that a large number of airlines will be forced to come out with special offers as the business is suffering. Jet Airways in Oman confirmed it is witnessing a fall too, saying that they are watching the situation cautiously to adopt plans to cushion the effect.
Dip in bookings
“We have dip in corporate bookings. We are waiting to see how serious it will be. Bringing down the fares won’t help. Aviation industry earnings is a small pie now all over the world, especially in Oman. So, taking steps to grab it from a small pie won’t help,” Riyaz Kuttery, general manager at Jet Airways in Oman, said.
However, Riyaz added that they may come up with offers in the future if the situation worsens.
Another travel agent in Muscat, who declined to be named, said that the airlines may increase the price to compensate the decline in corporate sales revenue.
“More than coming up with offers to lure customers, they will increase the price,” the travel agent added.
The oil price dip has helped the airlines to save money, however, budget tightening initiated by the governments and companies in the region have put them in a fix.
Forecast
In December 2015, the International Air Transport Association (IATA), had forecast an average net profit margin of 5.1 per cent being generated with total net profits of $36.3 billion and also a revision to its airline industry outlook for 2015 upwards to a net profit of $33 billion (4.6% net profit margin) from $29.3 billion forecast in June.
According to IATA, the strengthening of industry performance in 2015 was driven by a combination of factors, mainly lower oil prices, robust demand for passenger travel, stronger economic performance in some key economies and efficiency gains by airlines
While airline officials eye corporate bookings, travel agents say that both cooperate bookings and cash sales are going down.
Raji Demonte, general manager at Universal Travel and Tourism in Oman, has witnessed a 20 per cent dip in corporate bookings as all over Oman everyone are adopting austerity measures.
Cash sales
“We can see dip in corporate bookings and also in cash sales. Many who used to travel annually are not doing so. Cash sales have come down in many of our outlets,” Raji said.
“However, I don’t see that airlines will bring down the prices to compensate for the loss due to dip in corporate bookings,” Raji added.
“More than coming up with offers to lure customers, they will increase the price,” the travel agent added
Meanwhile, Jose Chacko, a financial advisor in Oman, said that cutting costs on premium class travel for their employees is one of the steps which companies can take to save money during this tough time.
“We know that many companies are adopting steps to avoid the number of travel, including in premium class, for their employees, if it can be,” Jose said, adding that many mid-level expatriate workers are pushing off their travel plans even to their
home country.
Mohammed Khaldi, an oil company employee in Oman, said that companies don’t encourage providing premium travel facilities for their employees.
“It was happening in the past, but it has gone up more now,” Mohammed added.
Oman’s 2016 budget focuses heavily on austerity measures and it projects OMR3.3 billion in deficit spending for 2016. Oman posted a budget deficit of 4.5 billion riyals in 2015 as revenues declined by more than 50 per cent.
