Chinese authorities for the first time closed the Shanghai and Shenzhen stock exchanges early under a “circuit breaker” mechanism to curb volatility after shares fell seven per cent Monday, raising concern over their commitment to market openness.

China’s stock indices plummeted in mid-2015 as a debt-fuelled bubble burst, sending ripples through global exchanges and wiping trillions from market capitalisations.

The falls prompted wide-ranging intervention by Beijing to prop up share prices.

The measures are estimated to have cost hundreds of billions of dollars, but worked – Shanghai ended the year up 9.4 per cent, while Shenzhen soared more than 63 per cent.

Even so the markets remain volatile – Shanghai saw a five per cent daily fall as recently as November. As part of their efforts to prevent a repetition of the rout, authorities instituted the “circuit breaker” system from Monday.

Under it, a five per cent drop in the CSI300 index, which covers both bourses, triggers an automatic 15-minute trading halt. A fall of seven per cent means the two exchanges are closed for the rest of the day.

But analysts said the “circuit breaker” risked interfering with market efficiency and could even prove counter-productive, heightening volatility instead of reducing it.

“The mechanism is merely a tool and it won’t help the market find its true value,” Northeast Securities analyst Shen Zhengyang told AFP. “With or without the system, the market will continue to drop further if selling pressures piles up.”

“What worries me the most is the enforcement of the system will also hurt market liquidity,” he added. “Investors who want to sell can’t, and those who want to buy also can’t. Trading will dry up if it gets triggered too many times.”

Global markets stuttered Monday as a flare-up in tensions between Iran and Saudi Arabia raised concerns about the volatile Middle East. But the Chinese falls followed poor data from official and private surveys of manufacturing activity in the world’s second-largest economy.

In addition, a ban preventing shareholders with holdings of more than five per cent in a company from selling shares – introduced in July to help defend prices – is due to expire on Friday, triggering fears of a sell-off.

By Monday’s early close the benchmark Shanghai Composite Index had tumbled 6.86 per cent, or 242.92 points, to 3,296.26.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 8.22 per cent, or 189.75 points, to 2,119.16.

Hong Kong closed normally but the Hang Seng Index was down 2.68 per cent, or 587.28 points, at 21,327.12.

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Emirates to start daily flights from Dubai to Cebu and Clark in the Philippines

Emirates airline is set to start daily flights to Cebu and Clark in the Philippines as it taps demand from Dubai’s vast Filipino expatriate population.

From March 30, Emirates will fly a Boeing 777-300ER aircraft to the routes with a two-class configuration, said Emirates.

“This new service will help to enhance the Philippines’ trade links with the rest of the world and boost incoming tourism,” said Thierry Antinori, executive vice president and chief commercial officer, Emirates. “[it will also] offer more flexibility for overseas workers departing Philippines or looking for options to fly home.”

Currently, there are over 900,000 Filipinos living in the UAE, most of them in Dubai. The new daily flights to Cebu and Clark will also further connect the two destinations to 39 cities in Europe and 16 in the Middle East via the Emirates network. This is in addition to other destinations in Africa and the Americas that are flown by Emirates.

The aircraft used on the route will have the capacity to carry 14 tonnes of cargo. Etihad also said last month that it would start three new weekly flights from Abu Dhabi to Manila on May 1. The services will include connections to Bahrain, Dammam, Doha, Jeddah, Kuwait and Riyadh – among the top 10 destinations for travellers to and from the Philippines. Emirates currently flies two daily flights to Manila.

The airline had operated a third daily flight to Manila, but the Philippines’ Civil Aeronautics Board decided not to extend Emirates’ right to fly the third flight in 2014. The board also slapped Emirates with US$40,627 in fines for selling tickets up to March 2015.

Emirates for a period of nearly two years operated three flights a day between Dubai and Manila. The Dubai airline operated the third flight through a codeshare agreement with Philippines Airlines (PAL).

Last February, the Philippine aeronautics board told The National that Emirates had “elevated” the dispute to a higher body, the Philippines’ presidential office, which was looking into the matter.

Emirates launched flights to Manila in 1990 to serve the thousands of Filipino expats in the UAE. The Dubai carrier said previously that its daily flights to the Philippines supports thousands of jobs through direct employment, as well as catering, ground handling jobs and other posts related to air travel services.

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Emirates to add new daily flight from Dubai to Cebu and Clark in Philippines

Emirates is to launch a new daily circular service from Dubai to Cebu and Clark in the Philippines as it looks to strengthen tourism and trade links.

The new service, which will feature a Boeing 777-300ER, will start from March 30 and will provide more options for Filipino workers living overseas – of which there are nearly 900,000 living in Dubai.

“This new service will help to enhance the Philippines’ trade links with the rest of the world and boost incoming tourism, supporting the Department of Tourism’s ‘Visit the Philippines Again 2016’ campaign,” said Thierry Antinori, Emirates’ executive vice president and chief commercial officer.

“It will also expand travel options for Filipinos from the Central Luzon region as well as the Visayas region and offer more flexibility for overseas workers departing Philippines or looking for options to fly home.”

Popular Philippine exports on this route are expected to be perishables, such as dairy products, fruit and vegetables, meat, seafood and electronic equipment, the Dubai carrier said.

Last month, Etihad announced it would add three new weekly flights between Abu Dhabi and Manila from May 1.

“The Abu Dhabi-Manila route is one of our strongest in terms of demand and has been capacity-constrained over the past few years,” Etihad president and chief James Hogan said.

More to follow.

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US “stripper well” operators, the nation’s smallest oil producers seen as most likely to succumb to the crude price slump, are hanging in tough, reducing the chances of near-term production cuts needed to rebalance the domestic oil market.

The conventional wisdom is that “strippers” would be the first to fold in the face of oil’s slide below US$40 given their tiny size – some may pump as little as few hundred dollars’ worth of oil a day – limited access to capital and high costs compared with bigger, more efficient shale producers.

Yet interviews with executives and experts show those smallest, often family-owned, businesses are also among the most resourceful, keeping the oil flowing even as prices near 11-year lows and a growing number of their wells lose money.

While hopes for a rebound are fading, “strippers” are doing everything they can to keep their “nodding donkey” pumps working so they can hold on to land leases that give them access to oil reserves.

“The small operators of the stripper wells are pretty resilient,” says Mike Cantrell, the head of the National Stripper Well Association. “They’ve always made it through and will still make it through.”

Stripper wells pump no more than 15 barrels of oil per day but together over 400,000 wells scattered across the nation’s oilfields produce over a tenth of US oil output, enough to affect the market supply-demand balance and prices.

Drawing analogies to the 1980s oil slump, some analysts had warned that half of stripper wells could shut if crude prices held below $40 a barrel, helping ease the supply glut and possibly underpinning the prices.

The tenacity of the stripper well producers is challenging that view.

For example, Nelson Wood who runs Wood Energy, a family business founded by his parents more than 60 years ago, has laid off 14 of his 32 employees and closed 10 of 150 wells in the Illinois Basin, but so far the production is down only 4 per cent.

He may have to shut more wells, based on electricity, labour, maintenance and salt water disposal costs, but said one key concern was meeting the requirements of oil and gas mineral rights.

“We run some wells at a loss to keep the lease active,” he said.

To be sure, many of these mom-and-pop shops have already cut production to conserve cash and the longer oil prices remain low, the harder it will be for them to keep pumping.

Darlene Wallace, who inherited her company Columbus Oil after the passing of her husband over a decade ago, has shut in four of her 25 wells in Oklahoma, cutting about a third of production, and is now focusing on overhead costs.

Ms Wallace says she has done everything from getting rid of a postage machine, which saves just $300 a year, to asking her three employees to cover 20 per cent of their health insurance costs, which she estimates could result in annual savings of $10,000.

“I hate to do that to my employees, but we’re all going to have to cut back,” Ms Wallace says.

Some stripper operators are even deferring necessary maintenance, others are turning to temporary workers to cut employment costs. Many are so small that their owners can roll up their sleeves and do the work themselves if necessary.

The stripper well operators who spoke with Reuters said many of their peers are taking similar measures to survive.

Ponderosa Advisors, a Denver-based energy, agriculture and water consultancy, reckons debt-free companies can cover their operating costs even with oil below $35 a barrel. Some produce at a cost as low as $18.

That means prices can fall further before any major shut-ins.

In the meantime, many stripper operators are manoeuvring carefully around clauses in their lease agreements to stay in the business. Most can only turn off their wells for a brief period without losing their rights.

In Texas, for example, the cessation period for which a well can get idled without the operator losing the lease is typically 60 to 90 days, according to Richard Hemingway Jr, the head of the oil and gas practice at law firm Thompson & Knight.

“I have clients that are masters at working that,” he said, referring to a technique in the industry known as “stop-cocking”, where producers wait until the very final day of the cessation period before turning back on production.

Ken Hunter of Vaquero Energy, a stripper well company with several hundred wells in California, says in some cases operators may chose to produce from just a single well on a lease that includes up to 10 to remain in compliance.

Such techniques could lead to deeper production cuts if the crude downturn persists, but as long as stripper producers keep their leases they should be able to crank up output again once prices recover.

“We could easily fill the void with production from incremental drilling as soon as the price rebounds to even $50,” according to Bernadette Johnson, a managing partner at Ponderosa Advisors.

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Consumer Electronics Show 2016: gadgets get smarter, friendlier

From drones, cars and robots to jewellery, appliances and TVs, the new technology on display at the 2016 Consumer Electronics Show (CES) promises to be smarter and friendlier than ever.

The annual tech extravaganza with more than 3,600 exhibitors set to formally start on Wednesday in Las Vegas is likely to see innovation across a range of sectors, from health care to autos, connected homes, virtual reality and gaming.

“There are always a couple of winners at CES, and sometimes there are the sleepers that turn out to be the cool thing,” says the Gartner analyst Brian Blau.

But Mr Blau says the innovations are “often evolutionary, not revolutionary”.

Televisions will play starring roles at the show as usual, with giants such as Samsung, Sony, LG and Vizio among contenders in a market rapidly shifting to ultra-high definition.

“We are in the sweetest of the sweet spot in the TV market,” says NPD analyst Stephen Baker.

“Sales of 4K TVs are exploding right now,” he adds, referring to the popular new high-definition format.

Drones are also expected to make a splash at CES, where an Unmanned Systems Marketplace has doubled in size from a year earlier to cover 2,300 square metres.

Mr Blau expects the drones on display at the show to be more sophisticated, with easy controls and even applications that let them be operated using smartphones.

“If you want to make it popular with consumers you have to make it relatively easy to use and foolproof,” he says. “And that is what a lot of drone manufacturers have been doing.”

Electronics makers are also using building smart technology into all manner of devices, allowing them to adapt to how people use them, responding to voice or gesture, for example.

“A lot more of your devices are going to run with less direction from you but a greater sense of how to help you out,” Mr Blau says.

The trend of once-dumb devices getting smarter will continue to include light bulbs, remote controls, thermostats and other devices in the home as well as “wearables” such as jewellery or clothing.

“We are going to see a lot of wearables, and more smart clothes than last year,” Mr Blau says.

Q&A

What about cars?

Cars rolled out at CES may also showcase the potential for digital technologies enhancing consumer goods, according to NPD analyst Stephen Baker. Mark Boyadjis of IHS Automotive referred to cars as a “core pillar” of the show. Innovation in cars is changing the way people interact with vehicles, as technology handles more and more aspects of driving.

What does that mean exactly?

Well according to Mr Mr Boyadjis: “In the long run, it means maybe delivering cars without steering wheels, or steering wheels that can be moved or put away. It means physical buttons may all but be gone, being replaced by display, gesture recognition, speech recognition.”

So how many car makers will be present?

A record 10 automakers are set to attend CES along with at least 115 automotive tech companies, according to the Consumer Technology Association, which organises the show.

Anything else of note?

CES will also boast a big section devoted to virtual reality, as product makers jump into the trend ahead of the expected releases in 2016 of headsets from Oculus, Sony, and Valve. It remained to be seen whether new contenders would step up to challenge “the big three” in VR, but CES goers may see uses of the technology extended beyond gaming.

Anything a little quirkier?

Of course. Attendees should look out for Haier’s moving refrigerator designed to resemble the beloved R2-D2 of blockbuster Star Wars film fame.

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Oil price on the rise as Saudi cuts ties with Iran after embassy attack

Oil gained for a second day as Saudi Arabia cut ties with Iran a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.

Futures rose as much as 3.5 per cent in New York, extending Thursday’s 1.2 per cent advance. Iran’s supreme leader Ayatollah Ali Khamenei warned of repercussions and protesters armed with rocks and firebombs attacked the Saudi embassy in Tehran on Saturday and set parts of the building on fire. The Middle East accounted for about 30 per cent of global oil output in 2014, according to the Energy Information Administration.

Saudi Arabia and Iran, respectively Opec’s first- and fifth-ranked producers, are on opposite sides of Middle East conflicts from Syria to Yemen. Prices last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as US crude stockpiles expanded and the Opec abandoned output limits.

“It may be seen by the market as an incremental step in a possible longer-term escalation of problems in the core oil-producing nations of Saudi Arabia and Iran,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “It’s likely to lead to some short covering and a bit of risk premium being built into pricing. There’s no immediate threat to production.”

West Texas Intermediate for February delivery climbed as much as $1.28 to $38.32 a barrel on the New York Mercantile Exchange and was at $37.79 at 11.37am Hong Kong time. The contract rose 44 cents to $37.04 on Thursday. The volume of all futures traded was more than double the 100-day average. Prices lost 11 per cent in December for a second monthly decline.

Brent for February settlement increased as much as $1.22, or 3.3 per cent, to $38.50 a barrel on the London-based ICE Futures Europe exchange. Prices slid 35 per cent last year for a third annual drop. The European benchmark crude was at a premium of 27 cents to WTI.

Iran’s ambassador in the kingdom has 48 hours to leave, Saudi foreign minister Adel Al-Jubeir said late Sunday in Riyadh. The crisis is the worst between the two regional powers since the late 1980s, when the Sunni-led kingdom suspended ties with Shiite-ruled Iran after its embassy was attacked following the death of Iranian pilgrims during Haj in Mecca.

Saudi Arabia produced 10.25 million barrels a day in December, helping to keep daily Opec output above 32 million barrels for a seventh month, according to data compiled by Bloomberg. Iran pumped 2.7 million barrels a day and is seeking to boost exports once international sanctions are lifted.

Iran will raise exports by 500,000 barrels a day within a week of sanctions being removed, said oil minister Bijan Namdar Zanganeh, according to the official Islamic Republic News Agency. The country will add another 500,000 barrels a day in a second phase within six months after the curbs end, he said.

“Geopolitical concerns keep ratcheting up, especially with the latest flare up between Saudi Arabia and Iran,” Robin Mills, an analyst at Manaar Energy Consulting in Dubai, said by phone from the UK on Sunday. “All the supply indicators are very bearish for oil prices. Iran looks to be nearing a return to the market, Russia is producing at a high and most of the Opec members are producing as much as they can.”

Russia’s crude output set another post-Soviet record in December, according to energy ministry data. The country’s crude and gas condensate production rose to 10.825 million barrels a day last month, beating the previous record set in November by 0.4 per cent, Bloomberg calculations based on the data show.

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GE wins $1 billion Saudi power plant contract

GE has been awarded a contract worth almost US$1bn (Dh3.7bn) to design and build gas turbines for a new power plant at Waad Al Shamal in northern Saudi Arabia.

The combined cycle power plant is being built for Saudi Electricity Company and will support the development of the $7.5bn phosphate mining complex under construction for a joint venture between Saudi Arabian Mining Company, Maaden, The Mosaic Company and Saudi Basic Industries. Once complete, the complex will be one of the biggest integrated phosphate fertiliser production sites in the world.

GE said its 48-month contract involves the delivery of the power plant, including four heavy duty gas turbines and one steam turbine. It will produce 1,390 megawatts, which is enough to power more than 500,000 Saudi homes.

Most of the turbines will be manufactured in GE’s plant at Greenville in South Carolina in the US, but one will be assembled at GE’s new technology centre at Damman in Saudi Arabia’s Eastern Province. GE’s Middle East and North Africa president and chief executive of gas power systems, Mohammed Mohaisen, said: “Waad Al Shamal brings significant value to the Kingdom by strengthening the northern grid and through its potential to energise the local industrial sector. By installing a gas turbine that is fully assembled at GE’s centre in Dammam, we are delivering on our commitment to provide stronger localisation support to our partners.”

Ziyad Al Shiha, the chief executive of Saudi Electricity Company, said: “We continue to strengthen the Kingdom’s power infrastructure to meet the growing demand for electricity and to accelerate all-round growth.”

Last week, Saudi Arabia announced that transport and infrastructure spending in 2016 will be cut by 63 per cent as the kingdom responds to continued lower oil prices. Funding for projects has dropped to 23 billion Saudi riyals – down from 63 billion riyals in 2015.

In October, BMI Research had predicted that growth in the kingdom’s power generating capacity would slow as projects are delayed or cancelled. Growth in power generating capacity will peak at about 6.3 per cent this year as new projects come on line, but will fall to just over 5 per cent next year and 4 per cent in 2018, the company said.

“Certain projects – such as the Fadhili gas project – which are crucial to the Saudi energy sector will be realised but others will not,” BMI Research said.

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Emaar hotel revenue to be hit after Dubai fire as developer appoints contractor to restore The Address

Investors yesterday shrugged off worries over the long-term effect on Emaar Properties’ outlook from the fire that broke out at its Address Downtown Dubai hotel on New Year’s Eve.

Emaar’s share price pared losses in Dubai yesterday to end the session down 1.58 per cent, after slumping 4.4 per cent at the opening. It dragged down the Dubai Financial Market General Index 0.51 per cent on the day.

Authorities are still investigating the cause of the fire that engulfed the 63-storey tower. The hotel will be closed for an indefinite period. There were no fatalities.

Emaar’s shares recovered in late morning trade yesterday after Dubai’s biggest listed property developer said there would be “no material effect on the company” from the hotel fire because “the building and risk of fire are covered by insurance”, in a statement to the exchange. The company didn’t quantify the financial impact on its hotel revenues following the closure of its luxury hotel.

But the Dubai-based financial services company Arqaam Capital said that Emaar’s hotel revenue is forecast to decline by 13 per cent this year, compared with last year, to Dh1.4 billion because of the closure. Based on the new forecasts Arqaam expects total group revenue this year to rise by 29 per cent to Dh17.8bn compared to its previous estimate of a 31 per cent year-on-year increase in 2016. Arqaam is “assuming disrupted operations of 12 months … for necessary refurbishment-rebuild works”.

Emaar said yesterday it had hired Dubai-based Dutco Group as the contractor to undertake restoration work on the 63-storey Address hotel “in record time”.

Emaar’s chairman, Mohamed Alabbar, said: “To achieve our timelines, we will leverage all our resources and our proven track record of delivering iconic projects. Every aspect of the workflow will be clearly streamlined and we will deploy the latest technology tools to ensure that we meet our time frame.”

Sebastien Henin, the head of asset management at TNI, The National Investor, in Abu Dhabi, said that Emaar’s status as one of the blue chips of the market and its appeal to institutional investors should minimise any effect on its share price going forward. “The financial effect for Emaar is pretty limited, so I think investors have understood that properly and that’s why we haven’t seen a kind of overreaction [in the stock market],” he said.

Emaar’s weighting accounts for 18.68 per cent of the Dubai Financial Market benchmark index.

Shareholders, speaking on the trading floor of the Dubai exchange yesterday, supported Mr Henin’s view.

“I don’t think [the fire] will affect the company’s profits,” said Abdulkarim Al Kassem, a Saudi national and an Emaar shareholder. “It is still a strong company and has strong revenues. It is an attractive stock to buy based on its future earnings.”

Hussain Al Qatari, a Bahraini investor in Emaar, said it is “the best company in the market”.

He said: “It is a strong company and has excellent assets even if they incur losses [from the fire].”

There has been speculation in the past that Emaar’s hotel business, which also includes the Vida and Armani brands, could be the next to be spun off after the IPO of its malls unit in 2014.

However, any aspiration to list this unit, or expand the Address chain of hotels, may in the short term be affected, according to analysts.

“The effect will be reputational on how its hotel business evolves going forward because we know they have ambitions to list the hotel business,” said Muhammad Shabbir, the head of equity funds and portfolios at Rasmala Investment Bank in Dubai. “It may be a short term negative effect on that.”

Emaar’s shares ended last year at Dh5.69, down 20 per cent since the start of the year and 45 per cent below their highs in autumn 2014, when the oil price slump began to weigh on many Dubai companies.

The group’s revenue from hotels in the first nine months of this year accounted for 12 per cent of total revenue.

Its third quarter net profit rose 31 per cent to Dh843 million as rising property sales overcame the wider real estate market malaise. The results missed analyst expectations, however.

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Gulf airlines remain at close quarters over open skies

Aviation policies or “open skies” was the main theme in the airlines business last year.

First, American carriers got tangled with their Arabian Gulf rivals in a long, dismal tale with both sides portraying the other as a beneficiary of protectionism.

In March, three American airlines – Delta, United, and American – disclosed what they called a detailed piece of investigative work. The report alleged that their three Gulf rivals – Emirates, Etihad Airways, and Qatar Airways – were receiving handouts from their governments to the sum of US$42 billion.

The Gulf carriers said the report was baseless.

Regardless, the US carriers asked their government to intervene, a process that, after a lot of noise, has led to nothing.

About the same time, European airlines – namely Lufthansa, Air France, and KLM – were also picking up momentum in their battle against Gulf carriers. By March, they had asked their transport ministers to urge the European Commission (EC) to look into alleged government subsidies for Gulf airlines, signalling more alarm than their American counterparts.

Fast-forward to last month, and the EC raised concerns over the way Gulf carriers operate in Europe and published a new aviation strategy. It called for comprehensive agreements between the European Union (EU) and GCC states based on common rules and transparency. In a memo, the EC revealed that the UAE had more direct traffic with the EU than China, India and Japan combined. It also said that the total number of seats available on scheduled flights between the EU and the six GCC states had increased to 39 million this year from 12 million in 2005.

The commission added that it would issue interpretative guidelines on the application of a key 2008 regulation covering the ownership and control of EU airlines. This could have implications for Etihad Airways, which has taken stakes in several financially troubled European carriers including Alitalia and airberlin.

But aside from the subsidies debate, a question that emerges is, why is there a big fuss about Gulf carriers?

One answer is that ever since their inception, their business strategy was to act as super-connectors between the East and the West. Their extensive route maps in Africa, Asia, and their steady growth in America supported their growth. Some western carriers view this as a threat to their long-haul routes and their airport hub model.

But there are also other reasons for the success of the newer carriers. These include the super advantageous locations of their bases, their modern, efficient fleets that save fuel costs, their high-quality service, and their glossy marketing that adds to their popularity.

Moving to the aircraft manufacturing side of the industry, there was a warning last year that the future of Airbus’ A380, the world’s largest passenger aircraft, was in limbo.

It has been just 10 years since the European plane maker launched its first commercial A380 flight in 2005. At the time, it was viewed as the future of air travel. The double-decker allowed airlines to carry more people without having to buy extra landing slots at increasingly congested airports.

The Gulf’s three biggest airlines all operate the superjumbo. Emirates, in particular, has made the A380 the backbone of its fleet, with about 65 in operation and more than 70 on order. Qatar and Etihad have together bought 20. But there have been no new orders since 2012.

When Airbus designed the A380, it predicted that more people would want to travel between large airport hubs. Its rival Boeing instead bet that fuel efficiency was key as people would want to fly to new destinations direct. So while Airbus concentrated on the superjumbo, Boeing developed the 787 – a smaller plane that can still fly long distances. Airlines consider the double-decker A380 expensive – it needs special gates at airports and burns a relatively larger amount of fuel, which is the largest component of a carrier’s costs.

With that in mind, the Emirates president, Tim Clark, has said he is ready to buy up to 200 more A380s – if a more fuel-efficient model is introduced.

Airbus has instead hinted at the possibility of discontinuing the A380 programme, although in November Fabrice Brégier, the company’s chief executive, said that he still expected to meet a target of selling 25 of the jets.

Last year also saw the latest biennial Dubai Airshow with Gulf airlines taking a pause in aircraft orders, following a buying extravaganza two years ago, when together they purchased planes and engines worth in excess of $200bn.

Military activity took centre stage at the air show, especially as the UAE and Saudi Arabia were leading a fight in Yemen against Houthi rebels. The two countries are also participating in the coalition against ISIL in Syria and Iraq. Among the deals struck at the November show was one between the UAE Armed Forces and the Swedish aerospace company Saab to buy two new Global 6000 surveillance jets and upgrade two Saab 340 aircraft owned by the UAE. The deal was worth $1.27bn.

Lockheed Martin also won a deal worth $262.8 million to provide Saudi Arabia’s F-15 sniper targeting system, which allows day and night low-level navigation.

Airport security was another important issue last year, after a suspected bomb led to the crash of a Russian plane over Egypt’s Sinai Peninsula, killing all 224 passengers and crew on board.

The Egyptian Civil Aviation authorities denied that the crash was an “act of terrorism”, but hired a security and risk-advisory company to audit aviation security at airports across the country.

Responsibility for the incident was claimed by ISIL, raising security concerns in the industry as it entered the new year.

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2015 in review: Gulf airlines at close quarters over open skies

Aviation policies or “open skies” was the main theme in the airlines business last year.

First, American carriers got tangled with their Arabian Gulf rivals in a long, dismal tale with both sides portraying the other as a beneficiary of protectionism.

In March, three American airlines – Delta, United, and American – disclosed what they called a detailed piece of investigative work. The report alleged that their three Gulf rivals – Emirates, Etihad Airways, and Qatar Airways – were receiving handouts from their governments to the sum of US$42 billion.

The Gulf carriers said the report was baseless.

Regardless, the US carriers asked their government to intervene, a process that, after a lot of noise, has led to nothing.

About the same time, European airlines – namely Lufthansa, Air France, and KLM – were also picking up momentum in their battle against Gulf carriers. By March, they had asked their transport ministers to urge the European Commission (EC) to look into alleged government subsidies for Gulf airlines, signalling more alarm than their American counterparts.

Fast-forward to last month, and the EC raised concerns over the way Gulf carriers operate in Europe and published a new aviation strategy. It called for comprehensive agreements between the European Union (EU) and GCC states based on common rules and transparency. In a memo, the EC revealed that the UAE had more direct traffic with the EU than China, India and Japan combined. It also said that the total number of seats available on scheduled flights between the EU and the six GCC states had increased to 39 million this year from 12 million in 2005.

The commission added that it would issue interpretative guidelines on the application of a key 2008 regulation covering the ownership and control of EU airlines. This could have implications for Etihad Airways, which has taken stakes in several financially troubled European carriers including Alitalia and airberlin.

But aside from the subsidies debate, a question that emerges is, why is there a big fuss about Gulf carriers?

One answer is that ever since their inception, their business strategy was to act as super-connectors between the East and the West. Their extensive route maps in Africa, Asia, and their steady growth in America supported their growth. Some western carriers view this as a threat to their long-haul routes and their airport hub model.

But there are also other reasons for the success of the newer carriers. These include the super advantageous locations of their bases, their modern, efficient fleets that save fuel costs, their high-quality service, and their glossy marketing that adds to their popularity.

Moving to the aircraft manufacturing side of the industry, there was a warning last year that the future of Airbus’ A380, the world’s largest passenger aircraft, was in limbo.

It has been just 10 years since the European plane maker launched its first commercial A380 flight in 2005. At the time, it was viewed as the future of air travel. The double-decker allowed airlines to carry more people without having to buy extra landing slots at increasingly congested airports.

The Gulf’s three biggest airlines all operate the superjumbo. Emirates, in particular, has made the A380 the backbone of its fleet, with about 65 in operation and more than 70 on order. Qatar and Etihad have together bought 20. But there have been no new orders since 2012.

When Airbus designed the A380, it predicted that more people would want to travel between large airport hubs. Its rival Boeing instead bet that fuel efficiency was key as people would want to fly to new destinations direct. So while Airbus concentrated on the superjumbo, Boeing developed the 787 – a smaller plane that can still fly long distances. Airlines consider the double-decker A380 expensive – it needs special gates at airports and burns a relatively larger amount of fuel, which is the largest component of a carrier’s costs.

With that in mind, the Emirates president, Tim Clark, has said he is ready to buy up to 200 more A380s – if a more fuel-efficient model is introduced.

Airbus has instead hinted at the possibility of discontinuing the A380 programme, although in November Fabrice Brégier, the company’s chief executive, said that he still expected to meet a target of selling 25 of the jets.

Last year also saw the latest biennial Dubai Airshow with Gulf airlines taking a pause in aircraft orders, following a buying extravaganza two years ago, when together they purchased planes and engines worth in excess of $200bn.

Military activity took centre stage at the air show, especially as the UAE and Saudi Arabia were leading a fight in Yemen against Houthi rebels. The two countries are also participating in the coalition against ISIL in Syria and Iraq. Among the deals struck at the November show was one between the UAE Armed Forces and the Swedish aerospace company Saab to buy two new Global 6000 surveillance jets and upgrade two Saab 340 aircraft owned by the UAE. The deal was worth $1.27bn.

Lockheed Martin also won a deal worth $262.8 million to provide Saudi Arabia’s F-15 sniper targeting system, which allows day and night low-level navigation.

Airport security was another important issue last year, after a suspected bomb led to the crash of a Russian plane over Egypt’s Sinai Peninsula, killing all 224 passengers and crew on board.

The Egyptian Civil Aviation authorities denied that the crash was an “act of terrorism”, but hired a security and risk-advisory company to audit aviation security at airports across the country.

Responsibility for the incident was claimed by ISIL, raising security concerns in the industry as it entered the new year.

selgazzar@thenational.ae

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