The agreement ending the rift with Qatar seems to have helped mitigate some regional tensions, but will the spirit of cooperation continue?
The coronavirus pandemic has tested few industries as much as aviation and tourism. In the Gulf, a region disadvantaged by its high dependence on long-haul travel, the sectors have already experienced mass layoffs and major bailouts. Recovery for Gulf airlines and the hospitality sector could therefore be more difficult than in regions with large domestic markets. This forced hiatus contains an implicit opportunity for structural changes that would boost the region’s competitiveness. But will governments have the vision to prioritize long-term gains over short-term objectives that could lock the industries onto a less sustainable path?
Despite pressures to cut costs and concerns about oversupply, aviation and tourism have remained significant contributors to Gulf countries’ non-oil revenue. Before the pandemic, they generated approximately one-tenth of the gross domestic product and supported a total 1.4 million jobs in the United Arab Emirates and Saudi Arabia. In Dubai, foreign visitors accounted for 25% of annual retail sales, and Dubai International Airport alone employed 90,000 people.
The economic and job losses are staggering. In 2020, passenger traffic in the Middle East is expected to be slashed to half of business-as-usual expectations, causing losses of up to 5 million jobs and $180 billion in GDP in the travel and tourism sector. In addition to salary reductions, the region’s three largest airlines, Emirates, Qatar Airways, and Etihad, are estimated to have already made thousands of jobs redundant. Total layoffs could eventually reach tens of thousands.
Even with Emirates’ campaign to attract visitors back to Dubai, flight traffic at Dubai International Airport between mid-September and mid-October was still down to less than one-third of 2019’s monthly average levels. Hotels reported some relief from local tourism. But staying afloat for many will still depend on a pickup in travel related to meetings, incentives, conferences, and exhibitions in the final quarter of 2020, which might not materialize as the economic downturn and videoconferencing cut into business travel and the pandemic drags on.
The forced groundings have also reignited a debate about the environmental performance of aviation, which is among the world’s most carbon-intensive industries, with two transatlantic roundtrips equaling one year’s emissions from driving a car. Pre-pandemic, aviation accounted for 2.5% of global carbon dioxide emissions – just below the total emissions of the six Gulf Cooperation Council member countries. However, with limited scope for reductions, aviation emissions are projected to remain largely coupled with the industry’s growth, taking up a sizable share of the world’s remaining carbon budget (or emissions that can still be safely emitted) through mid-century.
Aligning aviation with the goals of the Paris Agreement on climate change would require an ambitious combination of technological and operational improvements, sustainable aviation fuels, and simply flying less. But alternative fuels, including hydrogen and biofuels, have yet to reach technological maturity or price parity with conventional ones. Government-imposed carbon taxes, which could encourage faster reductions, have so far been too limited to have an impact.
Tourism is another major culprit, estimated to account for 8% of global greenhouse gas emissions. Its negative environmental and social impacts extend to ecological damage, high water and energy consumption, plastic pollution, and overtourism, among others. In the UAE, the hospitality sector is a significant contributor to food waste, estimated to cause $3.5 billion in losses each year.
Global aviation is not expected to return to 2019 passenger traffic levels before 2024, constrained by prolonged travel restrictions, lower demand for business travel, and weaker consumer sentiment. Despite boasting a growing number of low-cost airlines, the Gulf’s high reliance on long-haul connecting traffic and relatively small domestic markets will hinder recovery in aviation and tourism. At the same time, the forced pause offers an opportunity to delink future growth from environmental impact.
The United Nations has called on governments to “build back better” from the pandemic by channeling their massive recovery spending flows to green jobs and sustainable growth. The European Union has been spearheading these efforts with its Green Deal and 2050 carbon neutrality target. But even in Europe, aviation bailouts, currently totaling around $38.5 billion, contain few binding environmental conditionalities.
International ambition has been equally weak: Heeding calls from the industry, the United Nations’ International Civil Aviation Organization agreed in June to relax the rules for its Carbon Offsetting and Reduction Scheme for International Aviation, which has been the centerpiece of global efforts to curb emission growth in the sector. All Gulf countries with major airlines have confirmed their participation in the first phase of the market-based scheme, under which airlines are expected to offset any emission growth beginning in 2021 through the purchase and cancelation of carbon credits.
The new rules will use the airlines’ 2019 emissions as a baseline, instead of averaging 2019’s and 2020’s emissions, which under the current conditions would have made the baseline 30% more stringent. This is estimated to save airlines $15 billion in offsetting costs, but it will also exempt them from any offset obligations, removing economic incentives to invest in lower-emitting operating models and obliterating the demand for offset credits and related emission reductions for several years to come.
In the absence of strong economic or policy signals from competing countries or regions, or at the international level, the future trajectories of Gulf airlines will largely depend on their own farsightedness. Some recent announcements offer hope in this regard: “Those who aren’t sustainable airlines, they probably won’t survive,” affirmed Etihad’s CEO in a recent interview, calling for government subsidies to support faster uptake of biofuels. In January, the airline announced a 2050 net-zero carbon emission target and has been testing green technologies with Boeing in the height of the pandemic. In August, Sharjah’s international airport was the first in the Gulf to achieve carbon neutrality accreditation.
There is no silver bullet for rapid emission reductions, and a mix of policies and actions is needed. This should include the use of high-quality offsets. Since late 2019, British low-cost carrier EasyJet has offset fuel-related emissions from all its flights, demonstrating that net-zero is already feasible.
In the long term, “brown recoveries” that aim to restore the status quo will leave airlines even further behind in a world moving away from fossil fuels. While curbing emissions from aviation could involve some trade-offs with the medium-term growth of the sector, the urgency of the climate crisis requires bold choices to be made now.
Two overarching goals for sustainable recoveries in the airline and tourism industries in the Gulf should include creating decent, sustainable jobs and aligning with global climate goals.
In the first instance, policies to revitalize the travel industry should focus on creating jobs that support green trajectories, provide sustainable sources of income, and ensure social protection. A survey of G-20 financial leaders in April identified clean technology research and development spending and clean energy infrastructure investments as recovery policies with the highest positive multiplier impacts on both the climate and economy in the long term.
Recovery plans should therefore include support for alternative modes of transportation and sustainable tourism. The delayed GCC Railway project, aiming to link the Gulf states, could become both a source of job creation and the backbone of sustainable regional travel.
Relying mainly on foreign workforce repatriation as a cost reduction strategy for the industry might backfire through broader economic losses caused by depressed consumer demand. Focus should therefore also be on education and retraining programs: The tourism industry in particular has ample space for innovation around sustainable business models and strategies. Cultural, experiential, and ecotourism are still nascent and have significant potential to support the region’s economic growth, diversification, and knowledge economy agendas.
Investments in sustainable technology research and development can also help create jobs and boost long-term competitiveness. Supporting the development of sustainable aviation fuels – specifically hydrogen-based fuels – and subsidizing their uptake would be particularly beneficial given the scale of potential emission reductions.
While the aviation industry has been under pressure to increase efficiencies and cut costs for several years, potential for greater operational efficiencies across the Gulf tourism industry remains significant: A single hotel in Dubai was able to save the equivalent of 70,000 meals a year with food waste management software.
In the second instance, governments should ensure the travel industry is placed on a Paris Agreement-compatible trajectory through regulation and economic instruments. This could begin with encouraging the industry to set carbon neutrality targets with medium-term milestones. Domestic emission trading systems could provide additional market incentives and certainty. The unconditional airline rescue packages and watered-down environmental performance requirements in other regions are unhelpful. The need for new airports and hotel capacity should also be reevaluated in light of revised and realistic growth expectations.
Green stimulus measures could also come in the form of incentives for companies that opt-in for more environmentally and socially sustainable practices. Compliance could be ensured by making assistance conditional on meeting sustainability standards or targets.
In the short term, combining profits, jobs, and environmental sustainability will only be partly achievable for aviation. In this sense, the pandemic may have come as a blessing in disguise, as it enables the industry to downsize temporarily while preparing for a greener recovery. In the meantime, Gulf governments also have an opportunity to rethink travel and tourism and emerge as frontrunners in creating truly sustainable growth and jobs.
This article draws from the author’s paper “Reviving Aviation and Tourism: Evaluation of COVID-19 Impacts and Responses in the EU and GCC in the Context of Sustainable Recoveries” published by the Bussola Institute.
is a thematic expert and writer, focusing on natural resource and environmental policy and politics.
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