Middle East in the red
The International Air Transport Association (IATA) has warned against dramatic losses to Middle East carriers. Amirah Ibrahim received an extensive briefing at IATA Global Media Day in Geneva
The Arab Spring is now turning into winter, with rain and maybe thunder. For the air transport business and industry, Middle Eastern airlines will post combined profits of $400 million for 2011, 50 per cent less than predicted earlier, as high fuel costs squeeze profit margins on price sensitive long-haul routes. Last week, IATA held its Media Global Day, inviting some 200 journalists from different destinations to exchange views and information over the troubled industry.
According to IATA boss Tony Tyler, regional carriers next year will see profits of $300 million, less than half the previous forecasts of $700 million, as the long-haul market conditions in Europe deteriorate.
Globally the aviation industry is forecast to post profits of $3.5 billion for 2012, down from earlier estimates of $4.9 billion.
In the Middle East, the region is divided in two parts or more parts. Arab carriers and mainly flag carriers of the countries where political unrest had hit air travel are suffering whereas Arab Gulf airlines are expanding their businesses.
Dubai's flag carrier Emirates Airline in November posted a 76 per cent slump in first half net profit which fell to $225 million as rising fuel costs and regional unrest squeezed margins.
"When we consider the new orders both Qatar Airways and Emirates Airlines have set over the past few weeks, we see that the region is doing very well," explained Tyler to Middle East reporters at IATA headquarters in Geneva. Emirates set an order to purchase 50 Boeing 777s for $18 billion while the Qatari airline ordered 50 Airbus A320neo aircraft and five Airbus A380 superjumbos, with a total value of $6.7 billion.
Abu Dhabi's Etihad Airways in July reported a 28 per cent rise in revenue to $1.72 billion for the first half of 2011, putting it on target to generate its first net profit in 2012.
But on the other hand, in Egypt, Syria, Yemen, and Libya, where the economies of those countries have passed through political unrest, air transport has been suffering even more. Revenue at airports dropped while air traffic through the airspace negatively decreased. The main carriers or flag carriers received strong blows. In Libya, an air embargo was imposed for seven months. The infrastructure had been damaged badly by bombing by NATO warplanes. In Egypt, just a few days after the tourists and foreigners were sent out of the country after the ousting of ex-president Mubarak, the load factor collapsed and 80 per cent of the commercial fleet was grounded. As for airspace, fees collected out of crossing the space fell by 50 per cent due to the tension around the region. Syria for months has been witnessing a political crisis with violent clashes and now is likely to experience an air embargo imposed by the Arab League. Yet, IATA made no comment on the impact of Arab Spring on its member airlines.
"We have been trying to help those airlines overcome the bad influence of the political crisis," replied Tyler to a question by Al-Ahram Weekly. "IATA has prepared a number of technical programmes to cooperate with airlines in Egypt, Libya and others in the Arab region, so that we provide them with the information and data required to calculate the visibility of suggested solutions."
However, explained Tyler, IATA is not authorised to commit its members to offer help to airlines in trouble to survive a crisis.
Tyler praised the Middle Eastern and North African aviation sector for achieving exponential growth and investing $100 billion in infrastructural improvements.
He acknowledged that expansion slowed in the first 10 months of 2011, highlighted by a 0.8 per cent discrepancy between supply and demand but said carriers in this region are poised for a bright future.
IATA figures for Middle East traffic show that political unrest has been a major factor to a troubling situation in the aviation sector in the Arab region.
Prior to the unrest the Egyptian market was seeing around 1.5 million scheduled passengers per month (domestic and international). This fell by one third in March 2011 to 1 million passengers.
"By the end of the third quarter of this year (September) the volumes appear to be approaching the 1.5 million mark again, indicating that there has been some recovery," indicated Tyler.
IATA figures indicate that Bahrain, Yemen and Syria amount to 6 per cent of Middle East traffic while Egypt and Tunisia account for around 18 per cent of the African market and 0.6 per cent of worldwide capacity. Libya is a further 3 per cent of the African market and 0.1 per cent of global capacity.