Middle East carriers still on a growth path

Jeddah
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It says much for the depth of the crisis facing the airline industry that IATA director general Giovanni Bisignani can describe the Middle East as an "oasis of some good news". The association does after all expect Middle East carriers to lose $500 million this year.

But the projection marks a halving of the region's loss in 2008 and passenger growth of 8% over the first eight months of the year is in contrast to the rest of the world. "The Middle East and North Africa region is the only one that is growing," Bisignani said, addressing the recent Arab Air Carriers Organisation general assembly in Jeddah. But he added: "That growth has not yet translated into profitability."

AACO secretary general Abdul Wahab Teffaha says: "For 2009 we will continue to be in the red, simply because of the magnitude of the crisis. Though airlines have managed to grow the traffic, yields are definitely depressed." But he points to Arab carriers contributing to 10% of total traffic but only 5% of the industry's total losses. "In terms of ratio, the Arab airlines are doing better relatively," he says.

Bisignani adds: "Growth is good, but if it does not generate profits the business is not sustainable." But he takes encouragement from the region's widebody fleet increasing 8% this year in line with demand and that aircraft utilisation is improving in contrast to other regions.

Strong activity

New Gulf Air chief executive Samer Majali says [sector] yields have been poor and challenges remain despite the economic and passenger traffic pick-up. And whilesome of this growth is driven by capacity, he says: "There is still a lot of activity in the region and a lot of demand."

The major Gulf carriers continue to grow, while September's near 20% increase in passenger traffic at Dubai Airport marked its fastest growth for almost two years. In addition, a number of mid-sized operators have their own cases for growth.

Oman Air's development from a regional carrier to an international operator supporting the Omani government's tourism ambitions continues. Frankfurt and Munich are the latest to join the network and it has taken the first of seven new Airbus A330s.

Middle East Airlines chairman and director general, Mohamed El-Hout says it continues to focus its growth on areas with "real economic activity" that connect tothe Lebanon and has benefited from the country's recent stability. "The tourism trade is coming. Lebanon is away from the international financial crisis and the economy is doing well. MEA will make more than $100 million this year and will be among the top 25 most profitable airlines again."

This stability has not been missed by others and Beirut Airport's traffic is expected to grow a quarter this year to five million. "There is over-capacity, because we have Open Skies," says El-Hout. "We have many low-cost carriers, but also new carriers and existing carriers are increasing flights. You will see a drop in load factors. But when you look at the growth, it is a good sign of the stability [of Lebanon]."

EgyptAir chairman and chief executive Hussein Massoud says the region has been fortunate that the impact of the international crisis has been less than for other areas, and adds: "We are expecting the second half of 2010 will be much better."

Teffaha adds: "The analysts are looking at 2010 for going out of the crisis and we are on the way to recovery." But whether Arab carriers, and the industry in general, will return to profit is contingent not just on revenue, but also on costs and he points to signs of rising fuel prices.

Click here for more on the fortunes of Arab carriers