Third-tier carriers can find a niche as the Middle East airline market consolidates in the coming years, but they will need to pursue a privatisation route and ownership rules must be relaxed to allow this to happen.
That is the message from Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organisation (AACO) here in Beijing. "You have three categories of airlines in the Middle East. The ones who are growing with a global outlook; the ones who have their own markets and have great potential for the future; and the smaller players who are doing well serving their own markets," he says.
Examples of this latter category are Royal Jordanian, Middle East Airlines and Tunisair, he adds.
Consolidation in the region is inevitable, says Teffaha, but there needs to be some key developments to allow this to happen. "There are some major hurdles - firstly, the regulatory regime which is far from being liberal, but I believe this will happen in 10 years."
Teffaha believes that smaller Arab airlines can retain their identity in the long term: "The consolidation in the region will see airlines integrate their networks, have cross-border ownership, and be able to maximise their strengths, similar to what is happening with IAG and Air France-KLM."
He adds that privatisation is key for this cross-border ownership process to begin. "Up till now, most of the airlines are owned by the governments. Now, we will start seeing a change similar to the privatisation at Royal Jordanian, where ownership is opened to investors but the government retains a minority stake."