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ME Airlines Losses to Double in ’09

DUBAI -The Middle East aviation industry should brace for further turbulence this year, with the region’s airlines poised to rack up combined losses of $200 million this year – twice the amount they lost in 2008, the International Air Transport Association said on Sunday.

IATA, the world’s largest airline association, warned that growth in regional passenger and air cargo traffic in 2009 would “slow to a crawl” of 1.2 percent due to the global recession. At the same time, IATA forecasts that capacity for Middle Eastern airlines would swell this year by 4.9 per cent, far outpacing demand and squeezing the carriers’ load factors and profits as a result.

Dr Majdi Sabri, IATA’s Regional Vice President for the Middle East and North Africa, urged the region’s airlines to be cautious about their expansion plans, arguing that overcapacity would become a critical issue.

Sabri’s comments yesterday at MEED’s Middle East Airport Projects 2009 conference in Dubai highlighted a dramatic reversal in the fortunes of airlines in the Middle East, which for several years has been among the few bright spots in global aviation.

“The Middle East led all regions … in traffic growth in 2008 — seven per cent for passenger and 6.3 per cent for freight compared to respective growths of 18.1 per cent and 10.1 per cent in 2007,” Sabri said. By contrast, global passenger traffic increased in 2008 by just 1.6 per cent, while global cargo traffic dropped by four per cent, he said.

“Regulatory impediments, government taxes and user charges are also adversely affecting our industry,” he added. “As a result, airlines in the region will lose $200 million compared to total global industry losses of $2.5 billion.” Sabri noted that the estimate for combined global airline losses this year was only half of the total global loss for 2008 of $5 billion, thanks to a deep plunge in the price of oil.

Sabri also warned of overcapacity at the region’s airports.

“The region has invested heavily in the future, with over $50 billion being spent on infrastructure and $178 billion on aircraft,” he said.

“In the near term, airlines will have to adjust capacity to match the downturn in demand growth. In the longer term, we could face an overcapacity situation with airports.”

Last year, 160 million passengers flew into, out of or within the Middle East. By 2012, this region’s 10 leading airports alone will have a combined annual capacity of some 320 million passengers, Sabri said.

Major airport projects in the region include the US$8.2 billion Al Makhtoum International Airport in Dubai, the US$6.8 billion expansion in Abu Dhabi International Airport, the new US$5.5 billion Doha International Airport and the US$11.3 billion upgrade of King Abdulaziz International Airport in Saudi Arabia. This ongoing development was disclosed at the Middle East Airport Projects 2009 Conference, which opened Sunday, February 22, at Park Hyatt Hotel in Deira.

Edmund O’ Sullivan, chairman for MEED Events, said that the total estimated airport projects for Middle East, Africa and the Asian sub-continent would be worth US$60 billion.

According to IATA, the Middle East led the airline industry with five years of double-digit traffic growth, doubling its share of international passenger traffic to 10 per cent, up from five per cent in 2001.

“This region has seen unprecedented investment in aircraft and infrastructure. The result is an air transport industry that generates 460,000 jobs and $17.5 billion in economic activity.”

Sabri said the economic crisis is a turning point.

“Airports and airlines must deliver significant change to weather this recession and emerge stronger on the other side. An aviation agenda for change will help us do just that with four core key components-safety, improved efficiency, an effective approach to environment and increased commercial freedoms.”

He said the Middle East remains one of the most promising regions for aviation.

“However, to maintain that promising future, change is needed. Healthy airports need healthy airlines. That means greater communication and cooperation between airlines and airports to improve safety, efficiency and environmental sustainability.”

· issacjohn@khaleejtimes.com