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Outlook Bleak for Aviation Industry

However, Arab Air Carriers Organisation Secretary General Abdul Wahab Teffaha predicted a gloomier outlook for the aviation industry as a whole, even after airlines forecast a loss of $5.2 billion in 2008.

“Next year’s figure is going to be even worse,” Teffaha said.

“While things are so bad, airlines will run for liquidity. There is going to be a bloodbath.

“Airlines are going to have deals left, right and centre to keep themselves afloat.”

Teffaha predicted consolidation across the aviation sectors in US, Europe and subcontinent and to an extent, Arab airlines.

For Arab airlines, he said there was still strong travel and the region was supported by good airports and economy. But he cautioned that, although airlines suffered from the extreme high prices earlier, the falling oil price must not progress beyond a point before it damages the economy helping support the airlines.

“Emirates, Etihad, Qatar – everybody who has good liquidity, will be able to manage well.

“There are opportunities in the crisis – of increasing their presence in other markets.”

Both Emirates and Etihad have indicated a positive outlook but have said they were already seeing a softening in demand.

“There is a crisis out there in the market but.. we have focused on building a cash reserve. That is going to help us today,” said Nirmal Govindadas, Emirates Airline Finance Vice President.

Emirates president Tim Clark said last week that the airline had seen the number of passengers per plane reduce, with it forecast to be up to two per cent lower than previously predicted.

Etihad Airways Financial Planning Vice-President Francois Oberholzer said the airline had seen a reduction in sales for its premium classes and on sectors traditionally high in business travelers such as London.

However, Oberholzer said the airline was on target to meet its business plans, that forward booking is “robust”, and agreed opportunities existed.

“In the current climate we’re witnessing for the airline industry a trend to equity sharing. It starts with codesharing and then as the market matures – to equity sharing.”

Oberholzer said the airline expected to see financing to dry up even in the Middle East but “there is still a lot of petrodollars floating around in the system looking for assets.”

While fuel costs have reduced, Oberholzer said the flow on benefit is often slow to be felt by the airline which can only regain 30 to 35 per cent of the cost of fuel increases through surcharges. Furthermore, airlines who recently hedged fuel costs, now find the prices dramatically lower than their peak at $147 per barrel in July.

Meanwhile, Wataniya Airways Project Manager Marian Pistik, said the premium airline was on schedule to start operating in the beginning of 2009 and was on track to list in November or December of this year.

· zoe@khaleejtimes.com