Steep Growth At A Cost For Middle East Carriers

Mid-East carriers are experiencing growing pains as they contend with congestion from a booming air transport market.

At the Arab Air Carriers Organization (AACO) Annual General Meeting (AGM) in Dubai in November, delegates heard that the region’s airlines were largely coping with the problems posed by geopolitical unrest in the area, but needed solutions to difficulties that threaten to derail their continued growth.

Despite instability and wars from Libya in the west to Iraq in the east, airlines from the troubled nations accounted for just 9.4% of Arab airlines’ total revenue passenger kilometers, AACO Secretary General Abdul Wahab Teffaha reported.

Even allowing for the crises, the Arab air transport market grew by 10% in 2013, and was expected to climb by a further 12% by year-end 2014, he said. Even a conservative estimate of that market anticipates growth to 271 million in 2020, from 156 million passengers in 2013. 

But his audience heard the clearest warning yet that the growth that distinguishes major Middle Eastern airlines as world leaders is also a source of weakness. 

Arab governments never shrank from expanding airport capacity, Teffaha said. But growth in available airspace or in air traffic management capability has outpaced efforts to keep up, resulting in increasing congestion. In addition to the booming size of the area’s airline fleets, over the years the Persian Gulf’s air-traffic control system has splintered, exacerbating the problem.

Where once there was a single Flight Information Region (FIR) based in Bahrain, now there are six, and the handover points between them create bottlenecks. Services increasingly see delays. Matters are further complicated by several UAE airports being in close proximity with each other: Abu Dhabi, Dubai and Sharjah for instance, are near specialist executive-jet airfields, such as Abu Dhabi’s Al Bateen.

Another complication is the fact that about 50% of the region’s airspace is off-limits, reserved for use by the military. There are increasingly urgent attempts to persuade the region’s defense ministries to make military airspace available to civil aircraft when not required for exercises, as happens in Europe.

Addressing the AGM, IATA’s Paul Steele, senior vice president, member and external relations, said that “greater civil-military cooperation for the flexible use of airspace is urgently required.”

If attempts to reunify the six FIRs into a “virtual” FIR are to succeed, “for example, by using harmonized separation and regulatory standards, the players in the region need to buy-in urgently to a vision for seamless airspace management and then work together in a team effort to make it happen.”

“Technology should be implemented in a cohesive way so that one country does not overinvest in systems that cannot be used across the region,” Steele said.

The other major weakness facing Arab carriers is continuing protectionism among some states in the region. This problem was supposed to be solved by adoption of the 2004 Damascus Convention to liberalize airspace between Middle Eastern countries, but have not yet ratified it many states.

But protectionism, many AACO member CEOs noted, is not just a Middle Eastern issue. “We’re finding the European Union is getting worse in terms of slot problems and access to the market,” Air Algerie’s Mohamed Salah Boultif said. “The EU is simply not granting landing rights at [Paris] Charles De Gaulle,” concurred Oman Air’s new CEO Paul Gregorowitsch.

Akbar Al Baker, CEO of Qatar Airways, drew some distinctions between individual European nations: “I don’t have problems in the U.K. . . . We have problems in France, Germany and the Netherlands. Emirates and Etihad have the same problems. There is enough business to go round. The only problem is [some airlines] are so inefficient. Their costs are sky rocketing and it’s the unions who are causing it.” 

Teffaha commented that the deterioration in the positions of some European and U.S. airlines and airports was not due to increasing competition from overseas, but the fact that their governments regarded aviation as a cash cow, burdening it with heavy taxes and regulations.

Arab carriers represented at AACO were generally optimistic about prospects for the immediate future; some expressed a wish to emulate the successes of the Gulf Big Three by increasing the attractions of their home hubs as transit points. One such airline is Egyptair, whose chairman and CEO, Sameh El Hefny, talked of increasing sixth-freedom traffic over Cairo, notably connecting Europe and the Far East with African destinations via Cairo.

Oman Air targets profitability by the end of 2017, CEO Paul Gregorowitsch said at the AACO AGM. The state-owned airline has seen consistent losses as it invests in fleet expansion.  In mid-November, it received its first Boeing 737-800 and -900ER, from orders of 15 for the two variants. It will also accept three Airbus A330-300s and six Boeing 787-8s over the next three years, and by 2018 is due to have an almost 50-strong fleet as it attempts to achieve critical mass.

The new 737-900ERs, the first to be acquired by a Persian Gulf customer, will operate in a two-class configuration (12 in business and 150 in economy class), compared to the 737‑800 layout with 12 in business and 130 in economy class. 

Data Aviation technical schools in the Middle East aim to help address the region’s MRO workforce shortage. See our list of some:



TAGS: Middle East
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