Friday, Dec 09, 2011

Gulf News

Geneva Airspace in the Gulf remains one of the biggest challenges to the region’s aviation industry, according to Tony Tyler, CEO and Director-General of the International Air Transport Association.

Tyler said that “infrastructure, airports and airspace” issues currently faced by the carriers of the Middle East, which are expected to see profits of $400 million this year, down from an initial forecast of $800 million, and an even lower profit of $300 million in 2012 (revised down from an earlier forecast of $700 million) owing to the Eurozone crisis.

“Airspace is a problem in the Gulf. Only 40 per cent of the airspace in the Gulf region is actually available for civilian operations as a lot of it is closed off for military or other purposes,” Tyler said, speaking on the sidelines of the IATA conference in Geneva on Wednesday.

He added that the IATA is working with the authorities to try to see what can be done to make the space that can be used more efficiently and also to free up more space in the Middle East, where airport capacity is expanding at breakneck speed.

Asked if Gulf authorities are willing to open up more airspace, Tyler said: “Everybody there recognises that there is an issue which needs to be addressed, and is working positively towards resolving it.”

IATA, meanwhile, is involved in a number of programmes in the Gulf with regional stakeholders in the states in those areas to open up airspace, Tyler further said, adding that there is a lot of cooperation taking place.

“Traditionally, what happens is that traffic is flown north-south in that region but now we are starting to see more east-west traffic as well, which of course, complicates air space management and makes it more difficult to use the space that is available,” Tyler said.

IATA on Wednesday said that the global aviation industry could suffer losses exceeding $8 billion in 2012 should the Eurozone crisis evolve into a full-blown banking crisis and European recession.

And with the Eurozone crisis putting severe downside risk on 2012, the aviation trade body lowered its profit outlook for airlines to $3.5 billion from an earlier forecast of $4.9 billion, for a net margin of 0.6 per cent.

For 2011, however, IATA said that profitability remains weak but unchanged at $6.9 billion for a net margin of 1.2 per cent.

“The biggest risk facing airline profitability over the next year is the econ-omic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis,” Tyler said.

He added that this could potentially lead to airlines losing as much as $8.3 billion, marking the biggest hit since the 2008 global financial crisis.

“There is no doubt that even in the best-case scenario we are going to see a tougher 2012,” Tyler said.

UAE outlook

The passenger air traffic demand in the UAE is expected to grow annually by an average 8.5 per cent until 2015, according to IATA’s forecast. The freight demand is expected to grow at a little lower rate of 6.2 per cent.

In the Middle East overall, passenger traffic is forecast to grow at an average 7.9 per cent every year between now and 2015, down slightly from eight per cent in 2011, according to IATA estimates.

Freight growth in the region, meanwhile, will remain at 5.7 per cent until 2015. Airlines in the Middle East saw their freight demand grow 7.9 per cent this year.

“The enormous growth we have seen in the Gulf shows that if governments have policies that are supportive and helpful to aviation, they can very much help to drive economic growth. And this is the message we are trying to communicate,” said Tyler.

Asked if there was scope for airlines to consolidate in the Middle East, Tyler told Gulf News: “The big three Gulf carriers — Emirates, Etihad Airways and Qatar Airways — all seem to be forging ahead quite independently. There are no particular forces at play which will push them towards consolidating.”

“And they want to grow organically rather than by consolidating,” he added.

As airlines’ access to credit becomes increasingly difficult amid the Eurozone crisis, the aviation industry is going to have to consider alternative options, according to Tyler.

Asked if the IATA as a body was doing something to help member airlines secure financing, Tyler told Gulf News: “On the financing side, there is not a lot we can do.

“I think what we will see happening is the export credit agencies come to the party – as they did in 2008 — and help plane manufacturers continue to move the metal.”

By Shweta Jain?Senior Reporter

Gulf News 2011. All rights reserved.