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Slow recovery from Mena unrest for region’s carriers

Saturday, Jun 18, 2011

Gulf News

Dubai The unstable geo-political situation in Middle East and North Africa (Mena) is taking its toll on the region’s carriers, affecting operational and financial performance.

But it’s not just the unrest in Bahrain, Libya, Syria, Egypt and Yemen that is slowing down Gulf carriers’ recovery. Aviation trade body the International Air Transport Association was forced recently to slash its 2011 profit outlook to $100 million (Dh367.3 billion) — down from $900 million in 2010 — for the region’s carriers owing to additional hurdles such as volatile oil prices and Japan’s natural disaster.

Though most Gulf carriers saw revenues hit rock bottom during the unrest in the region, they are slowly starting to spread their wings again, although they are still a long way from a full recovery.

Royal Jordanian Airlines’ revenues, for instance, took a two per cent hit due to the unrest, according to its chief Hussain Dabbas.

“We don’t really see our revenues picking up,” he said. “On the contrary, because of the unrest there are a lot of empty seats on airlines. So airlines ended up reducing fares just to attract passengers, and the yields went down. Even though we are carrying more passengers the revenue has dropped. In addition to that, the high oil prices in March and April affected everybody’s bottom line.”

Breaking even

Dabbas said making a profit this year was going to be tough for the Amman-based carrier.

“However, we are hoping to break even this year and that would be a good result for us. We made a modest profit last year,” he said.

On a more optimistic note, Emirates President Tim Clark said before a year to 18 months, “things will resolve themselves for the better and everyone will get on the move again. In the meantime, we just got to tough it out and manage what we have always been doing in our history [of] crisis after crisis.”

For Emirates , Clark said the Tunisian market had come back quite quickly, and Egypt is moving on quickly as well.

“We have difficulties in Syria and Yemen at the moment. Libya, of course, is anybody’s guess as to what is going to happen there. Bahrain is slow but it hasn’t gone away completely,” he said.

Flexibility

On a similar path, Stefan Pichler, chief executive of Jazeera Airways , said barring Syria, most other regional markets have begun to rebound.

He told Gulf News: “As an airline, we have a certain flexibility in terms of assets, which means we can change flights [move capacities around]. When the unrest started in Egypt, we flew a little bit less there and moved capacity to other destinations. In Lebanon and in Bahrain, we did the same. So we were more or less able to compensate because of the flexibility of the network,” adding Syria remained the carrier’s only market with ‘problems.’ “We recorded profits in first quarter 2011. That means we have been able to compensate,” Pichler said.

He said since the markets were slowly recovering now, Jazeera Airways was doing very well in Egypt, and that the airline started to fly to Cairo a few weeks ago. Meanwhile, asked what kind of revenue increase Royal Jordanian was anticipating for the rest of the year, Dabbas said: “It’s a crystal ball kind of a thing. If things improve, we expect resurgence.”

He added the airline was, however, seeing more traffic and bookings coming in now as the situation is settling down, “at least in Egypt and Tunisia.”

“But again, we are just all hoping that whatever happens, happens fast and that we should be able to get it out of the way and once again start living our lives the way we should,” said a hopeful Dabbas.

Delaying plans

Further, as a direct fallout of the political unrest in MENA, Sharjah-based Air Arabia, was forced to delay plans to launch its Jordan hub, the budget carrier’s chief told Reuters last week.

“With the current environment, we have delayed the Jordan plans...we will review the situation and take a decision,” Adel Ali was quoted as saying, adding that the airline had planned to open its fourth hub — it has hubs in Morocco and Egypt — in Jordan in June this year.

“Jordan is stable but countries like Syria, Egypt and Tunisia are still facing political instability. There is a lot going on in the region and with the current fuel prices, we thought this was not the right time,” Ali said.

To offset some of the impact, major airlines in the region are expected to continue to win a share of the long-haul market, flying passengers via Middle East hubs, according to IATA’s director general and chief executive Giovanni Bisignani. “However, high fuel costs will weaken demand from key passenger segments and asset utilisation will be under downward pressure,” he said, adding capacity growth of 15.5 per cent in the region is expected to outstrip demand expansion of 14.6 per cent.

By Shweta Jain?Senior Reporter

© Gulf News 2011. All rights reserved.