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IATA official assesses future of air travel in Middle East

IATA official assesses future of air travel in Middle East - Airlines face numerous challenges in wake of Sept. 11

Founded in 1919, the International Air Transport Association (IATA) brings together approximately 280 airlines. Flights by these airlines comprise over 95 percent of all international scheduled air traffic. IATA is the forum that facilitates the coordination of industry players to ensure a seamless service to passengers and cargo shippers.

IATA’s Mideast Regional Office was established in Amman in 1991 and serves 34 airlines in 16 countries. The office also supports travel agents and many airlines operating to the region, as well as infrastructure and air traffic services providers in the Middle East. Majdi Sabri, IATA regional vice-president, based in Amman, talked to The Daily Star about regional issues.

The Daily Star: The civil aviation industry has just about survived a shake-out after the Sept. 11, 2001, attacks. But airlines like Cyprus Airlines and Emirates from the Middle East seem to have weathered the storm well. How could these regional players do that?
Sabri: Many airlines in the region were adversely affected by Sept. 11. Airlines relying heavily on tourist traffic were hard hit by a sharp drop in tourism. However, most Middle East carriers quickly recovered, with impressive double-digit growth rates achieved in 2002 by Emirates, Qatar Airways and Oman Air. This has been primarily due to the improvement in economic mood of the region, rising intraregional tourism and an unprecedented increase in transit though major regional hubs.
In fact, during the past 10 years, Middle East international traffic rose by a remarkable 206 percent. The respective traffic share of major airlines in the region has changed dramatically, with Emirates carrying one-third of the international traffic. In contrast, North African traffic increased in 10 years by 48.6 percent with a fairly stable traffic distribution among the major players. Egypt Air traffic remains the largest.

Q: An “open skies” policy is the emerging norm the world over, but some regions like the Indian subcontinent are opening up the civil-aviation sector a bit slowly. How would an open skies policy help the airline industry as a whole and in particular in the Middle East ?
A: The Middle East has a wide spectrum of attitudes toward aviation regulation. Only a few states are at the liberal end, but the aviation regulatory environment in the region remains generally restrictive. We have recently witnessed a strong liberalization trend with remarkable success stories in United Arab Emirates and Lebanon. The Arab Civil Aviation Commission (ACAC) program for gradual liberalization has won the approval of the Arab Heads of States. ACAC is now busy with a major project to introduce a pan-Arab multilateral open skies agreement.
We believe that national ownership limits should be liberalized wherever governments think it is feasible. Airlines need access to international capital markets in order to face tomorrow’s challenges. The bilateral system of air traffic agreements should give way to regional “wide open skies.” This is expected to improve the competitive environment in the region and boost traffic growth.

Q: No-frills airlines seem to be taking off in many parts of the world. In North America, in Europe and now in Asia, network carriers are under pressure from low cost carriers. What are the prospects and problems?
A: No-frills airlines have created a new business model for aviation. In local markets they can be tough competitors. On the other hand, international network carriers provide a full range of services that the no-frills airlines can’t offer. There is room for both models. The Middle East has just witnessed the establishment of the first no-frills airline (Air Arabia) in the United Arab Emirates.
In Europe, no-frills airlines are not limited by bilateral agreements, since they work in a single market. Here in the Middle East, the development and success of no-frills airlines might be held back by rigid government restrictions and the bilateral system.

Q: The increasing security checks and security fears in the United States seem to be impacting the industry even in Europe. Is it a phenomenon likely to continue?
A: Our objective is to facilitate passenger flows at airports while ensuring their safety. We would like to see technology-assisted security measures that do not cause delays. We also believe the cost of security measures should not be reflected on airlines, as security is a government responsibility.

Q: What is the broader vision of IATA for the Middle East as a destination as well as a player in civil aviation?
A: The Middle East has been an important area for IATA, especially with recent impressive traffic growth and successful development of airlines and aviation infrastructure in general.
IATA initiatives have been numerous in this region. Shortening air routes, staff training, lobbying on behalf of members on important aviation issues.

Q: In the past we have seen several mergers in the sector in the West, but that does not appear to be the trend in the Middle East. Is there scope for at least more coordination and if so do you see any moves in that direction?
A: For the time being, there is very little discussion taking place on airline mergers in the Middle East.

Q: Total airline losses since Sept. 11 are estimated at $35 billion. The Iraq war has finished and SARS, hopefully, has blown over. Is the future looking bright this year?
A: The Middle East region scored the highest regional growth rate in 2003 for the second consecutive year. So far the passenger growth rate stands at 10.1 percent and freight at 15.2 percent. The region has obviously fully recovered from the adverse effects of war.
Our most recent IATA forecast indicates a rebound of international passenger traffic in 2004-05. Increases will likely reach about 7 percent for 2004 and 2005. Domestic traffic will grow more slowly at 4-5 percent.
We expect that traffic in the Middle East region will continue its upward trend at least for the next two years.

Beirut,29March2004
Redaction
The Daily Star


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