Political barriers block Arab airline tie-ups

Political barriers must be knocked down if consolidation among Arab airlines is to take place, a move that could shore up their profits expected to suffer due to "Arab Spring" protests, top aviation industry officials said on Tuesday. "It is an artificial barrier imposed by Arab governments for cross-border mergers and acquisitions and we are calling for removal of these barriers," Abdul Wahab Teffaha, secretary-general of the Arab Air Carriers Organisation (AACO) told reporters on the sidelines of a regional aviation meeting. He cited national ownership and control rules as the main barriers. Arab carriers are mainly state-owned and governments in these countries are the major investors in airports and related infrastructure. The Arab world is home to some of the fastest growing airlines, primarily in the Gulf Arab region where Dubai's Emirates airline, Qatar Airways and Abu Dhabi-owned Etihad vie for dominance. "In this region there has not been much consolidation because it is politically difficult," said Tony Tyler, IATA's director general and chief executive. "Regional airlines are fighting for market share ... if you break down some of the national barriers it could be quite profitable." Unrest in the Middle East and North Africa, coupled with the European debt crisis, is expected to crimp carriers' growth in the Arab world in 2011 and possibly next year, Teffaha said. In 2010, Arab airlines grew more than 17 percent in revenue passenger kilometers, a key performance yardstick. But the figure is expected to drop to 7 percent in 2011, according to AACO. "It is because of what is happening in the Middle East, the Arab world," Teffaha said. "For 2012, it all depends on the situation in the region and Europe. “If it deepens, it will be lesser than double-digit growth." The political situation in the region is the "biggest worry" for Arab airlines, he added. At least 25 airlines from the Arab world are members of the AACO. Asked about Arab League sanctions against Syria, Teffaha said Arab airlines have no choice but to adhere to their government directives. "We have no stand on this, it is purely a government issue," he said.