Prospects for Middle East airlines look up

Rising fuel costs resulted in a softening of demand and capacity for Middle East carriers in June. The region's airlines recorded a 6.4 per cent increase in demand against a capacity increase of 8.4 per cent for a load factor of 74.8 per cent in the month compared with June 2010, according to the latest estimates by IATA (International Air Transport Association) said in a statement on Wednesday. "For the second consecutive month both demand and capacity increases by Middle East carriers have fallen behind those of Europe and Latin America," the Geneva-based global aviation body said. Global increase Article continues below Globally, meanwhile, slower economic growth and increasing tax, combined with increased costs resulting from higher jet fuel prices, led passenger demand for June to increase only slightly, by 4.4 per cent, whereas freight demand went down by three per cent compared to June 2010, according to IATA. "The industry is living in several different realities," said Tony Tyler, IATA's newly-appointed Director General and CEO. "With high load factors and an upward growth trend, the passenger business is doing better than cargo. But regional growth patterns are shifting. And it is certainly not the time to burden the industry with increases in other costs, including taxation." Citing Middle East's example, Tyler said the region's carriers have moderated to a "single-digit expansion". Until a couple of months ago, the Middle East airlines were recording double-digit growth but poor market conditions including the unrest in the Middle East and North Africa region pulled it down considerably for the region's carriers, just as it did globally. Tighter economic conditions have also slowed China's growth, Tyler pointed out, while Latin America is leading the industry expansion at present, followed by Europe, which is growing strongly despite its currency crisis. North America is underperforming on growth but leading on load factors. The US, representing more than half of the domestic travel, posted 1.3 per cent growth in June. "What is clear is that the rising jet fuel price is putting pressure on the bottom line. The average price for the second quarter was $133 (Dh488.5) per barrel which is an increase of $10 over the first quarter," Tyler said. IATA, in its latest forecast, expects global aviation industry to make a profit of $4 billion for 2011 which is a 78 per cent fall from the $18 billion that the airlines made in 2010. The Middle Eastern carriers, however, will witness a massive 86 per cent decline as the aviation body slashed profit outlook for the region's carriers to $100 million in 2011 compared to $900 million in 2010. Freight decline Carriers in the Middle East, Latin America and Africa showed year-on-year growth for June in freight traffic, according to IATA, recording demand increases of 3.7 per cent, 2.8 per cent and 0.3 per cent respectively. Asia Pacific carriers, the biggest players in the air freight market with a 40.5 per cent market share, also recorded the largest year-on-year decline (5.8 per cent) — mainly attributable to disrupted supply chains for the electronics and car industries in the wake of the Japanese tsunami and earthquake, coupled with slower economic growth in China, as per IATA estimates. It added that freight volumes have not grown since July 2010.