Airlines set for losses as Middle East unrest continues

Rising oil prices and declining tourism will take toll on carriers, as Arab uprisings spread
Airlines set for losses as Middle East unrest continues
Aviation, plane take off, aeroplane generic, airplane generic, airport, plane, airplane, aeroplane
By Reuters
Thu 24 Feb 2011 01:18 PM

Airlines
operating flights to the Middle East and North Africa could face losses this
year, as tourism slumps and oil prices surge amid political uncertainty and
escalating violence.

Libyan
protestors are resisting desperate attempts by Muammar Gaddafi to crush a
revolt demanding an end to his 41-year rule. This follows protests in
neighbouring Egypt and Tunisia where mass movements toppled entrenched leaders.

"If
the unrest continues, it might reach a point where airlines cannot fly into
these countries," said Gunther Matschnigg, senior vice president for
safety, operations and infrastructure at International Air Transport
Association (IATA).

He
said Gulf-based carriers and other European airlines operating into the region
will be affected in such a scenario.

Emirates,
British Airways, Lufthansa and others suspended flights to the capital city
Tripoli with immediate effect on Tuesday.

European
tour operators and airlines cancelled several trips to Cairo last month, as
angry protesters took to the streets to oust president Hosni Mubarak, dealing a
blow to a tourism industry that provides about one in eight jobs in the
country.

"Countries
like Egypt and Tunisia are popular among tourists and people in these countries
also depend on tourism. Unrest in the Middle East will affect the traffic
growth," said Matschnigg.

Egypt
Air said this month that it has offered to lease out 25 of its newest aircrafts
as tourists stay away from the country.

Emirates,
one of the Arab world's largest carrier, reduced its flight frequency from 13
flights weekly to and from Cairo to seven weekly. Others airlines are also
known to have reduced their flights to Egypt.

IATA's
director general Giovanni Bisignani said on Wednesday that airlines are
"very challenged" by oil price rises amid unrest in the Middle East.

The
turmoil in Libya, which pumps nearly 2 percent of world oil output, sent Brent
crude prices above $108 a barrel to a two and a half year high on Monday.

"Assuming
the situation continues, the oil prices are expected to touch $115 to $120 per
barrel within the next two weeks, which would result in losses for global
airlines for the current year," said John Siddharth, an industry analyst
for the South Asia and Middle East at Frost & Sullivan.

IATA's
Matschnigg said rising oil prices may compel the aviation sector to think about
fuel surcharges, thereby increasing ticket costs.

"If
prices go higher there will be a discussion about surcharges," said
Matschnigg.

"Several
airlines have hedged for their fuel needs but not all. It all depends on how
long this situation will continue."

For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.