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Thu 23 Oct 2008 06:21 AM

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Middle East airlines urged to act to halt profits decline

IATA director general says 2008 profits for region's carriers will fall $100mn.

International air transport chiefs have predicted that profits for the Middle East's carriers will plummet from $300 million in 2007 to $200 million this year and while some will remain profitable, the majority will fall into the red.The International Air Transport Association (IATA) has urged the region's airlines to focus on an agenda of efficiency and expanding commercial freedoms in a bid to survive the global economic crisis.

“The oil price is falling, but what we save in fuel, we lose in revenue. This industry will lose $5.2 billion this year. Even the Middle East is not immune. The region’s carriers posted 18.1 percent traffic growth in 2007. This year, August growth plummeted to 4.3 percent,” said IATA director general and CEO, Giovanni Bisignani, in a speech at the Annual General Meeting of the Arab Air Carriers Association (AACO).

“Profits of Middle East carriers will fall from $300 million in 2007 to $200 million this year. Only a handful of carriers will be profitable, while the majority bleed red ink.

"The region’s fleet is set to double to 1,300 aircraft over the next decade as we enter a period of global economic uncertainty. The challenge of matching capacity to demand will be difficult,” said Bisignani.

Bisignani urged the region to adopt an agenda focused on efficiency — Simplifying the business, fuel and infrastructure — and expanding commercial freedoms.

Regarding the need to simplify the business, he added: “MENA (Middles East and North Africa) carriers met the e-ticketing deadline with a jump from 16 percent e-ticketing to 100 percent in just 18 months. This great effort shows what the region can achieve.”

But he warned that the region must speed up to enjoy the cost-efficiencies of e-freight.

Only 10 out of 22 states in MENA have ratified the international conventions needed to recognise electronic invoicing — the starting point for e-freight. “The industry crisis highlights the need for change. MENA has some great advantages — strong oil economies, top-notch infrastructure and fuel-efficient fleets. The crisis is a turning point. We must deliver significant change with efficiency and commercial freedoms,” added Bisignani.

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