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Thu 30 Jul 2009 04:44 PM

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Mideast airlines prosper amid international slump

Traffic figures show Middle Eastern airlines remain industry's sole bright spark in June.

Middle Eastern carriers remained the sole bright spot in June as international airlines continue to be hit by a slump in passenger demand and a decline in seat load factors, according to traffic figures published on Thursday.

Airlines in the region recorded a 12.9 percent growth in demand and a 15.2 percent expansion of capacity during June compared to the same month in 2008, according to the International Air Transport Association (IATA) results.

Carriers in the region were growing market share with routes to Europe and Asia seeing particularly strong traffic growth, IATA said in a release.

The region bucked the global trend as airlines felt the pinch from the world recession and fears about swine flu, with international passenger demand falling 7.2 in June compared to the same month in the previous year.

Leading the decline were Asia-Pacific carriers, which recorded a 14.5 percent drop in demand, with European airlines seeing a 7.1 percent fall.

International passenger load factors stood at 73.5 percent, down from 77.6 percent recorded in June 2008.

Revenue on international markets fell by 25 to 30 percent as a capacity adjustment of minus 4.3 percent proved insufficient in matching a slide in demand, heaping pressure on average fares and yields, said IATA.

It follows a 9.3 percent decline in international passenger demand recorded in May.

“The outlook remains bleak,” said Giovanni Bisignani, IATA’s director general and CEO.

“International passenger demand remains very weak.”

Middle Eastern carriers reported a 4.2 percent drop in freight demand, with a 40.2 percent load factor.

Internationally, freight demand remained weak and at a 16.5 percent level lower than the same month last year, according to the figures.

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Omar 11 years ago

Enough speculations and opinions. Thank you AB & IATA for giving us solid FACTS that are in line with my previous comments. Yes, the aviation sector is growing in the ME BUT we MUST be extra cautious. This growth might backfire with negative results if this growth was not based on strategic ground. i.e. ordering planes, opening new routes, new carriers, etc... are NOT enough. We MUSt ensure long term sustainable demand for these aircraft, routes, carriers for decades to come!

SV 11 years ago

Glad that you are back with your comments. Hello people now we have something to cheer up!.

Luis Sisamon 11 years ago

Hi Omar, long time. The only two positive facts mentioned in the article are: "Carriers in the region were growing market share with routes to Europe and Asia seeing particularly strong traffic growth". This you will notice is about market share. As a management consultant, it will be easy for you to understand that growing your market share of a declining market is not such a good thing. From the article you can not say. "Airlines in the region recorded a 12.9 percent growth in demand and a 15.2 percent expansion of capacity" This sounds positive but, again, it has happened against a strong decline in airfares (It is way cheaper for me to travel now, I am very glad thank you, my business is benefiting from that). and of course the big thing. Expats leaving the region maybe for holidays, maybe for good. By the way in the report i downloaded from iata i can not find those numbers... No mention of revenue, nor profitability, nor cash positions. Revenue is vanity, profit is sanity, cash is reality. When I look at the YTD figures as opposed to month on month, i get a different picture. Finally, it is hard to get any fact from the article, as it drops a lot of numbers but is not clear the scope. Many numbers are given without context, are the drops (yes, after first paragraph they talk only about drops) referred to the region or global figures? In most cases they do not mention, but freight is down 4.2% (that happens to be the global decline, in the report i see FTK down by 11%). When you see facts, i see a poorly written article that chooses to highlight certain numbers and not discuss others. I suggest you take a look at the operating profits and net profits in the report (you can download it very easily, at least a 2-page one). ME airlines are doing average or even below average. As usual Omar, we take very different readings from the same material. Awaiting your answer, as I am awaiting about the telco sector. take care

Omar 11 years ago

I agree with most of your comments Luis but the facts are from IATA. I believe the ME airlines are doing RELATIVELY good. I mean compared to the entire sector in the west i.e. USA, Europe, etc... But by natural business standards, ME airlines are just doing average. I am very surprised how you could not find the figures on the IATA website. Please google further! They publish very accurate figures that we must take as they are. I sent a comment last time with very exact links confirming my facts on the aviation sector but AB did not publish that specific comment for unknown reasons!! Regarding telecom, Etisalat is the market leader in the region's 3 largest markets: UAE, KSA and Egypt (among the top 2!)+ Indonesia (one of the world's largest countries)+ They recently declined Iran for reasons that i do not wish to reveal. Now they are entering Greece (Europe!!) and more + many small African countries (small but they accumulate!). + UAE is a major investor in SyriaTel (the market leader in Syria, the region's 4th largest market). This is what i can recall for now! The point is that i purely rely on facts / figures that i obtain from reliable indep. sources such as IATA rather than opinions / speculations that are random. One of the comments that i like very much said that nagging is the best exercise people love to do!I appreciate all constructive comments bcz this is what will make progress but random comments are useless. I love the German media bcz they are very technical / specific with solid facts, something that contribute to the growth of the nation. I am not a fan of the British media where they love mocking just for the sake of mocking as if they were chatting in a bar!

mike 11 years ago

I don't want to burst Omar's bubble but I hope this is sustainable demand, not one way tickets out of the ME? Sadly this does not seem to be the whole story as ME airlines are suffering badly, with premium seating which seems to suggest all is not quite as simple as the articel suggests

The Don 11 years ago

The body of the article suggest the opposite to the headline used by AB. 1. Capacity is growing faster than the demand. This means airlines companies are burning more capital costs (cost of aircraft) and more fixed flight costs (cost of operating the empty aircraft on the route) due to empty seats. 2. The report suggest that the overall demand is not growing but indirectly refer to regional adjustment in the form of increase of transit passengers. 3. The regional adjustments are driven by fare cuts rather than genuine rise on demand. 4. Point 2 and 3 means indirectly that airlines are experiencing decline in the marginal gross profit per flight. 5. Load factors for freight suggests that global trade has slowed down and therefore the increase in the passenger traveling would be within specific segments (visiting home passenger) with less business and tourist travel. The Mideast airlines is not going to prosper especially they are growing capacity (as a result of massive aircraft orders placed before the crises) which will place a greater pressure on margins and fares in order to sustain a high load factors. Also supply fragmentation with the setup of many new airlines will increase the intra-region competition which will add to the pressures on fares and margin.