Saturday, May 21, 2011

2011 A Challenging Year

2011 started with several challenges that did not only affect airlines in MENA and GCC, but the whole industry globally;
1. The natural disasters in Japan and the ensuing damage and problems;
2. The deepening Euro zone financial woes;
3. The political upheavals in MENA and GCC; and
4. The increase of fuel prices.

According to IATA air traffic shrunk in March (read story here) due to events in MENA and Japan. Traffic shrunk in MENA with growth measured in single digits which in April improved with Dubai and Abu Dhabi posting double digit passengers increase.

Political upheaval has struck Tunisia, Egypt, Yemen, Libya and Syria very hard while other countries were affected to a lesser degrees. In any case these most of these countries are tourist destinations predominantly from Europe. Jordan had tours cancellations and I am sure other MENA countries experienced the same. As a result flights to places like Cairo and Tunis have been reduced and of course totally stopped to Libya.

The airlines did not cancel or defer any aircraft deliveries, Yemenia took delivery of its first A320 on  28 April 2011 and RJ its 32nd Aircraft an A320 on 29 April 2011. This is an indication that they consider the medium and long term prospects as being good. Oil prices are fluctuating and trending downwards, at this time, to the extent that Emirates reduced its fares as a response to that reduction after having increased them.

The airlines will do what they always do in times of crisis, expand their networks to maintain their existing capacity; Emirates is planning Geneva and Copenhagen this Summer and Rio de Janeiro and Buenos Aires in January 2012, Royal Jordanian is planning flights to Berlin in June, a code share with BA for closer ties with a One World partner has been signed and has increased frequencies to compensate for the reduction in other areas, Etihad has a code share with Virgin Blue Group and ANZ and that goes for most the airlines of the region.

As Summer starts the movement of expatriates to their home countries will start and this is not politically very sensitive. People will go home regardless of the political situation in their home countries.

Oil is the biggest challenge that faces the airline industry not only in the region but globally. Oil prices are not only a rising cost to airlines they also represent a threat to recovering economies, that might falter and as a result experience less travel.

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