Monday, June 27, 2011

MENA Airlines the Elusive Recovery

 As we approach the end of Q2 2011, airline recovery in MENA is as elusive as ever. The Arab Spring has not subsided and with no end in view; Libya, Syria and Yemen are still in turmoil with causalities recorded daily. Other countries still face peaceful protests on daily basis. Oil prices are still hovering around a $100 a barrel with no clear direction threatening to derail the global recovery coupled with a Euro zone debt crisis.

MENA airlines continued with business as usual, well almost business as usual. No new aircraft deliveries were postponed by most airlines, showing their belief that this is a short term issue and their confidence in the medium and long term positive outlook of the future. The airlines did what they did best, expand with most of the carriers in the region increasing capacity to destinations in response to seasonal (summer) demand or rising traffic and operating to new destinations.

However, all these events are taking their toll on the airlines. The UAE seems to be the least affected with the traffic increasing around 8% in Dubai and 14% in Abu Dhabi while QAIA saw a 2.8% increase in Q1.
It appears that the Global airlines (EK, EY and QR) are faring better than most. Most airlines reduced prices and introduced promotions to keep their revenues up which has caused tremendous pressure on yields. Fuel surcharges have been introduced to compensate for the high fuel prices.

Air Arabia postponed its plans for Air Arabia Jordan for the time being and several airlines reduced or combined flights to reduce the number of empty sectors.

How long would this last no one knows. For sure, a reduction of oil prices is desirable and will help reduce losses and improve margins, even a stable oil price is better than nothing (it allows for planning).

As long as violence is the response to the reform movement in some countries, the region's economies
will be adversely affected. Regimes should deal with their people in a civilized manner and respond to their aspirations. Once peaceful protest becomes the norm and reforms materialize, only then things will get better.

Saturday, June 25, 2011

Social Media and the MENA Airlines

The Arab Spring was attributed to the use of Social Media by the Arab younger generations. Social Media has galvanized opinions and coordinated marches and sit ins that changed regimes. Yet, MENA airlines have not tapped this resource.

It appears that most of these airlines have Info pages with no interaction with passengers or potential passengers and it is sometimes hard to figure out if the page is the airlines official page. Of the twenty one (21) airlines, that I have looked at both legacy and LCC that have Facebook pages; only four (4) have flight booking and other facilities on their pages; Royal Jordanian, Gulf Air, Bahrain Air and Etihad.  

The most liked so to speak page is Qatar Airways (161200 fans) but it is not growing and that maybe attributed to their successful promotion celebrating its 100th destination. 

The fastest growing is Royal Jordanian's page (53500 fans) which adds around a 1000 fans a day and is probably the most balanced page among the region's airlines. It has a lot of traffic directed from the airline which prompts comments and likes but not much customer service content that the airline should encourage.

The most interactive page with customer service issues is Air Arabia's but only has 5500 fans.

Interestingly Emirates (43000 fans) has an info page only but is not growing, Etihad (31000 fans) is not very interactive same as Gulf Air (15500 fans) even though both airlines provide booking and other facilities on their pages. 

It appears the MENA airlines are not very serious about social media yet, a few of them have advanced Facebook Pages but are not very successful in promoting them to the public probably due to lack of resources..

Of all the airlines Royal Jordanian seems to take the effort seriously, they launched their efforts with an aircraft on ground tweet up with the 20 most popular bloggers in Jordan and have allocated resources to maintain the effort and it seems to be successful; around a 1000 fans per day for an airline the size of Royal Jordanian and a country the size of Jordan is no mean feat.

Monday, June 20, 2011

The New Challenges ... Manpower and Training

One of the greatest challenges facing the Aviation Industry globally and including MENA is trained manpower: pilots and engineers. The Industry is losing its appeal to the younger generations to sectors in the economy that are less physically demanding, less regulated and with less expensive training requirements. With the expansion of the world aircraft fleet expected to increase in the coming 25 years by another 25000 aircraft over the current fleet of 17000, the training needs become more important. By 2026 there will be a need for an additional 480,000 technicians and 350,000 pilots to maintain and fly these aircraft. Staggering numbers, a real global challenge.

MENA will be affected, some countries less than others. Taking into consideration that the UAE and Qatar have the fastest growing fleets and networks along with the corresponding additional maintenance requirements, they will be the hardest hit. Both countries have a relatively small indigenous population that can be tapped to support the aviation sector resulting in an increased  dependence on an expatriate work force. However, their traditional sources will also be hard hit, India is in need of thousands of technicians to support the existing and new aircraft orders of the airlines there and countries like Jordan, Egypt and others will be struggling to cope.

The GCC carriers need to look at their manpower requirements for the long term and figure out how they will face the challenge of ensuring a steady flow of well trained and capable workforce. Certainly the training  requirements will somewhat vary for the newer generation B787 and A350. There is a real need for an innovative approach in manpower supply and the airlines should look beyond their national training schemes offered to their citizens to start including expatriates who have been residing for generations in the country or even sponsoring people beyond their borders.

The availability of well trained and efficiently capable engineers, technicians and pilots, is what will make or break an airline and to a certain extent the aviation industry in MENA and globally.

Wednesday, June 8, 2011

"The Cracked Record"........ Legacy Carriers vs. GCC Carriers

It flared up again, the accusations and arguments and counter arguments in the IATA AGM in Singapore (click here for full story). Mr. Giovanni Bsignani the outgoing Director General of IATA called for an end of the dispute between Gulf carriers and European/North American carriers in a civilized manner. He pointed out that the solution to call governments as advocates or referees has not worked and will not work and as responsible leaders of this global industry we should find a resolution by ourselves.

Of course, Air Canada will not have any of this and the litany of the Gulf carriers being supported by their governments as if Air Canada is not the darling of the Canadian Government the only difference is that the governments of the UAE and Qatar embrace an open sky regime while the government of Canada has one of the most noncompetitive and restrictive policy (read my blog Canada's Air Transport Competitiveness) Air Canada was supported by Austrian, a subsidiary of Lufthansa that has a record of opposing entry allowed under EU open sky agreements.

The problem lies in the fact that the Legacy carriers of Europe and North America are not able to match the growth of the Gulf carriers. I agree that they are at a disadvantage but it is not caused by government, it is caused by location, location location. The Ultra Range aircraft shifted the geographical center of aviation from Europe to MENA and the Gulf and allowed the carriers of the region to become real global airlines. The UAE and Qatar have always been open economies, yes they have requirements for local partners but they also have free zones that allow foreign companies to operate without a local partner.

So far the Europeans and the North American carriers have elected to lobby their governments to limit access for almost every airline from MENA. This is a failed policy, they forget that the Gulf carriers are developing markets in South America, Africa, the CIS and Asia locations where their governments have no influence.

The lack of innovative thinking and problem solving is indicative of organisations that have been very comfortable for a long time with the status quo and are at loss when the world changed. As long as these carriers bury their heads in the sand and go screaming to their governments there will be no solution. These Gulf carrier add value to the destinations they serve, they advertise them as holiday destinations something that the European and North American governments on the whole don't do.

So far no one knows exactly what they want other than stop the rapid growth of the Gulf carriers, in their countries, but would the threat go away when these carriers dominate traffic in Africa, South America and shut them out of there. I don't think so

The solution is to stop accusations and counter accusations and sit down and work equitable solutions that are win win.

Monday, June 6, 2011

Emirates Airlines Brighter Prospects

Emirates Airlines must be very happy with the news of the last couple of weeks. Having posted its best ever profit results of USD 1.5 Billions (click here for details) in 2010, the airline had more good news;


1. Emirates closed a USD 1 Billion Bond Issue which was indicative of the investor community confidence in
    the airline financial health and strength.


2. The Oxford Economics Report concluded that the success of Emirates is not the result of unfair
    competition or government support but because of effective aviation policy. The report concluded that
    the aviation  sector in Dubai  generates 125000 jobs  and their spending supports an additional 134000
    jobs which contribute an additional USD 7.9 Billions in Dubai's GDP. In total  the aviation sector's 
    contribution to Dubai's economy is 250000 jobs and USD 22 billion representing around 19% of total 
    employment and 22% of GDP.



3. MasterCard Index of Global Destination Cities ranked Dubai as the #9 most popular destination City 
    in the world in 2011 with 7.9 million visitors and a USD 7.8 Billion spend.


All the above and the rebound of passengers growth in April compared to March is validating Emirates policies and plans 

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