Saturday, January 21, 2012

2012 ... A Tough Year

Is 2012 going to be a repeat of 2011? The chances are yes. Not much has changed except a lot of issues of 2011 are going to be resolved one way or another. The uncertainty that prevailed in 2011 is still with us and in some cases it is getting worse.

2012 is full of geopolitical issues affecting the region
- Tunis, Egypt, Morocco and Libya will be governed by Islamists, who for decades were in the opposition.
   They will face the test of governing, the realities of the world and the well being of their people and
   economies. With the exception of Libya the other three depend heavily on tourism and the test will be the
   balancing act between beliefs and pragmatism.
- Syria remains a problem with no apparent solution in sight in the mean time casting shadows on Lebanon.
- Yemen is still the same with very little movement in spite of the accords signed in Riyadh.
- Iraq seems destined to even more political instability that may end up in its break up.
- Iran's threats to close the Straits of Hormuz could lead to a major conflict coupled with the nuclear
  capability problem with  Israel threatening to bomb Iran's nuclear installations.
- The Palestinian Israeli conflict that keeps worsening with the intransigent position of Israel relative to the
   Peace Process and Palestinian Statehood.
- The Euro zone debt crisis deepens with the downgrading of France, Austria and others including the
   European Financial Stability Facility (ESFS) leading Europe into recession and potential country defaults
   affecting tourism to the region.

On the other hand there are some good news
- Dubai and Abu Dhabi are developing into destinations of their own attracting more and more visitors.
- Saudi Arabia is embarking on an interesting experiment in airline liberalization by allowing GCC and other
   foreign airlines to operate domestic and international flights from the Kingdom.
- The airlines of the region are still expanding into new markets mainly South America, Africa and the CIS.
- Cargo operations are on the rise and with the reconstruction in Libya and hopefully Iraq will cause an
   increase in regional cargo operations.
- GCC airlines are expanding by acquisition with Etihad and Airberlin following Qatar Airways and Cargolux
   in 2011. Qatar Airways indicated that they have identified a target airline in Europe for acquisition. Who
   knows, Royal Jordanian may revive the plans of a merger with an airline a la Air France/KLM model.
- India is allowing Foreign Direct Investments (FDI) in its ailing airlines and hopefully more restructuring
   of the industry. India remains a large and expanding market that attracts not only Oneworld and Star
   Alliance but every GCC airline.

In a nutshell nothing changed from 2011.
- The capacity of the MENA/GCC airlines will increase and so would their networks through additional
  aircraft deliveries and mergers and acquisitions.
- Kuwait Airways will hopefully restructure.
- Saudi Arabia will launch its new initiative allowing regional airlines to expand within the Kingdom by
  operating domestically and internationally and allowing carriers to serve more and more destinations.
- Cargo is assuming a higher importance with airlines like Emirates, Etihad, Qatar Airways and Royal

Will the airlines of the region make profits, probably if everyone in the neighborhood behaves.
"Plus ca change, plus c'est la meme chose" (The more things change, the more they remain the same).

Wishing you all a prosperous and safe 2012.

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