Monday, May 7, 2012

MENA and GCC Airlines Upbeat But...

This year's Arab Travel Market (ATM), the most prestigious regional event in travel and tourism in the MENA and GCC regions, was the most successful in many years. Attendance was 10% more than last year's. African and Asian countries attended to market their countries, even Europeans attended despite the Eurozone crisis. The mood was upbeat. Airlines in the countries of the Arab Spring showed Q1 traffic growth of around 25% higher than last year and airlines in the GCC had around a 10% growth (the difference being the lower base for each region).

Political instability is still a factor in the prosperity and financial performance of tourism and the airlines in the region, but things are stabilizing as political and hopefully economic reforms take hold.

However, oil prices are by far a larger threat, almost every airline has indicated fuel costs constituting around 40% of its total cost in spite of fuel hedging ( 25% to 30% of their annual fuel needs are hedged on average). This has prompted Qatar Airways CEO to declare that if oil prices persist or increase we are bound to see higher ticket prices. An increase that might derail a fragile recovery.

Of course, the Eurozone crisis is another problem and the recent elections in France and Greece are not very encouraging. If the economies of the Eurozone enter into a deeper recession, a further reduction in European visitors to the region will occur with negative consequences to tourism and airlines.

Airlines in the region are again discussing growth plans and expansion into new markets and destinations, exhibiting the vibrancy and resilience of the sector.

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