IATA expects carriers in the Middle East-North Africa region to only turn a $200 million profit in 2007
Arab carriers plan to continue their aggressive expansion well into the next decade, as they take delivery of the record orders from November's Dubai air show. But when highly profitable Emirates is removed from the group, Arab carriers collectively remain in the red.
"I am concerned about the bottom line," IATA secretary general Giovanni Bisignani told carriers attending the Arab Air Carriers Organisation annual general meeting in late October. "This region's share of global traffic grew from 5% in 2001 to 8% in 2006, but your share of global profits is only 3.5%."
In a new forecast released at the AACO meeting, IATA expects carriers from the Middle East-North Africa region will turn a $200 million profit this year, matching their profit figure from both 2005 and 2006. IATA projects this will increase in 2008, but only to $300 million.
After Emirates and its industry-leading 11.4% profit margin, the picture is not pretty. Emirates in November reported a 2.36 billion UAE dirham profit ($643 million) for the six months ending in September, meaning everyone else in the region is collectively well into the red.
But AACO secretary general Abdul Teffaha points out more Arab carriers are profitable now than ever before. He says Arab carriers are operating at a load factor of almost 80%. Traffic surged 14.5% over the first eight months this year. Teffaha is confident the planned capacity growth is sustainable because Arab hubs are "providing needed alternatives" for Europe's congested hubs.
Bisignani adds: "The infrastructure developments in this region are supporting your ambitious plans compared to hubs like SingaporeOn the infrastructure side, you are well prepared. There were 120 million departing passengers in the Middle East last year. The new airport at Jebel Ali [in Dubai] is being built to serve exactly this number of passengers. Expansion plans at airports in the region amount to $38 billion. In 2012, the 10 leading airports in the region will have a combined capacity of 320 million."
The growth of the region's carriers is not an overnight phenomenon. AACO, which now has 24 members and has seen its annual meeting grow over the last decade from 70 to over 300 attendees, points out Arab carriers only accounted for 2% of the world's traffic in 1988. Back then Arab carriers had a fleet of less than 150 aircraft. Today the fleet consists of over 600 aircraft and is growing fast.
Arab carriers announced commitments at Dubai for about 300 additional aircraft. Dubai Aerospace Enterprise's new leasing division ordered another 200 aircraft, many of which will end up with Arab carriers. The orders follow the roughly 200 commitments made by Arab carriers at June's Paris air show.
Source: Airline Business
