The airlines of the Middle East, the Gulf and North Africa have found themselves in an increasingly difficult position in recent years. Largely state-owned and relatively inefficient, the airlines generally do business under the protection of illiberal operating environments pertaining in their home markets.
At the same time, apart from Emirates and Gulf Air, they are disregarded as potential recruits by global alliances which have been happy to embrace other non-Western airlines, especially the modernising carriers of Asia and Latin America. International competition is increasing, and pressures for liberalisation are inevitably growing.
Against this background, the 18-member Arab Air Carriers Organisation (AACO) has embarked on a major expansion of its co-operation pact. Unable to replicate the joint marketing or sales deals of airline alliances, the group, which met in Cairo, instead focused on cost-saving agreements.
The new move will see AACO airlines expand current co-operation on airport services and use their collective muscle to develop joint fuel-purchasing arrangements and improve the terms of contracts for computer-reservations (CRS) services. They also plan the joint purchase of market-intelligence data and the development of a joint strategy for electronic commerce.
AACO comprises the national carriers of Algeria, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia and Yemen, plus Emirates, Gulf Air, Palestinian Airlines, Trans Mediterranean Airways and Trans Sahara Airlines. The group reported an upturn in fortunes last year after a poor 1998.
Passenger numbers grew 8% and international traffic increased 7.8% against a capacity hike of 6.5%, pushing load factors up to 65.5%. Individual performances inevitably varied, however, with traffic figures ranging from a 1.8% decline to 16.7% growth.
AACO secretary general Abdul Wahab Teffaha identifies several positive factors last year, including "tranquil" security, the lifting of UN sanctions on Libya, stability in Algeria, and progress in the Arab-Israeli conflict. For once, rising oil prices were of benefit, allowing Arab governments to spend more, stimulating traffic.
The Cairo initiatives follow last year's framework agreement for handling of AACO flights at London Heathrow by Air France/Servisair. Nine carriers have adopted the agreement, saving $5 million a year, while seven operators save $1 million through joint handling by Olympic Airways in Athens. A similar scheme was introduced last month in Frankfurt; others are planned for Amsterdam, Rome, Paris and Manila.
Teffaha says 10 AACO members will save $10 million annually through joint fuel purchasing at Middle East airports. This will increase by 50% as AACO appoints a single supplier at 15 out-stations. Tenders have been invited and a contract should be sealed next year.
The CRS deal has seen AACO operators split their requirements between Amadeus and Galileo. New terms have been agreed for eight Galileo customers (Egyptair, Emirates, Kuwait, MEA, Royal Jordanian, Saudi, Syrian and Yemenia), and at Amadeus, existing clients Royal Air Maroc and Tunis are to be joined from 2002 by Libyan Arab, Palestinian, Qatar and Sudan. Teffaha reports that under contracts running to 2008, carriers have "been able to change or add to existing terms", and that "the deals are extremely good for both sides".
The AACO hopes to make further savings by overcoming the problem of fictitious passenger bookings. Both the European Commission and Arab League transport ministers (who comprise the Arab Civil Aviation Commission, or ACAC) say fees should be based on ticketed sectors, not bookings, reducing costs.
A deal on market intelligence would be another coup, and has required a major lobbying effort in Europe for the revision of a code that prevents data transfer to a single entity. Joint e-commerce activities will, meanwhile, focus on improved distribution, and the direct selling of seats in particular.
As Arab politicians debate a free-trade zone, AACO has also started talks with ACAC ministers on deregulation. It will lobby for freer travel movement, while first moves toward "open skies" will likely comprise bilateral agreements.
Source: Flight International
