Analysts say region is top heavy in aircraft numbers and burdened by red tape
Analysts are warning that the Middle East region is facing a potentially-damaging burden of over-capacity combined with continuing inefficiency resulting from heavy air transport regulation.
A study by consultancy Booz Allen Hamilton says that Middle Eastern states must accelerate national deregulation activity and co-ordinate their long-term air transport planning in order to prevent over-investment in unnecessary airport and fleet capacity.
While the study, "Mastering the Challenges of the Middle East Aviation System", accepts that the Middle East region is growing rapidly it says planned investments at 10 airport locations are designed to provide for an extra 320 million passengers by 2012. "However the region will likely fall short of such growth, even if it meets its expected growth rate of about 7% per year," it states. It adds that several programmes are taking place in areas of close proximity, which could result in overlapping catchments and cannibalisation of demand.
Despite evidence that airlines' capacity management in the Middle East is relatively poor - the study says that load factor is, on average, around seven points lower than in Asia and Europe - the region's carriers are investing heavily in fleet expansion. Emirates, Etihad Airways and Qatar Airways account for most of the aircraft on order in the area. The projected increase in fleet capacity, says the study, is "well ahead" of demand and "bears the risk of intense competition", driving down aircraft utilisation and performance efficiency.
"These investment programmes pose serious risks of unhealthy competition and unexpected over-capacity that the region must address," it says, warning that government backing in many cases will prevent normal market forces from reducing excess capacity in the near term. Over-regulation, it adds, is leading to low efficiency and low quality within both the aviation system and its infrastructure and this, in turn, is generating "serious restrictions" on sustainable, self-funding growth.
"Even though some aviation markets, such as Dubai, have introduced 'open sky' policies and released foreign-ownership limitations, the aviation system remains heavily regulated by government airport and airline ownership, restricted traffic rights, selected traffic right allocation, and price restrictions," it says. "As a result the Middle East aviation system has clear cost and efficiency disadvantages which lead to increased prices and subsidies. Heavy regulation also limits the adoption of new aviation business models, such as low-cost carriers, to the detriment of faster regional tourism development and consumer benefit."
Source: Flight International
