Middle East carriers to reduce losses in 2010 to $300m from $1.2bn in 2009

Dubai: Middle East carriers will reduce losses to $300 million (Dh1.10 billion) next year from a projected $1.2 billion in 2009, according to the International Air Transport Association (IATA), the global aviation watchdog.

"A strong long-haul connection business over Middle East hubs will provide some insulation against the impact of Dubai's financial difficulties," IATA said in a statement.

Most Gulf airlines are in a growth mode with massive investments in capacity expansion. The combined orderbook of the UAE's three airlines has crossed $110 billion and involves more than 375 aircraft.

Dubai's Emirates recently announced a $205 million profit for the first half of this year.

Tim Clark, President of Emirates, said" "Air transportation is a key facilitator of economic growth."

Single market

Despite achieving reasonable growth in the wake of the global financial downturn, aviation officials feel integrating the Middle East aviation market could boost revenue further.

Kuwait's Jazeera Airways has called for the creation of a single aviation market across the Gulf Cooperation Council (GCC) that lets Gulf carriers operate freely between cities without any commercial restrictions.

This move will essentially end an era of archaic bilateral agreements between GCC countries and establish a single, more progressive GCC sky.

"GCC skies today are governed by agreements that restrict the freedom of airlines and consequently limit the choice of customers. Some might say this is the only way to govern the skies," Jazeera Airways Chairman Marwan Boodai said in a statement.

"We say there is another way, a more progressive way through the creation of a single travel market that brings more freedom to customers across the GCC.

"Under a single market, all commercial restrictions on GCC carriers flying within the GCC, such as restrictions on routes, number of flights and the setting of fares, will be removed to allow the aviation industry to reach its potential."

Competition

The creation of a single GCC market will transform the air transport industry by creating conditions for competitiveness and ensuring both quality of service and the highest level of safety.

Customers, airlines, airports and employees will all benefit from new routes and airports, greater choice, lower prices and a better overall quality of service.

This is critical at a time when the problems of the global aviation industry are growing. The IATA revised its financial outlook for 2010 to an expected $5.6 billion global net loss, larger than the previously forecast loss of $3.8 billion. For 2009, IATA maintained its forecast of a $11 billion net loss.

Giovanni Bisignani, IATA's Director General and CEO, said in a statement: "The world's airlines will lose $11 billion in 2009. We are ending an annus horribilis that brings to a close the 10 challenging years of an aviation decennis horribilis. Between 2000 and 2009, airlines lost $49.1 billion, which is an average of $5 billion per year.

But Bisignani was optimistic about 2010. "The worst is likely behind us. For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3 per cent.

"But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with $5.6 billion in losses," he said.

Passenger traffic

Following a decline of 4.1 per cent in 2009, passenger traffic is expected to grow 4.5 per cent in 2010 (stronger than the previously forecast 3.2 per cent).

A total of 2.28 billion people are expected to fly in 2010, bringing passenger numbers back in line with the peak recorded in 2007.

"The number of travelers will be back to the peak levels of 2007, but with $30 billion less in revenues. The $38 billion cash cushion built up throughout this year will help airlines survive through the low season, but there is no recovery in sight for 2010," Bisignani said.

"The industry is structurally out of balance. The precipitous fall in yields will likely never be fully recovered. It is difficult to see how this can be balanced on the cost-side of the equation.

"There will be some individual success stories. But without relaying the foundations of the industry to facilitate structural change, covering the cost of capital for this hyper-fragmented industry will remain a dream at best," he said.

The forecast highlights include:

Revenues: Industry revenues are expected to rise by $22 billion (4.9%) to $478 billion in 2010, compared to 2009.
However, revenues remain $57 billion (-11%) below the peak of $535 billion in 2008 and $30 billion below 2007 when passenger traffic was at similar levels to what is expected in 2010.
Passenger Demand: Following a decline of 4.1% in 2009, passenger traffic is expected to grow by 4.5% in 2010 (stronger than the previously forecast 3.2% in September).
A total of 2.28 billion people are expected to fly in 2010, bringing total passenger numbers back in line with the peak recorded in 2007.