The west side of the Atlantic is expected to see the emergence of the biggest airline company in the world in October after the US Department of Justice approved the United Airlines and Continental Airlines merger, in a deal valued at $3.2 billion (Dh11 billion). The merger will also help the two companies overcome some of the repercussions the civil aviation sector suffered in the aftermath of the global financial crisis.

This approach comes after the successful merger between Delta Air Lines and Northwest Airlines in 2008, which means that the success enjoyed by that merger two years ago has encouraged the current merger between United and Continental Airlines, which is expected to also achieve similar positive results for this new company.

In difficult times

The hot and sluggish Gulf waters, on the other hand, saw Sama Airlines announcing that it will be ceasing its operations due to bankruptcy. The company also dismissed 95 per cent of its employees. Not to mention the immense difficulties faced by Kuwait Airlines, which is still operational due to generous governmental backing. Many other companies operating in the Gulf have also suffered heavy losses.

Excluding the successful ones, such as Etihad, Emirates and Qatar Airways, other airlines need an American-type comprehensive reevaluation, especially since some companies' annual losses have reached more than $500 million, a massive amount that does not coincide with growing air traffic in the Gulf.

The fact is, it is unlikely any measures will be taken to resolve the difficulties facing the struggling companies. On the contrary, it is expected that new companies will be established, and more support will be provided to faltering companies or possibilities of privatisation, despite the fact that the Gulf financial market's initial public offerings are suffering from investor reluctance and scarcity of liquidity after experiencing distortions during the boom period. Reassessing the status of these companies in light of local and global developments is an important factor in the bailout procedure. This is also necessary for supporting the liberalisation of air transportation in the region, which has reached global dimensions in the past few years, thanks to the success of pioneer airline companies in the region.

Among such developments are the Gulf Cooperation Council (GCC) countries' constant attempts to complete the requirements for the Customs Union. Practically, this union would mean the comprehensive integration and openness of Gulf markets. This, in turn, brings forth many serious issues regarding economic cooperation, such as cooperation and coordination between Gulf companies, which includes airline companies.

Besides looking into the possibilities of mergers, providing new facilities for air transportation can contribute to a possible qualitative shift in this sector's operations. Transportation that spans GCC countries can be considered a method of internal transportation. That is within the framework of the GCC common market.

It would also not require any of the complications usually involved in international transportation procedures. Moreover, people living and working in GCC countries could be allowed to travel to member countries using identification cards provided by each country, which in turn encourages tourism and travel between member states.

In the past, such difficulties covered commercial airline companies. Recently, however, these difficulties are also being faced by budget airlines in the Gulf, which signifies that further complications may arise if the current situation continues, possibly affecting the region's air transport sector in general.

Airline boom

Currently, in a region where the population does not exceed 40 million people, there are 17 airlines in the GCC countries, and they may increase to 20 in the next few years. In America, however, there are five airlines for a population of more than 305 million.

If the mergers that took place in the US were due to pressing issues brought about by global air transport market requirements, then such requirements are also present in the Gulf market, especially since the service sector in the Gulf, which includes air transportation services, has become an important sector in the past few years with its key contribution to gross domestic product components.

More care should be given to this sector, which has begun to play a significant role in diversifying the local revenues of GCC countries.

The writer is a UAE economy expert.