Opening the skies in the Middle East

"The natural effort of every individual," said the 18th-century political economist Adam Smith, "is to better his own condition." In his classic Wealth of Nations and other works, Smith argued that human beings are instinctively self-interested, that societies are naturally competitive, and that this is good for the shared well-being and prosperity of all. He opposed any law that could hinder free and fair competition. He was one of the earliest proponents of deregulation, and what we know today as "free trade."

What does all this have to do with the Middle East aviation sector? A lot more than we might think!

For far too long, the air travel industry was characterised by limited options: in the past, if you wanted to fly from one state to another, your choices were limited to a few national flagship carriers - one based in the country of departure, the other in the country of arrival - along with a couple of pan-regional airlines. Flight schedules were limited, prices were high and, as a result, an awful lot of potential travellers simply stayed at home. But this changed over time; the US has become the largest air travel market because private sector was extended to operate across the country. The same scenario moved to Europe over the last decade which led to serving a lot of unused airports resulting in creating more job opportunities. Development of air travel has become a necessity everywhere in the world now, and couldn't be of any more in this region!

Historically, rather than striking bargains (you open your airport, and I'll open mine), Middle East states simply closed their skies to the competition. Thinking that by ensuring a near-monopoly on landing rights, they would ensure healthy protection for their national carriers; Arab regulatory authorities stifled the growth of the region's aviation sector - and the growth of the economy as a whole.

Times have changed, however, especially since 2004. In that year, a landmark piece of legislation was signed in Jordan by the Arab Minister of Transportation, committing the entire region to the principle of open skies. Although the full liberalisation of the region's airports has yet to take full effect, this agreement has already has a dramatic impact on the competitiveness of the industry.

Open-skies policies are now generating a range of significant benefits for the region. More competition has naturally led to lower prices, creating opportunities for more people to travel than ever before. This has an additional knock-on benefit for the regional economy: the creation of new jobs in related and ancillary areas.

A recent study on the impact of open-skies policies, which surveyed more than 190 countries worldwide, showed that countries that liberalise air traffic experience growth in air traffic of between 12-50 per cent. According to the same study, the creation of a single European aviation market in 1993 led to an average annual growth rate in traffic between 1995-2004 that was almost double the rate of growth between 1990-1994. Further, such liberalisation led to the creation of 1.4 million new jobs.

Here in the Middle East, the long-term impact of open skies will surely be similarly positive. Countries at the forefront of deregulation - such as Lebanon, UAE and recently Kuwait - are already reaping tangible rewards, and passing along those benefits to consumers. Morocco is another great example with the benefits the country gained since its open skies agreement with the European Union.

The current trend is towards opening up to competition, cutting red tape and incentivising private-sector participation in the Industry. As they both fuel the economic expansion of the region and benefits from it, Arab airlines are poised to continue to experience levels of growth far above international averages. In the Middle East, today more than ever, with all developments happening in nearly every airport and with-in the current speed of the economical growth, the sky should truly be the only limit.

The writer is board member and chief executive officer, Air Arabia.