x Abu Dhabi, UAEThursday 18 January 2018

$200bn of new planes for Middle East airlines

Middle East airlines plan to spend US$200 billion on new aircraft over the next decade but still trail their rival in generating bottom-line profits, the IATA says.

Middle East airlines plan to spend US$200 billion (Dh734.55bn) on new aircraft over the next decade but still trail their global rivals in generating profits, says the International Air Transport Association (IATA).

Regional carriers account for 11 per cent of global aviation traffic but will take home just 4.5 per cent of global profits forecast for the airline industry this year, the IATA said.

MENA region carriers will earn $400 million in profits among the more than two dozen IATA members located in the region, according to the IATA chief executive and director general Giovanni Bisignani.

This equates to an improvement of $1bn after MENA operators lost $600m last year.

"A more cautious approach to capacity is helping to drive this improvement. While demand is in line for a 21 per cent increase over last year, the capacity increase has been limited to 15.9 per cent," Mr Bisignani said in an address to the Arab Air Carriers Organisation in Cairo.

Worldwide, airlines are expected to generate $8.9bn in earnings this year, ending almost a decade of consecutive losses amounting to $50bn because of the effects of the terrorist attacks in September 2001 in the US and the rising cost of oil prices followed by the global economic downturn.

However, the airline industry will encounter a cloudier outlook next year, with profits declining to $5.3bn globally and to $300m in the MENA region.

In the Middle East, "the small profit will be partially driven by an expected capacity expansion of 10.6 per cent outstripping demand growth of 10.4 per cent", the IATA said.

In his address, Mr Bisignani urged the region's airlines to play a larger role in the global airline industry and improve safety records, while exhorting governments to open their markets to competition.

Over the past decade, MENA region airlines have grown from 5 per cent of global traffic to 11 per cent, Mr Bisignani said. "Planned aircraft purchases of $200bn over the next decade will support this growth into the foreseeable future. This expanding global presence brings with it the challenge of playing a larger role in the global aviation community," he said.

The region's accident rate, measured in the amount of hull losses, has worsened over the past four years. For western-built aircraft, the accident rate has slipped from zero accidents in 2006 to 3.32 accidents per million flights last year.

"At 4.6 times the global average of 0.71, that is a concern," Mr Bisignani said. "The region's rapid growth must be accompanied with a strong safety record."