x Abu Dhabi, UAESaturday 20 January 2018

$700 million boost yet Iata has a warning for Middle East airlines

Middle East airlines are expected to make $800 million this year, up from a forecast of $100 million three months ago.

Tony Tyler, the Iata director general and chief executive. AP Photo
Tony Tyler, the Iata director general and chief executive. AP Photo
Middle East carriers are this year forecast to make US$700 million (Dh2.57 billion) more in profit than was earlier predicted as the airline industry continues to prosper in the face of regional unrest.

The forecast was issued yesterday by the International Air Transport Association (Iata), which has upgraded its global industry profit expectation to $6.9bn from a projection of $4bn in June. Middle Eastern carriers are benefiting from better-than-expected passenger demand, the association said. Carriers in the region are expected to make $800m, up from the $100m projected in June.

However, Iata also warned that global airline profitability was still relatively weak at 1.2 per cent and had deteriorated substantially compared with previous years. Also, Iata said next year "will be even more difficult".

"I think that Iata has come to realise that while the Middle East is engaged in political upheaval, it hasn't really affected the key markets of Abu Dhabi, Doha and Dubai, which predominantly are the driving hubs for traffic in and out of the region," said Saj Ahmad, an analyst at FBE Aerospace.

Mr Ahmad also pointed to the rapid growth of low-cost carriers in the region, with flydubai as a prime example.

"That shows you that there is demand in other markets in and around the GCC that are not necessarily exposed to or having any influence as a result of the political change that is going on outside," Mr Ahmad said.

Passenger traffic for the region's carriers grew by 8.3 per cent in the first seven months of the year, while capacity rose 9 per cent, Iata said.

"Airlines are going to make a little more money in 2011 than we thought," said Tony Tyler, the Iata director general and chief executive.

"That is good news. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement. But we should keep the improvement in perspective," he said. "The $2.9bn bottom-line improvement is equal to about a half a per cent of revenue. And the margin is a paltry 1.2 per cent. Airlines are competing in a very tough environment."

Mr Tyler warned that the industry was "brittle", with its health closely linked to the state of the world economy.

"Any shock has the potential to put us in the red," he said.