x Abu Dhabi, UAEThursday 18 January 2018

Middle East airlines soaring back into profit

Airlines in the Mena region are set to soar back into profit this year, with the International Air Transport Association predicting $700m (Dh2.5bn) in third-quarter profits, reversing last year's $600m in losses.

Middle East and North African airlines will reapUS$700m (Dh2.56bn) in profits this year.

Simon Maina / AFP
Middle East and North African airlines will reapUS$700m (Dh2.56bn) in profits this year. Simon Maina / AFP

GENEVA // An exceptionally strong recovery for passenger travel and air cargo in the third quarter will help Middle East and North African airlines reap US$700 million (Dh2.56bn) in profits this year, reversing the $600m in losses suffered last year during the economic downturn.

The region will also post the fastest demand growth this year and next as its long-haul airlines take market share from rivals in Europe and its budget airlines continue to open new routes, according to a forecast issued today from the International Air Transport Association (IATA), airline industry's largest body representing more than 230 airlines worldwide.

The growth mirrors larger trends as the industry worldwide will reap a $15.1 billion in profits, a record amount helped by $7.7bn in profits from the Asia-Pacific. The results are not a record in terms of profit margins, however, which were higher in the 1990s, IATA said, and also less than the current cost of capital for the world's airlines.

"Margins remain pathetic," said Giovanni Bisignani, the director general and chief executive of IATA. "The industry is fragile and balancing on a knife edge - any shock could stunt the recovery."

The positive outlook for MENA carriers will be tempered by slowing growth next year as the industry rebound matures, with $400m in profits for the region and demand growth slowing to 10.5 per cent, compared with a 21.5 per cent increase in demand this year.

The region's long-haul airlines, such as Emirates, Qatar Airways and Etihad Airways, are adding new aircraft at rates three times faster than their rivals in Europe and Asia. Brian Pearce, the chief economist of IATA, said the region as a whole will benefit from this rapid fleet expansion. "The Middle Eastern airlines in particular have benefited from market share gains they managed to achieve on long haul markets. This has been an important part of their profitability," he said.

This year's airline profits come after a disastrous decade in which carriers worldwide lost $51bn between 2001 and last year. Similarly, the MENA region was home to a number of carriers posting losses last year. While some carriers, such as Emirates Airline and Air Arabia, showed profits, Kuwait Airways, Oman Air and Gulf Air reported significant losses amid their ongoing restructuring efforts.