Over the past 25 years, the Gulf region has experienced an economic transformation, in which the UAE has played a leading part.
UAE offers 'shining example' in aviation
Over the past 25 years, the Gulf region has experienced an economic transformation, in which the UAE has played a leading part. Aviation has been at the centre of this change, which is reflected not only in the success of the well-known and rising Gulf airlines, but also in the emergence of some of the world's most impressive airport infrastructure.
The fast growth of aviation in the region should not, however, obscure the fact that global aviation faces considerable challenges. Last month, the International Air Transport Association (Iata) downgraded its airline profit forecast for this year from US$3.5 billion (Dh12.85bn) to $3bn. We expect to generate revenue of $633bn this year, so that means a paltry 0.5 per cent profit margin on revenue growth of 5.9 per cent and traffic growth of 3.6 per cent. Rising fuel prices are the biggest culprit for these falling profits.
In the Middle East, Iata sees a profit this year of $500 million. The Middle East is one of just two regions whose outlooks have improved since our December forecast.
A study conducted by Oxford Economics shows that the Middle East represents 3 per cent of global passengers, has 5 per cent of the total jobs and 6 per cent of the GDP generated by air transport. That translates to air transport supporting 2.7 million jobs, and contributing $129bn to GDP. Furthermore, aviation's role in the region is set to grow rapidly over the next two decades as international passenger numbers rise from 77.1 million in 2010 to 220.4 million in 2030.
So when I am asked what the future of aviation will look like, I am tempted to respond that I hope it bears more than a passing resemblance to what is occurring today in the UAE, as well as in places like China, Singapore and South Korea, where governments are using aviation strategically to spearhead economic development.
However, this bright future is not guaranteed. It depends on having the right conditions in place to support competitive sustainable businesses. Many of these are beyond the direct control of airlines, and most require that industry and government work together with a common vision and purpose. Two key areas concern infrastructure and environment.
Any forward look at aviation must incorporate a vision of adequate airport and air traffic management infrastructure. Without it, aviation's contribution as an economic catalyst is compromised. The Middle East and North Africa (Mena) region has invested more than $100bn in airport projects, including $6.8bn in Abu Dhabi, $14bn on the new Doha International in Qatar and $33bn on the new Al Maktoum International for Dubai.
But runways and terminals are, of course, only half the story. What is also required is efficient air traffic management (ATM). Within the Mena region, ATM infrastructure is not harmonised or facilitated to its full extent, and routings in some areas are less efficient than they could be. With movements growing 11 per cent annually in the flight-information regions of Bahrain, the Emirates and Muscat, we could see a doubling of traffic in seven years, creating the potential for aerial bottlenecks.
Add to this the fact that just about half of the airspace is permanently open to civil aviation, with the rest controlled by the military, and you have a recipe for future gridlock. On the positive side, the UAE is ahead of many other air navigation service providers with regard to ATM capabilities, and Saudi Arabia, Qatar and Bahrain are in the process of making much-needed upgrades to their air traffic management.
Aviation's licence to grow and fulfil the global demand for connectivity is also contingent upon environmental responsibility and sustainability. That means aviation must address its 2 per cent contribution to man-made CO2 emissions, and to do that the industry has committed itself to improving aircraft fuel efficiency by 1.5 per cent annually to 2020, to cap net CO2 emissions from 2020 with carbon-neutral growth, and to cut net carbon emissions in half by 2050 compared with 2005.
Sustainable biofuels will play a key role, and we are seeing important progress around the world, with more than a dozen projects under way. In this region, Qatar Airways,Airbus, Rolls-Royce and others have formed the Qatar Advanced Biofuel Platform consortium to develop the first large-scale, algae bio-jet fuel value chain in the world.
The aviation industry also recognises that economic measures are a necessary - if temporary - bridge to enable it to meet its environmental targets. But it is critical that such measures are agreed upon in a global approach under the leadership of the International Civil Aviation Organization (ICAO).
Unfortunately, Europe has chosen a go-it-alone approach with the inclusion of international aviation in the EU Emissions Trading Scheme. This is creating opposition, because non-European states see the intention to tax airlines for emissions over non-European Union territory as an attack on their sovereignty.
No one wants a trade war, and there is a solution. A global agreement through the ICAO is the way forward. Now is the time for Europe sincerely to take a stake in making the discussions and decisions at the ICAO a success.
Aviation is a force for good in the world. It connects people and goods to markets, reunites families and enables journeys of discovery.
Despite some challenges, the UAE's support for aviation is a shining example to other governments around the world. I hope this example is heeded so that the benefits of this wonderful industry may continue to be enjoyed by all.
* Tony Tyler is the chief executive and director general of Iata.