January 21, 2013
Credit: Photo Credit: Gulf Air
The Middle East is one of the major growth regions for air travel. But more than 90% of air traffic there does not stay within the region. If its domestic and short-haul international air transport services are to be developed further, major political and economic change will be needed.
“The key challenge for the region is to promote and foster economic and social stability,” asserts the Arab Air Carriers Organization (AACO). That is not so much an issue for the Big Three Persian Gulf carriers—Etihad Airways, Qatar Airways and Emirates—that are less exposed to short-haul markets. But most airlines in the Middle East do not have the benefit of large long-haul operations through which they could link growth markets far from their home economies. They rely on tough groundwork such as liberalization that is often painfully slow and political stability that is still a far-fetched goal in some countries.
AACO itself illustrated part of what needs to change by holding its annual general assembly in Algiers, Algeria. The number of delegates was down significantly compared to past events, simply because the travel arrangements proved too difficult for many. Some were unable to obtain visas, and those that did were hardly able to leave the conference hotel without bodyguards. Algeria has not been involved in the Arab Spring uprisings or made in any serious attempt to liberalize its economy in general and air transport in particular. It is a good example of how things used to be across more of the Arab world.
But elsewhere things have changed and airlines suffer. Almost every Middle Eastern airline relies on tourism as a major source of income. It nose-dived in 2011, the first peak of the Arab Spring, according to the World Tourism Organization. Egypt saw tourist spending fall by 30.5%, Tunisia was even worse at 32.5%, and Jordan was down 16.3%. These three countries have traditionally been the most attractive destinations for tourists. And, for lack of natural resources, tourism has been their most important source of foreign capital.
If there was any hope that demand would recover quickly, reality has already surpassed it. Egypt has entered another phase of civil unrest as protests against constitutional changes proposed by new President Mohammed Mursi, who is supported by the Muslim Brotherhood, unfold. It is too early to speak of any sustainable tourism rebound anyway, but things are looking bleak again now.
Consequently, airline business models that focus on the region are suffering the most, regardless of whether their own home countries are affected by violent unrest. It goes without saying that Syrian Arab Airlines has had a hard time maintaining anything close to a normal flight schedule, and most other carriers have suspended operations into Damascus, with fighting between government troops and the opposition near the airport making the trip into the city an incalculable danger.
Royal Jordanian was forced to make serious capacity cuts and abandon several routes within the region as demand dropped, even though Jordan itself has remained relatively quiet and stable. Many of the airline's flights were into markets that have been directly affected by political instability, complicating efforts to turn around the already struggling carrier.