MidEast airline majors may cutback on aircraft orders: IATA chief economist
29 Oct 2008
Major Middle East airlines may be compelled to cut back on their large aircraft orders with the global economic downturn impacting air passenger traffic and affecting revenues negatively, according to IATA chief economist, Brian Pearce.
Pearce issued the warning Wednesday saying the International Air Transport Association figures for September showed Middle East passenger traffic dropping for the first time in years, dipping 2.8 per cent over the same period last year.
According to IATA figures, the region recorded traffic growth of 10.6 per cent in the first six months of the year, which slipped to 5.3 per cent in July and 4.3 per cent in August.
Pearce said Middle East airlines, which handle a large portion of transit traffic, are heavily exposed to the global downturn and will find it "very difficult" in the coming months as demand for air travel in the United States, Europe and Asia begins to dry up.
This is particularly critical for airlines such as Emirates, Etihad Airways and Qatar Airways which have capitalised on the region's strategic location midway between the United States, Europe and Asia. This lucrative transit traffic, according to Pearce, is now bearing the brunt of the downturn as economies around the world begin a slide towards recession.
According to Pearce, Middle East carriers which have experienced revenue growth between 15-23 per cent since 2003, will likely find growth slowing down to single digits because of the downturn. He also warned that the economic downturn ''was potentially more significant than the rise in fuel prices."
He also said that passenger traffic within the region was "fairly robust" and that regional airlines would probably fair better than those more reliant on transit traffic.
Pearce also said the drop in demand could see a cutback in the huge aircraft orders made by regional carriers. He also pointed out that the current banking environment made it more difficult to finance purchase of these aircraft.
A carrier like the Emirates is one of the world's largest customers of Airbus' 380 superjumbo.
