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Not all good news for MENA carriers

Not all good news for MENA carriers

New routes, new planes, more profit – lately, airlines in the region seems unstoppable. But some news today should at least give them pause for thought.

October 21, 2010 4:54 by

Lately, they have seemed unstoppable. The young, profitable and rapidly growing airlines of the Middle East represent one bright spot in the otherwise dark and grim world of aviation. While long established global names post losses and struggle to restructure in a post recession landscape, the region’s companies seem to talk only of expansion and new purchases.

This optimism was underlined this week by Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA). He has predicted that MENA airlines will add $1 billion to the bottom line this year, taking them from $600 million in losses last year to $400 million in profit for 2010, according to Emirates 24-7.

“We are expecting the region to make $400m profits this year. A more cautious approach to capacity is helping to drive this improvement. While demand is in line for a 21 per cent increase over last year, the capacity increase has been limited to 15.9 per cent,” said Bisignani in a keynote address to the Arab Air Carriers Organisation’s annual general meeting in Cairo, Egypt.

Yet Bisignani has also flashed a warning at these Middle East carriers, according to Gulf News, which has a different take on his speech. IATA has forecast a fall in profitability for carriers across the MENA region as capacity outstrips demand in the coming years. Globally, airlines are expected to see profits fall from $8.9 billion in 2010 to just $5.3 billion in 2011. MENA carriers are expected to make capacity increases of 10.6 percent but demand will only grow 10.4 percent, says the paper. Carriers in the region will therefore see a reduction in profit of around $100 million.

IATA also raised concerns that go beyond the balance sheet. According to Gulf News the region’s hull loss rate for Western built aircraft slipped from zero accidents in 2006 to 3.32 accidents per million flights in 2009.

“At 4.6 times the global average of 0.71, that is a concern. The region’s rapid growth must be accompanied with a strong safety record,” said Bisignani. IATA is pushing for the region’s carriers to undertake new safety audits.

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