Middle East airlines fail to build capacity

Middle East airlines are not able to meet the increase in the passenger traffic growth as demand for seating capacity is outstripping supply, according to figures released on Wednesday.

The statistics showed that the airlines increased seating capacity by 12.8 per cent in July and 31.2 per cent in the first seven months but demand was higher at 16.8 per cent last month and 19.4 per cent in the first seven months of this year.

Middle East airlines’ 16.8 per cent growth in passenger traffic last month also outpaced the global average with a big margin of 7.6 per cent.

Air Arabia, the first and largest low-cost carrier in the Middle East and North Africa, on Wednesday announced that passenger traffic between Sharjah and other GCC destinations reached 551, 041 in the first half of 2010, an increase of 16.8 percent, compared to 471, 828 in the same period last year.

Dubai Chamber said in a report recently that the UAE carriers are expanding their networks globally, which will guarantee feeding more number of passengers into the aircraft acquired.

Emirates airline, which has 150 aircraft in fleet, is planning to more than double its all-wide body fleet capacity by 2012. Once all these aircrafts are in use, it is expected that the airline will be the world's largest long-haul carrier. Similarly other regional airlines such as Etihad and Qatar Airways have also ordered aircraft worth billions of dollars which would help the carriers to meet the capacity demand in the coming years.

But the report also alerted the authorities to watch for overcapacity in the aviation sector.

The International Air Transport Association (IATA) statistics also reinforce Dubai International Airport and Abu Dhabi International Airport figures released on Tuesday, announcing 14.3 per cent and 9.2 per cent growth in passenger traffic, respectively.

DIA and ADIA crossed the four-million and one-million milestones in a single month in July. Dubai International handled a total of 4.308 million passengers in July compared to 3.769 million in July 2009; while a total of 1,008,228 passengers travelled through Abu Dhabi airport last month, the airports said in a press statement on Tuesday.

Globally, IATA said international passenger demand was up 9.2 per cent in July but warned that the recovery has recovery entered a lower phase.

“The recovery in demand has been faster than anticipated. But, as we look towards the end of the year, the pace of the recovery will likely slow. The jobless economic recovery is keeping consumer confidence fragile, particularly in North America and Europe. This is affecting leisure markets and cargo traffic,” said Giovanni Bisignani, Director General and CEO of IATA.

July global cargo demand was four per cent higher than pre-crisis levels in early 2008 but a slowdown in air freight markets is expected in the second half of the year as the economic cycle moves into a new phase.

“Improving demand is an important component of the recovery. But it must translate to the bottom line. The anticipated 2010 profit of $2.5 billion is only a 0.5 per cent return on revenues. Hence, the financial situation of the industry remains fragile. We must go beyond recovery to secure sustainable profitability at levels exceeding the 7-8 per cent cost of capital. For this, we need a change in the industry’s structure,” said Bisignani.

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