Capacity rise outstrips Middle East traffic growth

The growth recorded by Middle East airlines has not translated into profitability, according to Chief Executive of International Air Transport Association.

The eight per cent growth in passenger demand has been outstripped by a 13 per cent increase in capacity, said Giovanni Bisignani, Director-General and CEO of Iata.

"The Middle East is an oasis of some good news for the industry. This is the only region that is growing. But the growth has not yet translated into profitability. Growth without profit is not sustainable," he said in a keynote address to the region's leaders at the 42nd Annual General Meeting of the Arab Air Carriers Organisation in Jeddah.

Iata urged the air transport industry in the Middle East and North Africa to focus on key challenges of growth, including safety, cost control, liberalisation and environment.

"Safety is our number one priority. Three accidents in the region this year remind us that safety is a constant challenge. Through September, the region's accident rate was six times worse than the global average. Flying is still safe but it is a wake up call for all of us. The next step is for governments to mandate IOSA [Iata Operational Safety Audit] similar to what Syria and Egypt have done. We have achieved 100 per cent IOSA registration, which is a milestone," Bisignani told Emirates Business.

"The industry has shown a strong commitment to safety through IOSA. In 2006 Arab Civil Aviation Commission made it mandatory for all carriers flying to and within the region to obtain an IOSA. So far, only Syria and Egypt have mandated an IOSA. Our message to regional governments is that it is time for more to come on board and deliver on their commitments," he said.

Bisignani believes cost control should become a norm in the industry across the entire value chain.

A build-operate-transfer agreement with AIG to build a new terminal at Queen Alia International Airport in Amman, Jordan, brought special mention at the meeting."Commercialising some airports is changing the nature of partnerships. AIG, the concessionaire, can increase charges without a requirement to consult airlines and 54 per cent of the gross revenue goes to the government. The regulator has become the business partner of the concessionaire. I am surprised that the government of Jordan, which has always had a progressive vision for aviation, has ignored the ICAO principle of user consultation. This must be changed," said Bisignani.

He said the flag on the tail cannot secure the future of this industry. "Aviation is not a diplomatic activity. We are businesses with bottom lines to protect. The downturn makes it clear that progressive liberalisation with competition on a level-playing field and global investment opportunities must mark the way forward. Our goal is to help governments develop effective tools to make this a normal industry capable of generating sustainable profits," said Bisignani.

Next month, Iata will host its second Agenda for Freedom Summit with an aim to facilitate the signing of a multilateral statement of policy principles.

"The biggest challenge to growth is environment. How we deal with climate change will shape our industry's future," said Bisignani. The industry's four-pillar strategy on climate change has saved nearly 70 million tonnes of carbon emissions. In 2009, Iata's work in Mena helped six airlines implement best practices in fuel efficiency, saving $80m (Dh294m) on fuel costs, optimised seven routes and implemented performance-based navigation at seven airports. Route optimisation included a new route from Amman to Jeddah and Aden saving up to 10 minutes per journey and 9 million kgs of carbon annually. "Now the region must think beyond national borders. Why not have a United Arabian Sky with seamless air traffic management and common technology standards? The time to invest is now, before the problems of growth become acute," said Bisignani.

He also urged carriers in the region to bring governments on board to the United Nations Framework Convention on Climate Change in Copenhagen in December.

Airlines are committed to improving fuel efficiency by an average of 1.5 per cent annually to 2020, stabilising emissions from 2020 with carbon-neutral growth and cutting emissions in half by 2050 compared to 2005 levels. To achieve this, the governments will have to adopt a sectoral approach that accounts for the aviation industry's carbon emissions at a global level, ensure the sector is accountable for its CO2 emissions and give the industry access to carbon markets to offset emissions until technology can offer the ultimate solution.

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