Oil prices have fallen to $115 per barrel after peaking to $147, but the damage such a high price caused the aviation industry is expected to last a while.
Air travel is now facing a period of unprecedented difficulties. But while the outlook may be foggy for most regions in the world, the Middle East seems to be flying in clear weather.
The latest forecast by Air4casts, aviation and passenger traffic analysts, says the Middle East is on its way to the highest growth in air travel, at 9.6 per cent in the final quarter of this year, leaving behind Africa (+6.5 per cent), Asia-Pacific (+2.2 per cent), Europe (+0.6 per cent), Latin America (+5.4 per cent) and North America (-1.3 per cent).
"Slowing growth of passenger traffic could see the year-on-year growth rates dropping from a level of 15 per cent per annum on average to below 10 per cent through 2008-2009. It is unlikely that growth rates for the Middle East will drop below 7.5 per cent," Peter Morris, Chief Economist at Ascend Worldwide, told
Emirates Business, adding the region was likely to remain one of the fastest growing regions overall.
He pointed to three factors influencing the Middle East growth: The regional GDP growth driven by world oil prices, the competition between carriers in the region (particularly Emirates, Etihad Airways and Qatar Airways) for both in-region traffic and long-haul traffic and the rise of low cost airlines in the region.
Richard Cope, a senior travel analyst at Mintel in the UK, echoed Morris' views. "The Middle East is more resilient due to its superior growth rates in tourism/business and passenger flows," he said.
"The Gulf carriers are not suffering from over-capacity like many Western or European carriers."
"There is not the same competition from short-haul, low-cost carriers, which many cost-cutting businesses are seeking in Europe," he added.
The Air4casts statistics, meanwhile, which are based on partial June data, further indicate that though there is a possibility of a mere 1.5 per cent rise in September 2008, the global air travel industry, overall, will register no more than single-digit growth in the final quarter of this year.
The growth in air travel in 2009, however, stands at 2.8 per cent at present for total passengers and at 3.5 per cent for internationals, according to Air4casts' muted projections. The report said: "The 2008 and 2009 forecasts are bound to be subject to further downward revisions, the first of which will be when the probably miserable July actuals are incorporated into the forecasting model. The second will reflect the new airline schedules for Autumn which set out some swinging cutbacks.
"Right now there is no kindly light perceptible amid the encircling gloom."
According to the latest estimates by the International Air Transport Association (Iata), passenger increases in the Middle East for the 2007-2011 period will average 6.8 per cent per annum.
It is not surprising if you were to consider the fact Emirates airline's President Tim Clark confirmed the carrier anticipates close to 20 per cent growth year-on-year.
Scott Hamilton, a US based aviation analyst with Leeham Company, said: "The airlines in the Middle East (and Emirates airline in particular) can achieve the growth that is inferred from the huge airplane orders."
The aviation trade body further points out the increase in Middle East passenger numbers in 2008 is likely to be slightly slower but with the year-to-date growth of 11 per cent, the region is set to be ahead of other regions.
In 2007, however, Iata said that the passenger growth rates in the region rested at 18.1 per cent, well above the global average of 7.4 per cent.
WHAT'S NEXT FOR THE MIDDLE EAST?When asked if the future would see Middle East carriers consolidating in order to fight the downturn, Peter Morris, Chief Economist at Ascend Worldwide, said: "We do not yet see pressures for business consolidation in the region with regard to air travel.
"Some investment by national sovereign wealth funds in airlines – both within and outside the region, may be possible. Also, some link-up between UAE and Indian airline interests looking to forge links across the travel and tourism spectrum could be an interesting development in business terms," he added.
Morris said not all countries in the Middle East benefit from oil price rises. "For instance, growth to countries such as Jordan, Egypt and Lebanon may be below average. The increase in fares on long-haul traffic due to high oil prices hits the long-haul business model used by Emirates, Etihad and Qatar Airways, rather harder than the short-haul," he said.
PASSENGER GROWTHJune passenger numbers available to Air4casts from 425 airports reveal a year-on-year increase of no more than 0.8 per cent.
Highlighting two key points, Air4casts said: "Firstly, these airports represent 71 per cent of total world traffic for the month and secondly, their throughputs are substantially below even the most recent expectations of 2.8 per cent.
"It is this shortfall which has pushed the forecast trend into a downward step function.
"There are still areas of strength which it may be prudent to regard as residual."
Dubai alone recorded an 11 per cent increase in the total number of passengers that travelled in June, which rested at 3,042, according to Air4casts. The emirate also recorded a year-to-date increase of 15.9 per cent with 18,460 passengers.
"Airline executives are warning of dire times and while some of what they say is primarily directed at their trade unions, they do have sight of forward bookings and these are telling them to cut capacity sharply," said the report.
"The May data gave hope that the seasonal summer peak, while not entirely unaffected by external factors, would offer some revenue comfort. June has shown those hopes to be optimistic, and the earliest data for July is not especially encouraging," it added.
As for July, Air4casts said it is too early to read since only 60 airports published their July numbers representing just six per cent of world traffic, but it said muted growth was likely.
"Collectively they are up by 2.1 per cent. The rate of increase for those same airports in June was 5.2 per cent and the expectation for July had been 5.3 per cent," the report said.
It further pointed out: "It is that three percentage point expectation to actual shortfall which will drive the next downward revision."
Meanwhile, of the American carriers to have declared passenger figures for July (47 per cent of the total) passenger numbers were down 1.4 per cent, exactly as projected.
According to Air4casts, long-haul demand is holding up better and providing support to revenue streams, with Indian being the prime example.
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