Mideast carriers continue to add capacity and routes

The impact of cheap fares and the resulting drop in yields has been less in the Middle East than in other regions, according to the International Air Transport Authority (Iata).

"The Middle East is one of the least affected regions in the world," Chief Economist Brian Pierce told Emirates Business. "The decline in yields for passenger and freight combined is about 2.9 per cent."

While passenger numbers between Asia and the Middle East have grown by 7.6 per cent this has been offset by a fall of 13.7 per cent in average fares. Middle East airlines are continuing to add capacity and new routes despite the global crisis, which has seen major airlines cut capacity in other regions.

Load factors on international routes improved in April to an average of about 74.4 per cent after worsening steadily for over a year, according to Iata. However, this improvement was due to the bounce in air travel rather than acceleration of the resizing of the industry.

The earlier decline in load factors had put intensifying downward pressure on fares, which played some role in boosting air travel. But it is not clear how sustainable the April rebound will be.

There have been two key developments since the last Iata forecast in March. First, there have been growing signs of a bottoming out of recession. But, second, it has become apparent that the airline industry suffered more than expected during the first quarter – in particular yields and revenues slumped very sharply. And any traffic recovery ahead faces severe headwinds.

There was an apparent stabilisation of international air passenger traffic during March. Internationally, the number of passengers travelling on premium tickets declined at a slower rate of minus 19.2 per cent in March, compared with the minus 21.1 per cent fall seen in February. The decline in economy travel also eased at a slower rate of decline – minus 8.2 per cent. The number of passengers travelling in international airline markets slowed from a fall of 9.6 per cent in February to a decline of 9.4 per cent in March.

Revenues are falling at a faster pace than passenger numbers. This is partly because fares are being cut in the face of falling load factors but it is also because of the composition of passenger declines. Premium tickets make up seven to eight per cent of total passenger numbers in global markets but provide 25 per cent of revenues. 

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