(OSAMA ABUGHANIM)   

 

 

The Middle East has been the aviation leader in terms of passenger growth for the past three years, riding on the back of strong economic growth, fleet expansions and new routes, according to a new report.

The region witnessed a growth of 18.1 per cent in passenger traffic during 2007 compared to just 7.4 per cent growth in global international traffic, says the wide-ranging study by the International Air Transport Association (Iata).


The Middle East was also the leader in terms of revenue passenger kilometre (RPK) and available seat kilometre (ASK) growth, reporting a year-on-year growth of 18.1 per cent and 14.5 per cent respectively during 2007.

This compares with the industry’s RPK and ASK growth of 7.4 per cent and 6.2 per cent respectively.

Africa also saw above-industry growth levels, reporting RPK and ASK growth of eight per cent and seven per cent respectively, Iata figures reveal. The Middle East economies – particularly the GCC economies – have been expanding at double-digit growth rates on the back of high oil prices, which have created unprecedented levels of liquidity in the region.

Average real gross domestic product (GDP) growth for the GCC economies over the past three years was reported at 5.8 per cent, while average nominal GDP growth was 14 per cent.

With no region-wide railways network, the economic boom in the area has fuelled the growth in air traffic, leading to a surge in the airline business with increasing numbers of new airline operators and expansion by existing operators.

A study compiled by Kuwait’s Global Research shows the Middle East accounted for almost 50 per cent of the world’s aircraft orders at the 2007 Paris Airshow. The total contracts amounted to $50 billion (Dh183.5bn).

Similarly last year’s Dubai Airshow witnessed record-breaking aircraft orders exceeding $100bn, a five-fold increase compared with the previous show in 2005.

The region has also seen aggressive expansion by airlines. Middle East airports’ showed strong performance in 2006 according to Airport Council International (ACI) with Dubai, Kuwait and Bahrain reporting double-digit passenger traffic growth with Dubai taking the lion’s share of passenger traffic. To handle the surge in passenger-traffic numbers many countries have announced plans to expand their airport capacities.

An estimated $60bn of investment is being made in planned and ongoing airport expansion projects in the Middle East and North African (Mena) region, with around 60 per cent ($37bn) of these projects concentrated in the Middle East.

Major projects under way in the Gulf include the $8.2bn Al Maktoum International Airport at Jebel Ali, the $6.8bn expansion of Abu Dhabi International Airport, the $5.5bn New Doha International Airport in Qatar and the $11.3bn upgrade of King Abdul Aziz, Madinah and Tabuk airports in Saudi Arabia.

Airport expansions in Bahrain, Kuwait, and Oman amount to $4.5bn collectively. In Africa, $3bn has been earmarked to expand Libya’s Tripoli International Airport and build five new airports.

And $850m will be spent on airport projects in Egypt including Cairo International Airport.

According to Iata, the number of new aircraft ordered in 2006 was the second highest in history.

Boeing and Airbus received 1,834 orders compared with the 2005 total of 2,057 – the highest ever number of aircraft orders in a year.
 
And Middle East aircraft carriers will be adding new aircraft faster than the rest of the world, with a total growth of 37.4 per cent over the next five years compared with the world total projected at 31 per cent.

The Middle East’s location, its population and demographics as well as the region’s increasing tourism and traffic are the major drivers that fuel the aviation sector, says Global Research, part of Kuwait’s Global Investment House. In addition, according to the Centre for Asia Pacific Aviation, the latest long-range aircraft technologies, enabling ranges of up to 8,000 nautical miles, make it possible to fly long-haul non-stop from the Middle East to anywhere in the world.


The region has short-haul traffic potential too, as it is within narrow body aircraft range of some of the key emerging and fastest growing markets in the world such as China and India.

Population in the Mena region has been growing at a fast pace during recent years with an average growth rate of 2.3 per cent beating the world’s average growth rate of 1.3 per cent. The GCC countries in particular have been reporting some of the highest growth rates in the region in line with their booming economies.

Developments in the region’s business environment have attracted foreign businesses too and led to an inflow of highly experienced professionals.

In addition, the booming real estate and construction sectors have attracted a larger number of low wage blue-collar expatriate workers.

Expatriates in GCC countries account for more than 30 per cent of the total population with the highest percentage of expatriates witnessed in the UAE and Kuwait where expatriate workforce form around 78 per cent and 67 per cent respectively of the total population at large.

This large percentage of expatriates add to the air travel numbers as the make numerous trips to visit friends and relatives.

The region’s population is dominated by the young and mobile with around 37 per cent of numbers in the age group of 15 to 35, says Global Research.

Another factor boosting air travel is the GCC’s tourism sector which has been performing well in recent years. Although political issues in the Middle East have been traditionally been perceived as being detrimental to growth, the effect has been minimal as tourism to the region continues to rise.

According to the World Tourism Organisation (WTO), the year 2007 exceeded the expectations for international tourism with arrivals reaching new record figures close to 900 million.

The Middle East is leading the regional growth ranking (13 per cent), followed by Asia and the Pacific (10 per cent), Africa (eight per cent), the Americas (five per cent) and Europe (four per cent).

The Middle East received more than 46 million international tourist arrivals in 2007, with Saudi Arabia and Egypt among the leading destinations in terms of growth in 2007.

The WTO said the region continues to be one of the world’s tourism success stories despite ongoing tensions and threats.

The group’s Tourism 2020 Vision forecasts East Asia and the Pacific, Asia, the Middle East and Africa to record growth at rates of over five per cent annually, compared to the world average of 4.1 per cent.

 
25,000 more hotel rooms

Eighty new hotels are being developed in the GCC region to accommodate the increasing flow of business as well as leisure travellers, according to a recent report by Global Research. Global, citing market sources, said more than 25,000 rooms and suites are set to be added to the existing stock by 2008. The boom in tourism was mainly due to increased international demand and a healthy intra-regional market, coupled with an inflow of investments that are further developing the tourism sector in the region and adding to its capacity. The report says around $272bn (Dh 998bn) worth of tourism projects are expected to be completed in the GCC by 2018.
 
The UAE alone accounts for around 86 per cent of these projects, while Oman accounts for six per cent, Qatar three per cent, Bahrain 2.1 per cent, Saudi Arabia 1.6 per cent and Kuwait 1.3 per cent.

Airlines open up

The region’s airline industry is mostly government-owned, but some countries have realised the need for change in order to improve their competitiveness.

In Jordan the government decided to float more than 59 million shares of its stake in Royal Jordanian in an initial public offering, which represents up to 71 per cent of the company’s capital.

Similarly Egypt Air is preparing for a 20 per cent float. Other markets such as Saudi Arabia and Kuwait have no privatisation plans for their flag carriers in the short term but their governments have started to liberalise the market through the relaxation of entry requirements for private lower cost carriers, forcing their flag airlines to improve their efficiency.