Middle East airlines will remain the fastest growing carriers - IATA

Middle East carriers will see their profits shrink from $700m in 2010 to $400m in 2011 as the fragile global aviation industry continues to flounder, the International Air Transport Association (IATA) said Tuesday.

Despite a drop in profits, Middle East airlines will remain the fastest growing carriers against struggling western airlines, the IATA said in its annual report.

“[The Middle East] will be the fastest growing region in both 2010 and 2011. But the pace of demand growth will halve from 21.5 percent in 2010 to 10.5 percent in 2011,” the agency said. “Middle East carriers are expected to see 2010 profits of $700m shrink to $400m in 2011.”

All regions, including Asia, Europe and North America, would be following a global trend of reduced profitability in the coming year, the report said.

Europe will play the “industry laggard” to global GCC airlines Etihad and Emirates, along with regional players like Air Arabia and flyDubai, as its profit is expected to shrink to $100mn in 2011 from $400mn the previous year.

“Intra-European market conditions remain depressed as a result of the debt crisis, slow economic growth, government austerity measures and increasing taxation,” the report said. “Profitability is further weakened by below trend demand growth of 3.5 percent alongside a 4.4 percent increase in capacity in 2011.”

“What is disappointing is Europe with a $400m profit.  Their surprisingly strong third quarter performance turned the earlier forecast net loss into profit.  But at $400m, it is really peanuts,” Giovanni Bisignani, IATA’s director general and CEO, said in a speech Tuesday. 

“The European industry is 13 times the size of Africa. But profits are just four times larger than the $100mn that Africa’s carriers will make.” He said the same was true of Middle East airlines. “They will make $700m this year, almost double the Europeans, but on a quarter of the revenues.” Bisignani said that industry-wide optimism had grown throughout 2010, but warned against false optimism.

The GCC has become a hub for airline innovation as traditional power players like Europe and the US continue to slump.

Flagship carriers Etihad, Emirates and Qatar have been expanding their routes further into Asia, Africa and South America, while regional low-cost carriers Air Arabia and flyDubai continue to provide local competition into destinations throughout the GCC and MENA regions.