Mideast states ‘must reform aviation to reach targets’
MIDDLE economies are growing at such an impressive rate that they are in danger of leaving behind their regional aviation systems and the region needs to reform this vital sector, says a new study by Booz Allen Hamilton.
Though some parts of the region such as Dubai have begun to reform their aviation markets through deregulation and increased commercialisation, more still can be done, it says. The aviation systems of the region simply do not offer the competitive pricing and service of their European and Asian counterparts, it says.
“Airports in the Middle East do not fully exploit the economic potential of the non aeronautical business. For example, Middle Eastern airports’ average revenues per passenger as well as non-aeronautical revenues per passenger are still significantly below European benchmarks,” said Dr Jürgen Ringbeck, senior vice president in Booz Allen Hamilton’s Dusseldorf office.
The problems are not insurmountable, but the need for a solution is as important as ever. Tourism to the Middle East has nearly tripled since 1995, with 35 million arrivals in 2005. The necessity for local aviation services that adequately give customers service that is at the level of European and Asian markets, is central to continued growth of the region as a whole, he says. Many Middle East countries have met increased travel demand with enormous investments in airport expansion. In fact, many Middle East governments have invested heavily in physical ground capacity, with the UAE leading the way. These considerable investments in airport expansion suggest that the planned capacity of the region in 2012 will be nearly 320 million passengers.
“The region will likely fall short of such growth however,” said Fadi Majdalani, vice president of Booz Allen Hamilton’s Beirut office. “Even if it meets its expected growth rate of about 7 percent a year, this is simply too high of a number to meet.”
What is the solution to combat these deficiencies? How can the Middle East create an aviation system infrastructure that can serve a rapidly growing base of customers? According to Booz Allen Hamilton, Middle East nations need to follow a programme that centres on deregulation and increased competition.
“Middle Eastern nations need a strategic perspective for a sustainable, innovative, deregulated and regionally coordinated Middle East aviation system,” said Ahmed Galal Ismail, project manager in Booz Allen Hamilton’s Dubai office. “We believe that aviation reform is the correct path to take, but the slow rate of liberalisation is a hurdle to sustainable reform, at least in the short term.”
Booz Allen Hamilton lays out a framework consisting of government action that will radically improve air transport services and capabilities, including developing strong local private airline carriers, improving service quality, lowering customer prices, expanding service offerings, improving safety and security, and reducing subsidies and public investments.
The benefits of an open and unfettered aviation market that follows these directives will mean increased customer usage and more economic activity for an already booming marketplace. To succeed, the Middle East region needs a clear vision and a commitment to deregulation and fair competition, says the study.