Saturday, May 15, 2021

Aviation Analysis


Choices rule the skies of Arabia
November 2007 300
Low-cost carriers to private jets, intensive local growth to ambitious international acquisitions, convenience to luxury, delegation to consolidation – the region’s aviation sector is witnessing a dynamism never seen before. The bottom line is clear: More choices for customers is the watchword when it comes to capturing a slice of the skies and greater collaboration on the ground among the industry players, says MP Philip, as the region gears up for the Dubai Air Show

IT doesn’t take an Air Show to unravel the sheer dynamism that marks the aviation sector of the Middle East.

Yet, Air Shows help. They streamline international interest and pass the slice of the excitement that underpins the industry to the end-users – from the man on the street to the jet-setting executive.
Aviation, unlike ever before, has emerged as a ‘talking point’ industry. Every one’s stakes are at play. Indeed, the integrated approach that marks the aviation industry today has pervaded all spheres of economic activity so much that one does not speak of aviation in isolation.
Aviation is as much as anyone’s business as it was of airline executives some years back. Today, there is reason enough to be concerned for all – the developer who pumps in his billions to create airport cities needs to keep abreast of aviation trends; the neighbour who can book his ticket on-line in a low-cost frill for his ‘nth’ trip to home needs to keep a vigil; the airfield operator in a far-flung township in Europe must keep his schedules flexible to accommodate requests from the private jets that operate from the Middle East; and yes, the investor must stay awake to global trends in the industry because he has wisely invested in the IPO of a local airline.
The sheer diversity, fluidity and pace of action associated with the aviation sector, today, make it everybody’s business.
Obviously, all this means more passenger traffic too. As bottom lines go, it is not how many aircraft the manufacturer delivers, it is how many passengers opt to fly them and thus enhance the profitability of the airline.
The Middle East, indeed, stands on strong fundamentals: the Global Market Forecast for 2006 to 2025 by Airbus states: “Tourism and business traffic to the entire Middle East have grown at a steady pace – 7.2 and 8 per cent respectively – contributing to a quadrupling  of the expected origin and destination traffic from 1990 to 2010.”
This is complemented by an almost tripling of fleet strength by 2025, with low-cost carriers and superjumbos – both contributing to the growth. This fits perfectly well with the robust projections of Airbus that it “could sell more than 800 of its A380 superjumbos over the next two decades.”

REDEFINING AIR SPACE
Aviation – from a commoner’s perspective – boils down to just one tangible factor: price. And that sentiment explains the flutter that low-cost carriers have been able to generate in the Middle East.
It was as if a giant bulldozer silently sliced through the biggest barrier — cost of flying — that had stood in the way of the travel plans of several millions of people who live and work in the Gulf. It also opened flood gates of action. Suddenly, it seemed, low-cost was the mantra for the airline industry – caught in a perilous grind of surcharges and incomprehensible code-sharing arrangements — to survive, succeed and walk with its head high through the new millennium.
The Airbus report further predicts: “Demand for single-aisle aircraft in the region will be higher than ever before as a result of increasing intra-Middle East traffic and the opportunities available to the promising and emergent low-cost carriers.”
The success of low-cost carriers can be gauged from figures of one the newest entrants to the fray: Jazeera Airways, the Kuwait-based low-cost carrier, flew “600,000 travellers in 2006,” which forms 10 per cent of the Kuwait International Airport’s total traveller traffic in the year.
NAS Air, launched by Saudi Arabia, has found a sure footing right in its infancy. The airline plans to increase its fleet size to 19 by year 2010,and fly 37 domestic routes by the end of next year.
Adding new destinations – including a chunk of ‘secondary cities’ that never found their way to any flight schedule plans — with the ease of veterans, low-cost carriers have been touching new lines of profitability, which was unthinkable even for the key players a few years back.
Does this mean that volume has taken over control, pushing luxury travel options to the backburner? Is the industry focused on the mass market?

GOING PRIVATE
The answer is an unambiguous ‘no.’ The Middle East, even as it supports a burgeoning low-cost carrier sector, is equally robust a turf for the ‘new kid in the block’ — business aviation and private jets. The serious inroads made by business aviation is testified by the growing strength of the Middle East Business Aviation Association (MEBAA), licensed as recently as June 2007 by the Dubai Government. Starting with just 16 members, MEBAA today has 55 members featuring a mix of aircraft operators, suppliers and manufacturers.
Today, private jet services — an industry worth over $500 million annually in the region and set to scale $800 million by 2012 — too have taken flight remarkably, thus giving a wider berth of choices for travellers, from all walks of life.
This momentum is also driven by the increasing popularity and affinity for Very Light Jets — the small ones that come at a price tag of about $3 million per jet, and further supported by the construction of terminals dedicated for executive jets.
Saudi Arabia leads the business aviation sector with an estimated 160 private and publicly owned aircraft and accounting for 50 per cent of the region’s business aviation business, according to estimates by MEBAA.

MULTIPLE HUBS
Even as the key players in the Middle East consolidate their market share, what stands out as a perfect co-operative model in the aviation industry is the emergence of new hubs that share growth synergies. Jazeera Airways, for one, will have two hubs — Kuwait and Dubai in addition to a mini-hub in Bahrain.
The importance of multiple hubs stems from the easy access these provide to a range of emerging markets in the Middle East and North Africa and the Indian Subcontinent. It also complements the increasing segmentation of aviation — business, religious, commercial, tourist and worker.
Indeed, the figures speak for themselves: In 2006, air traffic grew 10.31 per cent in the UAE alone, reaching 390,993 flights – meaning, 1,071 flights per day. The number of airline operators too hit an all-time high — 31.
This trend spreads through the Middle East too: The growth in traffic in the region was higher than the global growth average – a trend that is set to continue in the near future too.







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