IATA CEO: Maintaining growth in Middle East aviation

Written by Tony Tyler is director general and CEO of the International Air Transport Association (IATA)

Having completed my fifth month as director general of the International Air Transport Association (IATA), I’ve come to fully appreciate the breadth, scope and complexity of all that IATA does for its members and for the industry. In particular, I have recognised the importance of working together.

Aviation is a team effort of airlines, airports, air navigation service providers, regulators, manufacturers and many more. As a priority, I have therefore reached out to all parties, including regional associations like the Arab Air Carriers Organisation (AACO) and important partners such as the Civil Air Navigation Services Organisation (CANSO) and Airports Council International (ACI). My message has been consistent: Aviation is a challenging industry, so let’s work together, where we can, to make it more successful.

The industry made US$15.8 billion in 2010 - the highest amount ever in absolute terms. But we expect profits to fall to $3.5 billion in 2012 for a margin of just 0.6%. On the cost side, we see limited relief in oil prices - with a slight slip to an average price of $100 a barrel. That will produce a $201 billion bill that consumes on average 32% of costs. And there is good reason to expect weakness in demand. The European debt crisis continues to deepen. We have not seen the job creation needed to put the US recovery on track. And the challenges of the political situation in the Arab world could also well continue into 2012.

We expect Middle East carriers to follow the trend of declining profitability - from a $900 million profit in 2010 to $300 million in 2012. But the story for this region is growth. In 2004, MENA carriers accounted for less than 7% of international traffic. Today it is over 11%. The double-digit growth of Middle East carriers over the last years has fuelled this expansion, which will continue in future years too. One of the challenges is handling that growth efficiently. Etihad and Abu Dhabi International airport are a great example of cooperation to deliver efficiency.

Working together, they are among the first six airport-airline pairs to implement all six self-service options in IATA’s Fast Travel initiative - check-in, baggage tagging, document check, flight re-booking, self-boarding, and baggage recovery. Another example is Emirates, which tops the charts of airlines implementing e-freight. Nearly 37% of their eligible freight shipments take advantage of the more efficient e-freight process. Both show that this region is a leader in adopting global best practices to prepare for the future.

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Another challenge is infrastructure. Airports have ambitious expansion plans, but I am concerned about potential bottlenecks in the sky. In the Bahrain, the Emirates and Muscat Flight Information Regions, movements are growing by 11% annually. This is made more complex by a growing dimension to the region’s traffic. Traditionally traffic flows have been north-south, but now east-west movements are growing in volume. This growth must be accommodated in just 40% of the airspace permanently accessible to aviation, whilst the rest is under military control and under restricted access or off-limits to civilian aircraft.

Cooperation in a coherent regional approach is needed to manage growth safely and efficiently. There are three priorities: more route options, harmonisation of technology and operations, and flexible use of airspace in cooperation with the military. We are supporting CANSO’s Middle East Regional Airspace Review to provide sustainable air traffic management solutions for the short, medium and long-term. And under the acronym MEAUSE for Middle East Airspace Users and Stakeholder Engagement, we are working to link governments, suppliers, ANSPs, the military, airlines and airports to ensure alignment of air navigation and airport investment plans with the needs of the airspace users - both civil and military. We all have high expectations that this approach will clear bottlenecks and ensure that airspace capabilities keep pace with the region’s growth.