Special Report: Gulf Aviation and Airports

08 June 2010

The global aviation industry has had to grapple with an unprecedented series of problems in the past three years: Soaring fuel prices; a severe economic recession; the threat of a swine flu pandemic; and, most recently, the closure of European airspace brought about by a lingering plume of volcanic ash from Iceland

Against the odds, the International Air Transport Association is forecasting the commercial aviation sector in all regions – with the exception of Europe – will return to profitability in 2010. Even the Middle East, which has endured consecutive losses since 2007, is expected to creep back into the black this year.

But a new problem could be sitting on the horizon for the region’s aviation sector: Overcapacity. The past decade has seen a wave of fleet additions, airport construction and the launch of new routes and airlines. The region consistently outperforms the rest of the world in terms of passenger growth, but as customer choice expands, its average 73 per cent seat occupancy will be difficult to maintain.

Governments until now have been able to prop up loss-making carriers and resist the pressure of consolidation, but there will come a point when the competition becomes too strong and tough decisions have to be taken.

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