• Home
• /
• Local business

ME Aviation Market Bucks Downtrend

DUBAI — The Middle East aviation market which has bucked the global downtrend, is poised for a larger role in the global transportation and logistics industry, but needs to relax rules that tend to restrict growth, according to 
a study.

Aerospace consulting company Frost & Sullivan, said that thanks to the resilient economies in the region, the aviation market in the Middle East remains as one of the fastest growing markets in the world, allowing countries in the region to diversify beyond the oil and gas sector.

“There is a high positive correlation between air travel and the level of economic activity in the region, since gross domestic product would relate to consumer spending, and hence positively impact the demand for air services,” said R. Madusudanan, financial analyst at Frost 
and Sullivan.

“Thus, a GDP growth in the Middle East will ensure that the region’s aerospace sector would outpace the rest of the world.”

The Dubai Airshow last week ended on a subdued but hopeful note, with a few last orders pushing the show’s final tally of contracts and purchase commitments incrementally higher to more than 
$14 billion.

The $14 billion in new business was a notable achievement, given the harsh economic conditions that have damped demand in most corners of the aviation industry.

Frank & Sullivan noted that a strong aviation market in the region will generate more jobs, it has estimated that for every $100 spent on air transport, the regional economy benefits by $325.

The massive spending by the countries in the Middle East to upgrade aviation-related infrastructure is starting to pay off, with its strategic geopgraphical position proving to be a market edge.

“(Middle East) It lies in the center of the world, equidistant from Asia Pacific and North America, attracting a large portion of transit traffic in the years to come. The region’s massive oil reserves enable it to serve as a refueling base for most airlines across the world. Considering the rapid pace of development of airport and cargo infrastructure in the Middle East, the region is poised for a larger role in the global transportation and logistics industry,” said Frank and Sullivan.

To really accelerate the growth of the aviation market in the region, Frank & Sullivan said countries should also be able to better plan the growth of the low cost carriers.

“Growth in this segment will result in deeper penetration of commercial aviation into underserved areas. This will necessitate the establishment of low-cost landing strips and smaller airports. The sector on the whole has grown in a disorganised manner, with inequitable growth in the region.

“Development has taken place in small catchment areas and most of them overlap, leaving large regional pockets uncovered by the sector. The setting up of low cost infrastructure in such areas must be prioritsed. It is vital for the aviation sector to percolate into the entire region to achieve sustainable growth. In the Middle East, the government’s stake in aviation projects tends to be high.”

More importantly, the region needs to relax its tight regulations and loosen traffic rights that are reining in “market progression.”

“Regional regulations do not promote adequate financial and operational transparency, which is a hindrance for attracting private investment,” said Madusudanan. “If the respective authorities do not address the issues relating to deregulation and privatisation, the aviation sector could be a facing a key restraint.”

Frank & Sullivan added there must be willingness by countries in the region to confront the risks associated with ill-conceived and uncoordinated deregulation initiatives at the various country levels.

“The Middle East is among the few regions promising growth in the highly turbulent aerospace domain, and proper strategising will see the market emerge stronger after the recession.”

· rocel@khaleejtimes.com