Gulf airlines unaffected by low oil revenue, political conflict

Gulf focused airlines are doing well with successful long-haul super-connector operations, whereas the other regionally-focused airlines in the Middle East are suffering from  the impact of lower oil revenues and political conflict, International Air Transport Association (IATA) said in its 2016 outlook released recently.

Middle East airlines will clock a profit of US$ 1.4 billion in 2015, according to IATA, a figure lower than its earlier estimate of US$1.8bn for the period. The association expects the airlines in the Middle East to clock US$1.7bn profit in 2016.

The airlines in the Middle East are expected to generate only US$7.97 as profit per passenger, a performance that is drastically below their counterparts in North America (US$21.44). 

The airline capacity in the region will go up by 12.2pc in 2016 on the back of a 12.1pc expansion in 2015, according to the report.

Lower oil price is cited as one of the major reasons for the upward revision of growth prospects by the agency, which upped its 2015 global profit forecast to US$33bn from US$29.3bn forecasted in June. Strong passenger travel demand more than compensated for the weak cargo-movement growth, stabilizing the industry and propelling to strong profits, IATA said.

The industry that is often bemoaned for losing capital of its investors is now able to deliver the minimal level of profitability, a fact highlighted by Tony Tyler, IATA’s Director General and CEO during the release of the report.

“This is an historic achievement for an industry that has been notorious for destroying capital throughout its history. But let’s keep that achievement in perspective. With net profit margins still in the 5pc range there is little buffer. Achieving returns that barely exceed the cost of capital means that airlines are finally meeting the minimum expectations of their shareholders. For most other industries this is the norm and not the exception,” he
said.

Caption : Tony Tyler