Shilpa Mathai reports from Muscat.

As the aviation industry worldwide navigates stormy weather, how does the downturn in air travel augur for the Gulf’s regional air carriers that, even pre-11 September, were already experiencing financial turbulence because of rising operational and fleet modernisation costs?
“There is no doubt the regional aviation industry has been adversely affected by both the slowdown in the world economy and more recently by the events of 11 September 2001 and the subsequent war in Afghanistan,” Abdul Rahman Al Busaidy, CEO of Oman Air, told The Middle East. “There has been a decline in business travel and more recently a drop in leisure travel. Unfortunately this happened at a time when regional airlines and hotels had introduced additional capacities; this has resulted in lower prices for both industries. The impact varies from one airline to another; those with a large European operation were harder hit.”

Arab airlines across the board felt the impact; confirmed a Gulf Air spokesperson: “The crisis created unprecedented difficulties for Gulf Air and all other airlines. The worldwide decline in passenger traffic is around 20 per cent and at least 10 per cent of the industry employees globally have been laid off so far. In the wake of the dramatic downturn in international air travel, Gulf Air, the national carrier of Abu Dhabi, Bahrain, Oman and Qatar is reviewing its options to maintain operations in the immediate future. Our four owner states have agreed to underwrite the huge demands being made for third party war risk insurance.”

Additional insurance premiums slapped on airline companies for both passenger liability and hull insurance led to a wave of ticket price hikes. Gulf Air and Kuwait Airways introduced a US$5 surcharge on tickets per sector, in line with most of the (GCC) Gulf Cooperation Council Countries and other international airlines. More elaborate security measures, mounting competition — more and more carriers are jumping into the fray for a slice of the Middle East market, pre September 11, 2001, this was very much a growth market with rapid increase in passenger numbers and the highest ticket yields in the world — and a sudden drop in passenger traffic add to airline woes.

Read the full story in the February 2002 edition of The Middle East Magazine

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