Study Warns Middle East to Address Over-Capacity
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Study Warns Middle East to Address Over-Capacity
Analysts say region is top heavy in aircraft numbers and burdened by red tape
Analysts are warning that the Middle East region is facing a potentially-damaging burden of over-capacity combined with continuing inefficiency resulting from heavy air transport regulation.
A study by consultancy Booz Allen Hamilton says that Middle Eastern states must accelerate national deregulation activity and co-ordinate their long-term air transport planning in order to prevent over-investment in unnecessary airport and fleet capacity.
While the study, "Mastering the Challenges of the Middle East Aviation System", accepts that the Middle East region is growing rapidly it says planned investments at 10 airport locations are designed to provide for an extra 320 million passengers by 2012. "However the region will likely fall short of such growth, even if it meets its expected growth rate of about 7% per year," it states. It adds that several programmes are taking place in areas of close proximity, which could result in overlapping catchments and cannibalisation of demand.
Despite evidence that airlines' capacity management in the Middle East is relatively poor - the study says that load factor is, on average, around seven points lower than in Asia and Europe - the region's carriers are investing heavily in fleet expansion. Emirates, Etihad Airways and Qatar Airways account for most of the aircraft on order in the area. The projected increase in fleet capacity, says the study, is "well ahead" of demand and "bears the risk of intense competition", driving down aircraft utilisation and performance efficiency.
"These investment programmes pose serious risks of unhealthy competition and unexpected over-capacity that the region must address," it says, warning that government backing in many cases will prevent normal market forces from reducing excess capacity in the near term. Over-regulation, it adds, is leading to low efficiency and low quality within both the aviation system and its infrastructure and this, in turn, is generating "serious restrictions" on sustainable, self-funding growth.
"Even though some aviation markets, such as Dubai, have introduced 'open sky' policies and released foreign-ownership limitations, the aviation system remains heavily regulated by government airport and airline ownership, restricted traffic rights, selected traffic right allocation, and price restrictions," it says. "As a result the Middle East aviation system has clear cost and efficiency disadvantages which lead to increased prices and subsidies. Heavy regulation also limits the adoption of new aviation business models, such as low-cost carriers, to the detriment of faster regional tourism development and consumer benefit."
Analysts are warning that the Middle East region is facing a potentially-damaging burden of over-capacity combined with continuing inefficiency resulting from heavy air transport regulation.
A study by consultancy Booz Allen Hamilton says that Middle Eastern states must accelerate national deregulation activity and co-ordinate their long-term air transport planning in order to prevent over-investment in unnecessary airport and fleet capacity.
While the study, "Mastering the Challenges of the Middle East Aviation System", accepts that the Middle East region is growing rapidly it says planned investments at 10 airport locations are designed to provide for an extra 320 million passengers by 2012. "However the region will likely fall short of such growth, even if it meets its expected growth rate of about 7% per year," it states. It adds that several programmes are taking place in areas of close proximity, which could result in overlapping catchments and cannibalisation of demand.
Despite evidence that airlines' capacity management in the Middle East is relatively poor - the study says that load factor is, on average, around seven points lower than in Asia and Europe - the region's carriers are investing heavily in fleet expansion. Emirates, Etihad Airways and Qatar Airways account for most of the aircraft on order in the area. The projected increase in fleet capacity, says the study, is "well ahead" of demand and "bears the risk of intense competition", driving down aircraft utilisation and performance efficiency.
"These investment programmes pose serious risks of unhealthy competition and unexpected over-capacity that the region must address," it says, warning that government backing in many cases will prevent normal market forces from reducing excess capacity in the near term. Over-regulation, it adds, is leading to low efficiency and low quality within both the aviation system and its infrastructure and this, in turn, is generating "serious restrictions" on sustainable, self-funding growth.
"Even though some aviation markets, such as Dubai, have introduced 'open sky' policies and released foreign-ownership limitations, the aviation system remains heavily regulated by government airport and airline ownership, restricted traffic rights, selected traffic right allocation, and price restrictions," it says. "As a result the Middle East aviation system has clear cost and efficiency disadvantages which lead to increased prices and subsidies. Heavy regulation also limits the adoption of new aviation business models, such as low-cost carriers, to the detriment of faster regional tourism development and consumer benefit."
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The entire study was posted by another user a few weeks ago:
http://www.boozallen.com/media/file/...ion_System.pdf
It seems to me that a large majority of growth in the GCC region (and not limited only to the airline sector) is ego driven. Easy money (petro-dollars) national pride and personal egos have created airline projects which I doubt are anywhere near profitable (but as one well-known airline CEO said a few years ago-- profit is not the most important thing) or sustainable.
However in the meantime, seems everyone is having a good time.
http://www.boozallen.com/media/file/...ion_System.pdf
It seems to me that a large majority of growth in the GCC region (and not limited only to the airline sector) is ego driven. Easy money (petro-dollars) national pride and personal egos have created airline projects which I doubt are anywhere near profitable (but as one well-known airline CEO said a few years ago-- profit is not the most important thing) or sustainable.
However in the meantime, seems everyone is having a good time.
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With free money gushing out of the ground nobody is overly concerned about superlative efficiency, nor about what anything costs. ...That's why you can go ice skating or play in the snow in the desert. Dubai is the biggest construction site in the world. 
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qatar or ek much beter managment than EU airlines or thers , they are beter than lously EU airlines,
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beter managment? 
Ohhhh, you mean they mange ("eat," in the French language) butter (often found in the form of ghee here in the GCC states
) more than in the European Union. Could be, but do you have any statistics to back up your claim? 
OK OK
Ohhhh, you mean they mange ("eat," in the French language) butter (often found in the form of ghee here in the GCC states
) more than in the European Union. Could be, but do you have any statistics to back up your claim? OK OK
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This will go on until the all pervading "mine's bigger than yours" (or, more accurately, "I have to have one higher/bigger/faster/flashier/more expensive than yours") attitude disappears from the local culture.
Not holding my breath waiting for it to happen.
Not holding my breath waiting for it to happen.
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ohhhhhhhhhhh . wake up baby ,
European airlines ,hotels all of them old , low standard , can you live their ,even layover you can not sustain it ,can you compare Europe to the south east asia ,or dubai , wake up the world is changing, can lazy workers make things betterthan the GCC , ohhhhhhhhhh no way ,wake up >
European airlines ,hotels all of them old , low standard , can you live their ,even layover you can not sustain it ,can you compare Europe to the south east asia ,or dubai , wake up the world is changing, can lazy workers make things betterthan the GCC , ohhhhhhhhhh no way ,wake up >
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Feel sorry for you Shampoo9....apparently you were not lucky in your hotel choice in Europe...Maybe the company you are working for is a low and cheap standard company....
Are you working for QR or Emirates, as it seems that you well known their managment..??
Are you working for QR or Emirates, as it seems that you well known their managment..??
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SV went thru this 'too much capacity' combined with the low price of oil in the mid-eighties, and decided all of a sudden to trim their pilot ranks by 15%.
So, expat contracts were selectively not renewed, and lo and behold, due to other expat pilots not liking what they saw (and resigning), suddenly found themselves undermanned at the pointy end by about 25%.
Massive hiring began, and overtime aplenty for those that were left.
And so...the cycle begins again (maybe), just different real estate.
So, expat contracts were selectively not renewed, and lo and behold, due to other expat pilots not liking what they saw (and resigning), suddenly found themselves undermanned at the pointy end by about 25%.
Massive hiring began, and overtime aplenty for those that were left.
And so...the cycle begins again (maybe), just different real estate.
