Open our skies, says IATA

Regional head says airlines lost US$800m in 2008.
IATA's regional vice president MENA says  liberalisation will help to counteract the effects of the economy
IATA's regional vice president MENA says liberalisation will help to counteract the effects of the economy

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Opening up the region’s skies and changing the aviation agenda must happen in order for airports and airlines to weather the economic slowdown, according to the International Air Transport Association (IATA).

Carriers in this region lost US$800 million in 2008, and the outlook for 2009 isn’t any better, said IATA regional vice president MENA Dr Majdi Sabri.

Speaking at the Middle East Airport Projects Conference, Dr Sabri, said:  “Low oil prices are taking their toll on regional economic growth. As a result the Middle East will see traffic growth slow to a crawl this year.

"Total passenger and cargo traffic will inch up 1.2%, but capacity will outpace demand increasing 4.9%, pulling down load factors and significantly hurting profitability.” To counteract the downturn, Dr Sabri called for the authorities to “open 
our skies”.

“Domestic liberalisation has sprouted new airlines in Saudi Arabia, the UAE, Jordan, Morocco, Lebanon, Bahrain and Libya, and across these areas open sky policies are bringing economic benefits,” Dr Sabri said.

Morocco’s open skies deal with Europe is boosting tourist arrivals towards 10 million a year, and Sharjah-based low-cost carrier, Air Arabia, is setting up its secondary hub there in April or May this year.

Commenting on the move, Air Arabia CEO Adel Ali, said: “Three years ago we would not have dreamt of setting up an airline in Morocco, but now they have open sky with Europe and North Africa, tourism has boosted from seven million to 10 million.” But Ali admitted it doesn’t go far enough. “I don’t know why half the sky here is blocked for military movement. Freeing up the skies would make flight times shorter and airlines could cut costs.”

Dr Sabri agreed that more needs to be done elsewhere in the region. “Despite facts that liberalisation will stimulate long-haul markets and help fill the airports being built, progress has been slow. In 2004, the Arab Ministers of Transport signed an agreement establishing a goal of open skies, fair competition and a mechanism for block negotiations with the EU. Since then only six states have ratified the agreement.

“Changing 3500 bilateral agreements overnight may not be realistic but the pace of change must increase,” Dr Sabri said.

Oliver Wyman aviation expert Niko Herrman, agreed that open skies could help the ailing UAE aviation market to generate new demand, but warned that open skies pose some challenges, particularly with larger countries.

“It can create an imbalance,” Herrmann said. “Clearly, it is more valuable to UAE carriers to be able to operate unrestricted to/from and within in a country like, say, Canada than it is valuable to foreign carriers to operate unrestricted to-from and within the UAE – simply because of the relative geographic and demographic scale.”

Herrmann commented that deregulation would send a positive signal to the world in a time where in other parts of the world protectionist fears are dominant. He went on to say that the move could lead to a competitive environment within the region.

“A GCC open skies, similar to the EU would increase attractiveness of the region overall, but might also lead to competitive situations among regional gateways,” he added.

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