UAE lights the way for aviation
Over the past 25 years, the Gulf region has experienced an economic transformation, in which the UAE has played a leading part. Aviation has been at the centre of this change, which is reflected not only in the success of the well-known and rising Gulf airlines, but also in the emergence of some of the world's most impressive airport infrastructure.
The fast growth of aviation in the region should not, however, obscure the fact that global aviation faces considerable challenges. Last month, the International Air Transport Association (IATA) downgraded its airline profit forecast for this year from US$3.5 billion (Dh12.85bn) to $3bn. We expect to generate revenue of $633bn this year, so that means a paltry 0.5 percent profit margin on revenue growth of 5.9 percent and traffic growth of 3.6 percent. Rising fuel prices are the biggest culprit for these falling profits.
In the Middle East, IATA sees a profit this year of $500 million. The Middle East is one of just two regions whose outlooks have improved since our December forecast.
A study conducted by Oxford Economics shows that the Middle East represents 3 percent of global passengers, has 5 percent of the total jobs and 6 percent of the GDP generated by air transport. That translates to air transport supporting 2.7 million jobs, and contributing $129bn to GDP. Furthermore, aviation's role in the region is set to grow rapidly over the next two decades as international passenger numbers rise from 77.1 million in 2010 to 220.4 million in 2030.
So when I am asked what the future of aviation will look like, I am tempted to respond that I hope it bears more than a passing resemblance to what is occurring today in the UAE, as well as in places like China, Singapore and South Korea, where governments are using aviation strategically to spearhead economic development. However, this bright future is not guaranteed. It depends on having the right conditions in place to support competitive sustainable businesses. Many of these are beyond the direct control of airlines, and most require that industry and government work together with a common vision and purpose. Two key areas concern infrastructure and environment.
Any forward look at aviation must incorporate a vision of adequate airport and air traffic management infrastructure. Without it, aviation's contribution as an economic catalyst is compromised. The Middle East and North Africa (Mena) region has invested more than $100bn in airport projects, including $6.8bn in Abu Dhabi, $14bn on the new Doha International in Qatar and $33bn on the new Al Maktoum International for Dubai.
But runways and terminals are, of course, only half the story. What is also required is efficient air traffic management (ATM). Within the Mena region, ATM infrastructure is not harmonised or facilitated to its full extent, and routings in some areas are less efficient than they could be. With movements growing 11 percent annually in the flight-information regions of Bahrain, the Emirates and Muscat, we could see a doubling of traffic in seven years, creating the potential for aerial bottlenecks.
Add to this the fact that just about half of the airspace is permanently open to civil aviation, with the rest controlled by the military, and you have a recipe for future gridlock. On the positive side, the UAE is ahead of many other air navigation service providers with regard to ATM capabilities, and Saudi Arabia, Qatar and Bahrain are in the process of making much-needed upgrades to their air traffic management.
- The sky is the limit: GCC lack of airspace coordination threatens Dubai's aviation aspirations
- Not just the Suez Canal: another massive infrastructure project coming to Egypt
- The domino effect: how Dubai's tram can revolutionize the real estate sector
- The 'death trip': an inside look into the perilious business of getting Syrian refugees to Europe
- 'Sensitive assets': how ports are advancing the GCC's strategic interests