silver lining in high oil prices for low cost carriers and airport industry

Published May 29th, 2008 - 08:57 GMT

As the aviation world shudders at the prospect of oil soaring to US$200 a barrel, an industry expert has said that budget carriers and low cost airports could benefit indirectly and ultimately help shape the future of air travel.
Simon Morris, Director of UK-based airport specialists, Jacobs Consultancy, said today, companies whose business models have not factored in rising fuel costs will be pressured into cutting expenses in other areas, such as flying with premium airlines, particularly in Europe and America.
“As times get tight, more people will fly low-cost,” said Morris, who will analyse the prospects for low cost airlines and airports at next week’s ‘Future Airports’ conference in Dubai, which runs alongside the Airport Show, the biggest aviation exhibition in the world this year.
“Rising fuel prices will also encourage airlines to use low cost terminals, where 15-20 per cent of the cost can be negotiated for the use of less sophisticated facilities. Low cost terminals will play an important part in the future of the aviation industry. Reducing airport facilities, such as eliminating transfer baggage systems and encouraging online check-in, can bring substantial savings for the aviation industry at a time of tightening budgets.”
As rising fuel prices impacts on travel trends in the west by forcing cost cutting, the effects of the  oil boom on the Middle East economy is seen as having a trickle down effect, not only encouraging more people to fly more often, but also bringing budget travel within reach for the lower paid.
Morris’ views about the growing influence of low cost carriers and airports, is shared by another speaker at the ‘Future Airports’ conference, Adel Ali, Board member and Chief Executive Officer of Air Arabia, the first low cost carrier in the Middle East and North Africa region.
Air Arabia has carried over 6 million passengers since its launch in October 2003 and Ali said: “The aviation industry in the Middle East is now very open for change. People want to travel more often to more places with the best value for money. Hence the future of low cost travel in this region is very promising and so are low cost terminals.”
“High oil prices and increasing inflation is putting pressure on the transport sector across the globe, but the rapid and strong economic growth of the Middle East region contributes to a sustained market for travel growth,” Ali added.
The growing role for low cost carriers and terminals in the future of aviation is accentuated by the Centre for Asia Pacific Aviation, which says low cost airlines in the Middle East and Asia Pacific region will experience 40 per cent capacity growth over the next four years.
“This trend has been highlighted by announcements of several new low cost carriers in the region and that the new terminal set to open next year at Dubai World Central’s Al Maktoum International Airport will provide special facilities for low cost carriers,” said Nick Webb, Chief Executive Officer of Streamline Marketing Group, organisers of the Airport Show. “This is an important time for industry leaders to meet and discuss the common challenges and find solutions, as well as see the latest technology and services, all in the one place”.
Running for the first two days of the Airport Show, the ‘Future Airports’ conference will address topical issues within the region’s aviation industry such as airspace management, environmental challenges, security and safety, airport infrastructure and operations. Among the other key speakers will be Khalifa Al Zaffin, Executive Chairman, Dubai World Central, and Andreas Schimm, Director, Economics and Programme Development, Airports Council International.
Now in its eighth year, the Airport Show is well established as a major forum for the selection and pre-qualification of suppliers for regional airport development, attracting the world’s leading airport contractors and suppliers. Taking place from 2 - 4 of June at the Airport Expo Dubai, the Airport Show also features three other specialised conferences on Ground Handling, Aviation Security and Air Traffic Control.


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