Gulf's economic transformation will drive air traffic, IATA says

The Middle East is set to be one of the fastest-growing airline markets in the next decade, and sweeping economic transformation plans adopted by many of the Gulf countries will stimulate air traffic in the years to come, according to the International Air Transport Association’s (IATA) Middle East chief. 

IATA represents some 300 airlines in about 120 countries, comprising around 83% of the world’s air traffic. 

An Oliver Wyman report released in March projects the Middle East to grow by 5.1% annually over the next decade, making it one of the fastest-growing markets in the world. 

Asked what will drive this growth, Kamil Al-Awadhi, IATA regional vice president for Africa and the Middle East, told Al-Monitor, “The main factor is the growth in the economies of the Middle East region, largely led by the Kingdom of Saudi Arabia, the UAE and Qatar, but also the growth in GDP of major source markets that the Middle East airlines service such as the Indian sub-continent, China and Asia Pacific.”

“In addition, the Middle Eastern countries are engulfed in large multidimensional economic and social transformation programs, investing in industries away from hydrocarbons, liberalizing visas and facilitation, and focusing on greater connectivity and tourism numbers," he added.

Awadhi cited examples of countries in the region hosting global business and sporting events, which have or will spur air traffic.

“Countries such as the UAE, Qatar and Saudi Arabia have focused on investing in the tourism, MICE and business markets but also have played host to large global events such as the World Expo in Dubai, the FIFA World Cup in Doha and the upcoming COP28 in the UAE,” he said.

“In addition, the transformation taking place in Saudi Arabia ranging from NEOM and Red Sea to additional tourism and lifestyle giga projects will continue to both increase connectivity and traffic and have an impact on both passengers and cargo.”

From wide to narrow

Widebody aircraft, such as the Boeing 777 and the Airbus A380 have historically been popular with airlines in the region. The big three Gulf carriers — Emirates, Etihad and Qatar Airways — mainly operate fleets of twin-aisle aircraft. But Awadhi noted that since 2020 there have been more deliveries in the region of single-aisle narrowbodies, which may indicate a broader shift in fleet composition. 

“Currently there is a healthy mix of fleet types across the legacy airlines (a mix of widebodies and narrowbodies) and the low-cost airlines (narrowbodies), but the trend of greater deliveries of narrowbodies than widebodies since 2020 may suggest this,” he said. 

“Airlines in the region are focused on efficiently connecting both primary and secondary/tertiary city pairs which narrowbodies are able to serve. In addition, new-generation narrowbodies such as the Airbus A321neo and the 737 Max are able to fly longer distances as opposed to older generations, giving airlines the ability to serve destinations that are farther from both prime and tertiary cities," Awadhi said. "Narrowbodies also offer domiciled airlines the flexibility to operate the most efficient and fit-for-purpose aircraft to destinations as opposed to just relying on wide bodies."

He said there are several threats to strong growth for Middle Eastern and North African airlines right now.

These include high fuel prices as well as the high cost of operating, including taxes and fees. Fuel prices jumped 5% to $84.13 a barrel following OPEC+'s surprise decision to cut output on Sunday. As of Thursday afternoon GMT, prices were hovering around $81 a barrel. 

Furthermore, economic volatility and recessions will impact travel demand in the region, the IATA executive added.

Awadhi also noted the challenges facing North African carriers. Namely, around $1.6 billion is being withheld in various African countries — including Algeria — due to currency shortages and other issues. IATA on Monday warned that the block funds could lead to airline disruptions if there is no progress in the talks to unfreeze the money owed to the carriers.