Long-term transport growth bodes well for Middle East airlines, airports as competition intensifies

Al-Monitor Pro Members

Afshin Molavi

Senior Fellow, Johns Hopkins School of Advanced International Studies

Aug. 30, 2022

Global air transport is well-positioned for long-term growth over the next two decades, according to recent UN and industry forecasts. The leading Middle East and North Africa airlines and airports will be well-positioned to ride this wave. Located strategically between East and West and near rising air travel populations in South Asia and large swathes of Africa, the "Big Three" aviation country powerhouses — the United Arab Emirates, Qatar and Turkey — will continue to grow while facing deepening competition from an ambitious Saudi Arabia. Meanwhile, low-cost carriers will continue their rise and the competition for increasingly lucrative air cargo dollars will intensify.

Scenario 1: Global recession slows air travel demand, creating a race to the bottom, pinching profits and slowing new investment. This is less likely. Air travel has demonstrated remarkable resilience throughout economic cycles and downturns. Despite seemingly catastrophic events like the 9/11 terrorist attacks and the 2008-09 global financial crisis, air travel has continued its steady march. Only a pandemic that physically shuts down air travel could threaten the steady growth of air travel and cargo. What’s more, several Gulf Arab states — notably Saudi Arabia — are flush with oil revenues. They are likely to continue investing in an air transport sector that has paid strong returns. Saudi Arabia’s rising air footprint will certainly pose a challenge, but the Big Three aviation country powerhouses — UAE, Qatar and Turkey — have strong first mover advantages in place and nimble regulators and state-owned carriers to meet the challenge.

Scenario 2: A combination of new COVID variants and carbon emissions regulations could pinch growth further, deter investment and create a new climate of volatility. This is also less likely. Next-generation aircraft from the leading suppliers — Boeing, Airbus and Embraer — are cleaner and emit less carbon. This is partly why emissions per seat miles are down nearly 6% since January 2018, according to IBA. Etihad Airways has been a global leader in the search for sustainable aviation fuels, and the other major carriers have followed suit. While new COVID variants can certainly hit future air traffic growth, we are unlikely to see mass shutdowns of airports and airlines again. Once China begins to open again, the game changes entirely and air traffic numbers pick up dramatically.

Afshin Molavi has nearly 25 years of experience covering the geo-economics of the Middle East and North Africa and broader emerging markets with postings in Riyadh, Jeddah, Dubai, Tehran and elsewhere. Currently a senior fellow at the Johns Hopkins School of Advanced International Studies in Washington, he has also held various research, reporting, analyst and leadership roles at Reuters, Oxford Analytica, the International Finance Corporation of the World Bank, emerge85 and the New America Foundation. His articles have also appeared in Bloomberg, the Financial Times, the Washington Post and the Journal of Commerce, and he is the founding editor of Emerging World, a Substack newsletter that explores the intersection of emerging markets, globalization and the key global trends shaping our future.