Political Revolt Spells Bad News for Airlines in the Middle East and Beyond

 - February 25, 2011, 10:15 AM
Egypt’s political revolution has already severely affected the country’s economy, forcing flag carrier EgyptAir to cut its fleet by 40 percent and calling into question whether it will now take all its planned deliveries of new Airbus A330 jets. [Photo: Airbus]

No one can say where, when or how the rolling political crisis in North Africa and the Middle East will end, but it already seems clear that it doesn’t spell good news for the air transport industry.

The top anxiety for world airlines is the rising cost of jet-A fuel. Crude oil prices hit a two-and-a-half-year high of $110 per barrel on February 23 due to concerns about supplies being cut in the wake of violence in Libya. Going back to January, when the scale of the regional unrest was not fully apparent, jet-A prices had already risen 40 percent above where they had been at the start of 2010, increasing to around $2.75 per gallon. According to IATA fuel statistics, in the week commencing February 21 the average price per gallon had already crept up to $2.84. 

Then there’s the fate of the airlines in countries undergoing various stages of political revolt. EgyptAir has already confirmed plans to ground 40 percent of its fleet and is offering wet leases for 25 of its newest aircraft to other carriers, as it desperately seeks to cut costs in response to the country’s collapsing economy and formerly vibrant tourist industry. Meanwhile, the events likely have scuttled plans by Egypt’s flag carrier to take delivery of another four Airbus A330s.

While the economic fallout from political upheaval in the region does not necessarily spell disaster for airlines in the countries concerned, one must view some retrenchment as a possible outcome. This could result in airliner order cancellations or deferrals.

Libyan Airlines, for example, has four A350-800s on order, as well as four A330-200s and three A320s. Also in Libya, Afriqiyah Airways holds orders for five more A320s and a mix of a half-dozen A330s and A350s.

In Yemen, flag carrier Yemenia has signed a contract for 10 A350s and 10 A320s.

TunisAir holds orders for three A350s, plus nine A320-200s and three A330-300s.

In Bahrain, Gulf Air holds an order for 24 Boeing 787s, and planned to renew its fleet with a mix of A320s, A330s and Embraer 170s. And carriers in Morocco and Algeria also face the prospect of mounting unrest.

IATA statistics for 2010 rank the Middle East and Africa as the two strongest regions in the global air transport market, showing growth in revenue passenger kilometers of 17.8 percent and 12.9 percent, respectively. It remains to be seen how badly the ongoing political upheaval could compromise the expected positive trend. The Beirut-based Arab Air Carriers Organization told AIN that it is too early to form any clear conclusions about how unfolding events might affect its members.