Airline diversity good for customers

Gone are the days when the consumer (in this case, the passenger) was king. Harsh conditions such as the soaring jet fuel prices, Europe's carbon emissions trading scheme, the geo-political unrest in the Middle East and the earthquake disaster in Japan seem to have changed the whole game. The global aviation trade body International Air Transport Association (IATA) predicts an average 5 per cent increase in airfares this year. And if that isn't enough, 2012 will see passengers paying additional fees as airlines are going to have to cover the carbon emission costs. Iata's chief economist Brian Pearce shared with Gulf News the strategy carriers need to offset some of the impact on the sidelines of the recent Iata annual general meeting in Singapore. Gulf News: How soon do you anticipate recovery for the Middle East carriers? And what is your forecast for global recovery? A slowdown is on. Obviously, we have got this profile because of the shocks in the beginning of this year, for which recovery is expected in the second half. What operational measures should airlines take to ensure speedy recovery? I don't have any comments on operational measures but I guess the lesson for airlines is diversification across markets, because we have seen shocks in Japan, and [in the] Middle East and North Africa as well as the shocks we have had in the past. Do you see airlines in the Gulf and elsewhere hedging their fuel bills this year? Yes, absolutely. The problem with hedging is that unless the rise in fuel prices is temporary, it just delays the impact of high costs. But yes, airlines are certainly going to be hedging. You said last year that the Middle East carriers could look at acquisition route in 2011-12. Is that still your opinion? That is still a possibility. There is, obviously, a lot of organic growth going on in the region. With the aircraft delivery, there is scope for expansion, organically. And, of course, acquisition is also still limited by national ownership rules. With massive aircraft orders by Gulf carriers, how do you think the Middle East market will cope with capacity versus demand? We are concerned at the moment because we have already seen capacity moving ahead of demand. So, load factors and aircraft utilisation have fallen and that is squeezing profits. Over the medium term, there is a lot of opportunity for this capacity to be deployed particularly on long-haul markets. But do you reckon the aircraft orders by Gulf carriers would help in the recovery for the region's aviation industry to some extent? It will certainly mean growth, but whether it's profitable growth is another question. Profitable growth really depends on being able to find markets and be able to meet and exceed your breakeven load factors. That's quite a challenging environment. What is the future of low-cost carriers (LCC) in the Middle East? It's difficult to make money in that part of the market at the moment. But in the medium term, I am sure we will see new entrants. The Middle East has got successful network airlines, cargo carriers and low-cost carriers. The LCC model is not the only model around. Singapore Airlines recently said it is going to start a long-haul, low-cost service sometime next year. Do you think such a model is something that Gulf carriers, such as Emirates, could consider? Many airlines are looking to serve different segments of the market in different ways. This diversity is good for the customer as well as for the industry as it seeks ways of trying to serve the customer and thereby make a little bit of money. From / Gulf News