Despite recession, Middle East aviation market on a roll, finds Frost and Sullivan

Foremost among the drivers for the market is the
favorable macroeconomic environment in the region.

New analysis from Frost & Sullivan, Middle East Aviation Market, finds that the aviation market in the Middle East region generated 460,000 Jobs and 17.5 billion in the year 2008. IT is estimated that for every $100 spent on air transport, the regional economy benefits by $325.

"There is a high positive correlation between air travel and the level of economic activity in the region since GDP would relate to consumer spending and hence positively impact the demand for air services. Thus, a GDP growth in the Middle East will ensure that the region's aerospace sector would outpace the rest of the world,"

says Frost & Sullivan Financial Analyst R. Madusudanan.

Apart from this, the strategic geographical positioning of the Middle East has proved to be highly advantageous. It lies in the center of the world, equidistant from Asia Pacific and North America, attracting a large portion of transit traffic in the years to come. The region's massive oil reserves enable it to serve as a refueling base for most airlines across the world. Considering the rapid pace of development of airport and cargo infrastructure in the Middle East, the region is poised for a larger role in the global transportation and logistics industry.

Aviation infrastructure in the Middle East region has not been in sync with the fast-paced growth of airlines in the past, leading to crowding of the airspace in the region. Efficient capacity management is critical for moving market prospects forward.

A prominent trend impacting market dynamics during recent times is the growth of low cost carriers (LCC). Growth in this segment will result in deeper penetration of commercial aviation into underserved areas. This will necessitate the establishment of low-cost landing strips and smaller airports. The sector on the whole has grown in a disorganized manner, with inequitable growth in the region.

Development has taken place in small catchment areas and most of them overlap, leaving large regional pockets uncovered by the sector. The setting up of low cost infrastructure in such areas must be prioritized. It is vital for the aviation sector to percolate into the entire region to achieve sustainable growth. In the Middle East, the Government's stake in aviation projects tends to be high.

Though some aviation markets such as Dubai have introduced reforms for the sector, the region's tight regulations and restricted traffic rights have reined in market progression. In the future, private investment is expected to gather steam in the aviation space in the Middle East.

"Regional regulations do not promote adequate financial and operational transparency, which is a hindrance for attracting private investment," says Madusudanan. "If the respective authorities do not address the issues relating to deregulation and privatization, the aviation sector could be a facing a key restraint."

To succeed, the Middle East's aviation sector needs a clear vision and a commitment to confront the risks associated with ill-conceived and uncoordinated deregulation initiatives at the various country levels. The Middle East is among the few regions promising growth in the highly turbulent aerospace domain, and proper strategizing will see the market emerge stronger after the recession.

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