[291111.EN.AIR] Study: India-Mideast Aviation Must Overcome Serious Inadequacies

OAG, the global leader in aviation intelligence and a UBM Aviation brand, warns that the Indian and Middle Eastern aviation markets will face immense challenges in the years ahead despite achieving annual growth of nine to 10 per cent.

The study also showed that with consistently growing demand for air travel, a surge in aircraft orders, steadily increasing inbound tourism, spectacular airport development plans and the enthusiasm of investors for the sector, both markets together will account for 11 per cent of the world's total aircraft deliveries over the next decade.

In the Middle East, airlines, airports, and air traffic control will need to successfully serve more than four times the 120 million passengers served this year - yet even the existing aviation systems do not fulfil current demand. In many Middle East countries, aviation quality and efficiency are well below international markets such as Europe and Asia. Heavy regulation also has resulted in limited service in terms of route frequency and destinations, as well as high consumer prices.

"In the Middle East, markets such as Dubai have set the stage for reforming aviation systems and the region has demonstrated its ability to develop world-class aviation players, such as Qatar Airways and Etihad.

But the region's slow rate of liberalisation and the uncoordinated regional competition for passengers are barriers to continued reforms," said Mario Hardy, vice president Asia Pacific, UBM Aviation.

In India, the government's open-sky policy has attracted many foreign aviation leaders to enter the market, spurring rapid industry expansion boosted by the growing population and an the increased demand for international travel and trade, as well as an increasing VFR (Visiting Friends and Relatives) market.

But airlines must also contend with insufficient infrastructure and challenging political bureaucracy. It is estimated that in the next decade the Indian market will absorb 316 commercial jets and need three times the number of airports that it has today, while at the same time the country doesn't have enough skilled labour to maintain or to fly the aircraft. Additionally, intense foreign competition prevents domestic carriers from international expansion, deeply affecting balance sheets.

"India is among the world's most promising aviation market, and the region has already taken steps to address some issues through the recent privatisation of airports. Skilled aviation personnel in developed nations with stuttering economies may want to look east for opportunities, but the region is not without risk - there is significant progress yet to be made in airport modernisation, aircraft maintenance, pilot training and air cargo services. It remains to be seen whether the Indian aviation industry can handle the region's relentless growth, with its Middle Eastern, oil-rich neighbours all too keen to take on more capacity with new fleets of super-jumbos based in the Gulf and hundreds more on order," said Mr Hardy.

The OAG market analysis of India and the Middle East concludes that in order to cut costs, boost efficiencies and spur competition, mergers of the more than 30 competing airlines in the Middle East and India will be necessary. However, mergers of the Middle East carriers are unlikely in the short term because most are government-owned, and therefore more likely to form alliances due to the geographical proximity of many of the carriers.

Source : HKSG.