Posted on January 05, 2012

Gulf carriers could see their aggressive growth checked this year by weaker air traffic due to the slowdown in the global economy, making route expansion more difficult and prompting some airlines to delay aircraft deliveries, analysts say.

High oil prices and conflict in the Middle East this year led to soaring fuel bills and plunging profits among Gulf airlines. Yet, despite the challenging conditions, they have continued to expand rapidly, opening up dozens of routes and lavishing billions of dollars on new aircraft to grow their already chunky fleets.

This freewheeling expansion could be thwarted by expected weakening demand for air travel in 2012 due a lacklustre global economy. Analysts expect Gulf airlines to face a similar slowdown in passenger volumes but say they are better placed than older carriers in the West to weather any downturn in the industry.

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“I don’t think they will be able to sail completely around the storm,” said Andrew Charlton, an analyst at Switzerland-based consultancy Aviation Advocacy. “Over time, constantly expanding the amount of capacity requires constantly growing markets. That might be a challenge in 2012.” Tony Tyler, secretary general of IATA, said in November there were “good reasons to expect weakness in demand” this year in passenger volumes. IATA said year-on-year worldwide air travel growth slowed in October to 3.6 percent, down from 5.6 percent in September.

One way to absorb this falling demand is to defer aircraft deliveries, according to some experts. “I think they’ve got sufficient flexibility to slow down orders so they wouldn’t need to take the aircraft when they originally were going to,” said Peter Morris chief economist at UK-based aviation consultancy Ascend. “It may well be they need to slow down their expansion to reflect market conditions,” he added.

Because Gulf airlines are some of the biggest buyers of commercial jets in the world, they have the bargaining power with top two planemakers Airbus and Boeing Co. to renegotiate delivery schedules if they wish. A spokesman for Dubai’s Emirates Airline said there were “no plans to delay any aircraft deliveries”. Abu Dhabi’s Etihad Airways and Qatar Airways said they didn’t plan to defer deliveries in 2012. Qatar Airways has orders worth over $50 billion for more than 250 aircraft, while Emirates’ order book is valued at around $84 billion.

source: Qatar Tribune

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