Aviation

ME aviation sector grappling with inflation, labor shortages, and fuel prices: Report

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The Middle East’s aviation sector is grappling with soaring fuel prices, labor shortages, and inflation as it emerges from the COVID-19 pandemic, making it more difficult for airlines to satisfy growing demand and deal with rising operational costs, according to new research.

According to management consulting firm Oliver Wyman’s latest ‘Airline Economic Analysis’ report, labor shortages were observed across the board, including pilots, ticket agents, flight attendants, baggage handlers, and airline mechanics.

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One of the biggest issues facing the industry, which is still recovering from the devastation caused by the pandemic, is the rise in fuel prices which is directly affecting operational costs.

“Airlines have been at the receiving end with the fuel price hikes and personnel shortage impacting their bottom-line,” André Martins, Partner – Head of IMEA Transportation and Services at Oliver Wyman said in a statement on Monday.

The war in Ukraine has also exacerbated existing stress on commodity markets and supply chains. This has led to flight restrictions due to airspace closures brought on by sanctions imposed on Russia.

In January this year, before the conflict began in Ukraine, Middle Eastern countries represented the second-largest destination for air travelers from Russia, accounting for around 28 percent of scheduled seats.

The United Arab Emirates also represented nine percent of the share of international seats on flights headed to Russia at the same point in time, second only to Turkey.

Although airlines in the region observed a spike in leisure travel demand, the firm said there was a slowdown in recovery for business travel.

In addition, Oliver Wyman found that sustainable aviation was still a way off, with battery-operated and hydrogen-propelled commercial airliners facing technological and regulatory hurdles, and sustainable aviation fuel too expensive and too scarce to be a viable option.

The firm expects that the aviation sector will see an increase in emissions before they fall. Qatar Airways and Dubai Airports have both signed a pledge to work towards 10 percent sustainable aviation fuel by 2030, reflecting regional momentum.

On a more positive note, the downturn in the global economy has made way for new airlines to enter the market.

“Every downturn in the global economy has proven to be the time for new market entrants in the airline industry. This time around, it has been no different – we have seen multiple airline start-ups just launch or prepare for an upcoming launch such as Akasa Air in India, the proposed new airline in Saudi Arabia, and Avelo in the US, among many others” said Martins.

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