AS OIL FALLS, AIRLINE STOCKS GAIN GROUND; SAUDI ARABIA GIVES GCC CARRIERS A BOOST

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By admin August 17, 2011 19:39

AS OIL FALLS, AIRLINE STOCKS GAIN GROUND; SAUDI ARABIA GIVES GCC CARRIERS A BOOST

Airline stocks rose for a second day yesterday, as oil prices fell back below $87 a barrel on concerns about the German economy. This was after oil leapt on Monday following better than expected US factory output figures. Airline shares showed real value last week as they fell substantially in line with global exchange movements, with Delta up over 5% in a week. Now though it is fair to argue that the narrow window for a small gain is passing and airline shares are set for a rollercoaster ride as passenger numbers fall back rapidly. The rapid fleet growth of the past two years may now come back to haunt some carriers as the spectre of overcapacity looms large during the next two quarters. The US carriers will have to roll out their plans for desert parking bays once again but the European airlines for the most part are in no condition to start parking aircraft.

Meanwhile in Riyadh: Saudi Arabia’s General Authority of Civil Aviation (GACA) unveiled plans yesterday to open the kingdom’s skies to all GCC airlines, in a move that will be most welcome to across the region. This move will open all Haj traffic to carriers across the GCC zone and would be a major boost to low-cost carriers in the region.

Meanwhile, Prince Fahd Bin Abdullah, Assistant Minister of Defence and Aviation at the Civil Aviation Affairs and deputy chairman of the GACA board of directors, said that the authority has not received applications from any Gulf airline seeking a licence to operate domestic services in the kingdom.

The Saudi aviation market makes up about 29% of the aviation sector in the Middle East. If this move goes ahead then a price war is on the cards every year in the run-up to the Haj. It remains to be seen if the Saudi carriers including the low-cost carries based there can weather full-on domestic competition without government assistance. Keep an eye on this story as it will affect many airlines in the GCC area.

admin
By admin August 17, 2011 19:39
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