Airlines, their passengers and the air cargo market will be far worse off if the industry retreats into protectionism after 40 years of air transport liberalization, the head of the Arab Air Carriers’ Organization (AACO) warned Tuesday.

Speaking in Cairo at the AACO’s 51st AGM Nov. 6, secretary general Abdul Wahab Teffaha said that “leaps in development” by the global air transport industry occurred in tandem with the adoption of liberal policies that eased or removed restrictions on traffic rights, the movement of people and goods, and the playing down the notion of the flag carrier and replacing it with brands.

“These opened the way for competition and the transformation of air transport from a sovereign activity into a an economic one,” Teffaha said.

As part of that movement, some Arab airports entered “the club of global hubs,” he said, clearly referring to Abu Dhabi, Dubai and Doha.

“Removing protectionism means that the service provider, be that an airline, or an airport or any provider of other services, has to do its best to gain the customer’s acceptance and satisfaction through the best services and prices. This also compels the service provider to manage its costs in the best way and become creative to achieve maximum customer loyalty.”

With protectionism growing in many regions, Teffaha reminded the audience what it would be like to go back to the pre-1978 era before air transport liberalization.

“In those times, airline used to agree among themselves on passenger fares and cargo rates. They agreed on the service provided to the passenger: the seat pitch, maximum levels of free food and beverage, maximum weight or number of free bags in accordance with the class of service, and how to construct fare in case the traveler was going to more than one destination.

“There were also undercover enforcement offices who tested airlines’ adherence to these agreements and heavy fines were imposed on any airline that deviated from those agreements and tried to compete with others in price or service.”

If an airline operated to a destination served by two airlines where the home airline did not want that competition, the second carrier had to pay a royalty to the other airline for each passenger carried.

In the 33 years between 1945 and 1977, airlines carried 6.5 billion passengers. In the years between 1978 and 2017, they carried almost 70.6 billion people, representing an average growth that was nine times higher in the post-liberalization period.

“New business models have emerged, more and more people have access to air travel and millions of jobs have been created by that growth,” Teffaha said.

The pro-liberalization speech came as one of AACO’s member airline CEOs, Qatar Airways’ Akbar al Baker, was absent from the AGM for a second year running. Bahrain, Egypt, Saudi Arabia and the UAE have barred Qatar Airways from their airspace since June 2017 as part of an ongoing diplomatic dispute. Airlines from the four nations have also ceased flying to Doha, the Qatari capital. The AACO AGM was in Sharjah, UAE, last year and is in Egypt this year.

Qatar describes the ban on flights as an illegal blockade. It has cost Qatar Airways, which competes directly with the airlines of its Middle Eastern neighbors, millions of dollars in circuitous and new routes as well as lost business on local routes to cities it cannot serve.

The Arab air transport industry in general, however, is seeing growth rates significantly down from the annual average of 10% increases enjoyed between 2006 and 2016. In 2017, growth in the region slowed to 7.7% and in the first eight months of 2018 it is just 4.7%, according to AACO.

But Teffaha said the long-term outlook for Arab air transport remained “resilient and robust” despite crises in the region. More than 60% of the Arab world’s population is under the age of 25, providing a large opportunity for future travelers and the geographic location of the region is optimal for air transport growth.

Karen Walker