Day two of the Arabian Hotel Investment Conference, hosted at the Jumeirah Beach Conference Centre, kicked off with a lively session during which, Jean-Claude Baumgarten, President, World Travel & Tourism Council, discussed the role and the current climate of aviation in the Middle East with James Hogan, President & Chief Executive, Gulf Air.
During the session, James told the conference delegates that airlines need to “get back in shape” and predicted that many carriers would move to share backroom costs within the next 10 years. He also suggested that an umbrella campaign was needed to justify the huge government and airline investment in the region.
JC-B: With the massive increase in air traffic, is the air going to be able to absorb the air traffic?
JH: The opportunity for this region is to bridge that traffic and infrastructure is key. The advantage that the Gulf has is with a new generation of aircraft. You are one stop to anywhere in the world.
The Government is focused on providing infrastructure to be a bridge. There is huge opportunity here and one major advantage is that this is such a visionary, decision-making region with people who make fast decisions and put things in place.
It is essential to plan and to look ahead 20 years. For the Middle East, issues of air traffic are not as much a priority as in Europe, but there are security issues, such as Iraq.
The infrastructure is not perfect but the plans are in place.
This region is not just a destination but a point of transit and Dubai has started to create a stop over market. People have begun to realise that 5 hours away from Europe and South East Asia is a great destination. The opportunity will depend on how we continue to promote the region.
J-CB: How many A380’s in the region? What is your point of view about these planes?
JH: You are seeing more capacity coming to the region. Whilst I am pleased to see the new aircraft, we need to put a greater focus on commercial reality within aviation. We need to look at how we can develop a network synergy instead of sitting on top of each other. Today far too many consumers are being subsidised and that damages the airline sector.
J-CB: Is it fair to say that the A380 is one of the solutions to traffic.
JH: That depends on what type of carrier - regional or national.
Different airlines require different solutions depending on their strategic footprint. Certainly for us, you won’t be flying on an A380
J-CB: How important is branding to bring tourists to the destination?
JH: If you take the Middle East as a whole, it could be argued that there is an immaturity and safety is an issue and mismatch of destination brands, and an overall perception that safety is an issue. But Corporate Arabia does have a structure in place, and the hospitality values, to push out a unified destination brand message and a model to manage some negative news coverage”.
I believe to bring tourists to this market needs a stronger umbrella. Airlines invest heavily to orchestrate beaches, resorts, history - we need to showcase these points. I believe there are too many public utility airlines in the region and at same time the airlines need to get back into shape, especially as there is more pressure as the industry becomes global.
The best way for the sector to move forwards is by consolidating some of the back room costs like engineering, training and IT development. This will take some of the costs out of the industry but will not affect the brands, much as the hotel industry.
If you want to improve efficiencies and costs we should move now with the embrace of an umbrella marketing campaign.
J-CB: What piece of advice could you give to airlines at this time?
JH: They need to look more at how we give networks more connectivity, stronger traffic, network synergy and to work closer on co-operative marketing.
Question from the floor: Why is it still so difficult to collect baggage?
Luggage is probably one of the most difficult problems. It has not been solved!
Question from the floor: What is the future of budget travel in the industry?
JH: Low cost carriers do not exist in the region, as seen in Europe, and will not do so until they open up new markets. At present they are just sitting on top of the current schedules and this will keep the yield down. In this region we still travel from the main airports. I believe it is too premature for low costs in this region. We still need to develop stronger networks for the regions. Also low cost airlines tend to fly from secondary airports which we do not have here.