Middle East airline fleet recovery to be slowest of any region

26 February 2021 Consultancy-me.com 4 min. read
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The Middle East aviation industry has been forecast for a slow recovery by consultancy Oliver Wyman, but Covid’s medium to long term impact on fleet numbers should be negligible.

On the very front line of Covid business disruptions, the aviation industry last year lost a staggering $118 billion dollars, with dwindling fleet numbers and a slew of high-profile casualties along the way. Now, a new report from global management consultancy Oliver Wyman has suggested that the Middle East fleet will be the slowest to recover, due to its heightened exposure to an international travel segment unlikely to fully pick up again until 2025.

Oliver Wyman’s annual ten-year ‘Global Fleet & MRO Market’ report forwards some sobering recent figures. At the height of the crisis, the world’s in-service fleet dropped to below half its number from the beginning of the year, at just 13,000. For the Middle East, that meant less than 400 aircraft in operation at its low point. Yet despite the heavy dent and lagging regional recovery, the firm expects that the local medium and long-term growth figures will not be impacted.

Fleet growth by region, 2021-2031

All in all, the report forecasts fleet growth of 2.1 percent over the coming five years, rising to a CAGR of above 6 percent from 2023 through 2031, with aircraft numbers to reach more than 2,300 in the Middle East by 2031. Last year’s projections, prior to the onset of the global pandemic, estimated a total of 2,105 commercial aircraft at the end of the decade. The composition of the local fleet however is set to change, with narrowbody craft tipped to overtake wide-bodied by 2027.

In recent times, the Middle East has had the highest concentration of widebody aircraft of any region, with almost 15 percent of the global stock based locally. While this disparity was previously forecast to persist, the fresh pivot toward narrowbody will account for the bulk of the region’s upcoming growth. In pure numbers, the narrowbody fleet size is expected to jump from a paltry 425 aeroplanes in service today to almost 1,300 by 2031. Widebody craft will climb from 579 to 921.

Speaking on the slower recovery time-line, Dubai-based Oliver Wyman Transportation and Services partner Michael Wette said, “A mitigating factor that could partially offset the drop in international demand is the relatively large number of narrowbody deliveries scheduled in the region over the next decade. These deliveries would help recoup some of the MRO demand lost from the cut in widebody deliveries to the region.”

Total MRO demand forecast by region, 2019 versus 2030

In terms of the local MRO (maintenance, repair and operations) market, its growth forecast also remains closely tied to the region’s reliance on international travel, and so a similar slow recovery to that of the region’s fleet size is expected. According to the Oliver Wyman report, a prolonged recovery scenario wouldn’t see MRO demand bounce back in the Middle East until 2023, and then only at “10 percent above 2019 levels rather than the baseline scenario of 23 percent over 2019”.

While the slower overall industry recovery may also mean fewer direct and less frequent routes – at least for now while the pandemic continues mostly unchecked – there was one other cause for optimism. “The Middle East sits in a unique position in dealing with the consequences of the pandemic and the airline losses from it,” noted Wette. “Mostly state-owned operators are somewhat protected from the short-term financial hit, given that the government will likely provide financial support.”

This hasn’t of course been the case for airlines in other parts of the world, and Oliver Wyman warns of another tough year ahead for the industry with pre-Covid levels of passenger demand not expected to return until the end of next year – or even as far off as 2026. At the global level, the firm still predicts a ten-year increase in fleet size to around 36,500 aircraft from roughly 23,500 today (down from previous 2030 projections of 39,000), equating to a CAGR of 3.4 percent.