‘Consolidation inevitable’ in Middle East aviation market over next five years

‘Consolidation inevitable’ in Middle East aviation market over next five years
Stefan Pichler CEO Royal Jordanian Dubai UAE November 15 2019 Photo by Aasiya JagadeeshITP Images151119 Stefan Pichler AVB
Published: 5 December 2019 - 5 a.m.

Smaller airlines in the Middle East will likely be swallowed up by larger groups in the next few years as the kind of consolidation being seen in the US and Europe currently drifts east.

That is the belief of Stefan Pichler, CEO of national flag carrier Royal Jordanian, who thinks that few parts of the global airline industry will be able to avoid the consolidation trend.

So far, the Middle East has escaped the kind of airline closures seen overseas, where in the US, for example, four major airlines hold around 90% of market share.

In Europe over the last year, a number of carriers have ceased operations, including BMI Regional, Germania, Thomas Cook Airlines and WOW Air.

Pichler told AVB that there is undoubtedly consolidation in the European market with groups like IAG and Lufthansa acquiring others.

“You will have a lot of casualties,” he said. “I think in the last 12 months around nine European airlines went bust, which is all part of consolidation.

“The big guys are earning good money and they are doing an excellent job. And consolidation will happen here in the Middle East.”

Pichler has been executing a turnaround plan at Royal Jordanian over the last two years and the company achieved over $34m in net profits during the first nine months of 2019.

But even Royal Jordanian could be part of a larger structure within the next five years, Pichler predicts.

He added: “[Consolidation] has to happen. And it’s the same for smaller airlines. It’s not my call, but the little ones will not stay around because of consolidation.

“The next step for [Royal Jordanian] after this operational turnaround could be that there has to be a strategic alignment to a bigger group.”

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