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Consumer confidence is a key indicator of the health of any economy. By looking at consumers' saving and spending habits, economists are able to gauge how likely individuals are to purchase goods and services - and therefore drive demand for the same. Today, by just about any standard, the West is facing a crisis of consumer confidence: the US-led subprime meltdown has made it much more expensive for businesses and individuals to borrow money, and consumers are spending less as a result.
In the US - the world's largest economy, where the threat of recession is now considered to be real - airlines are among the businesses hardest hit by this crisis of confidence. Skybus, a newly established low-cost carrier in Columbus, Ohio, recently ceased operations less than a year since it was launched as the airline struggled to overcome the combination of rising fuel costs and a slowing economic environment. The same situation has slightly started moving to Europe as well. Elements such as uncertainty surrounding the health of the domestic economy, a perilously weak dollar and soaring fuel prices are all hitting US and European airlines where it hurts the most.
In the Middle East, the outlook couldn't be more different. According to the American Express Bank, "Led by high oil prices, the Middle East is, we believe, not just in the midst of a period of sustained growth but also in the middle of an investment boom. In 2008, buoyant prices will support such ongoing public- and private-sector investment, with a particular focus on large-scale infrastructure projects."
The Middle East today is leading emerging markets, and that is not only driven by the oil boom; the region has also become an essential economic hub for all sorts of businesses. Foreign and multinational firms are now more than ever eyeing this region as the place to be.
Booming demand
For the regional airline industry, which must also shoulder rising fuel costs, extremely strong macroeconomic conditions mean that consumers are willing and able to travel more frequently than ever before. In 2007, Middle East passenger traffic grew by 11.4 per cent. In December 2007 alone, regional passenger traffic increased by a record 19.2 per cent. Overall, Middle East airlines are growing at an annual average rate of 10 per cent, far above the global average.
An increasingly attractive global tourist destination and an ideal transit hub between, for instance, Europe and Asia, the Middle East aviation industry is collectively investing in important infrastructure, including new and expanded airports. Simultaneously, the trends towards the privatisation of services and selective open-skies policies in some countries are making the industry more competitive.
But let's be frank: If the regional economy were not celebrating a boom, many of those positive indicators would point in the opposite direction. Airlines provide a service, transporting people and cargo from one place to another, and service industries like ours depend on the confidence of consumers.
Today, regional consumer confidence is soaring - and so are Arab carriers. In fact, one of the greatest challenges facing the Middle East airline industry is simply keeping up with rapidly increasing demand. Right now, there is every reason to believe that tomorrow will be even brighter than today, taking into consideration, of course, that political stability will remain unchanged.
The writer is board member and CEO, Air Arabia.
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