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Middle East fails to keep pace with Global recovery

Coinciding with the MEADFA 2016 Conference in Dubai, analysis from leading marketing intelligence analysts Counter Intelligence Retail (CiR) examines the state of the industry in the region, and the future opportunities.

Global optimism for retail sales fails to reach Middle East

As reported by Erik Juul-Mortensen, President TFWA, at the opening session of the TFWA World Exhibition, sales in travel retail have seen decline in 2015 but there is optimism for growth with recovery evident in the early part of 2016.

Duty Free & Travel Retail Sales 2015. Source: Generation Research

In 2015, combined Middle East and Africa sales amounted to $6.7bn. Middle East sales of $5.9bn were down -1% versus 2014. Pitted against a global decline of -2.7% this was a robust performance and the region out-performed both Europe and Americas but was adrift of the +2.3% growth enjoyed by Asia Pacific. In Africa however the picture was bleaker with a -10.2% decline in retail sales, driven by traffic declines amidst political unrest. 

Duty Free & Travel Retail Sales Q1 2016. Source: Generation Research

Into the early part of 2016 the global picture showed signs of improvement to +0.8% growth. This was driven by recovery in Europe to return to positive growth, a shortening of the decline in Africa to -4.2% and increased growth to +5.0% in Asia Pacific. Sales figures show Middle East continuing to struggle with a -0.9% decline, a very marginal improvement from the -1.0% decline recorded for 2015 and behind the global recovery picture. 

Where are the passengers?

Based on CiR data, Middle East and Africa (MEA) accounts for over 5% of global passenger traffic and has doubled in size in the last ten years such has been its strong growth. 

Total PAX share by MEA sub-region. Source: CAPA

Middle East strongly dominates the region with 68% of PAX, and having the largest international airport in the world with Dubai DXB which handled a record 40.5 million PAX in the first half of 2016, and also reported in September that six of the previous nine months had seen passenger levels exceed 7 million per month, announcing this the ‘new norm’ for the airport.

Total PAX growth by MEA sub-region Source: CAPA

All sub-regions showed substantial growth in 2015, which is sustained into HY 2016 – with the exception of North Africa which has been impacted by severe restrictions in flights to Egyptian holiday resorts. Both Hurghada and Sharm-el-Sheikh have declined -63% and -84% respectively in the HY 2016, where in contrast Cairo has remained relatively stable. Traffic at Hurghada and Sharm-el-Sheikh has been impacted by severe restrictions in flights to Egyptian holiday resorts imposed by many tour operators through 2016, which has resulted in holiday makers switching their destinations to ‘safer’ European destinations in Spain, Portugal and Croatia for example.

Where are they travelling to?

International traffic in the region is dominated by its three largest airports of Dubai DXB, Doha DOH and Abu Dhabi AUH, all of which are in strong growth and combined account for over half of all traffic in the MEA region. The only non-Middle Eastern airport to feature in top ten of MEA airports is Johannesburg Oliver R Tambo JNB airport, which grew +4% in 2015, and has grown +10% in the HY 2016 with growth in destinations in Zambia, Zimbabwe, Botswana, Kenya, USA, Qatar and China (Beijing).

Almost half of international flights originating from within the MEA region have a destination within the region, followed by flights to Asia, Europe and Americas. Top destinations for scheduled international flights from MEA airports are UAE, India, Saudi Arabia and the UK. The Southern Asia sub-region (India, Pakistan, Sri Lanka, Bangladesh) accounts for 15% of all departing flights from MEA, with much of this traffic being made up of migrant workers currently residing in the Middle East for employment. Reinforcing this, total Indian passenger traffic departing MEA rose +19% HY 2016. Departing from Dubai, Abu Dhabi and Doha respectively, key destinations for Indian travellers are Mumbai, Delhi, Kochi, Hyderabad and Bengaluru.

Who are the passengers?

Over half of PAX departing from MEA airports on international flights are resident in MEA, and unsurprisingly occupy the top five rankings of nationalities. UAE residents (including ex-pats) make the largest contribution to departing PAX growth, followed by USA, India and Israel.

International departing PAX from MEA, Full Year 2015. Source: CiR Business Lounge

There is significant growth, and opportunity, amongst some key nationalities within MEA airports, with Netherlands, Israel, India and USA showing strong PAX performance through 2015.

Top 10 fastest growing PAX nationalities in MEA 2015. Source: CiR Business Lounge

Amongst the top five airlines, the likely contenders of Emirates, Qatar, Etihad and Saudi Airlines feature, and all enjoy double digit growth. This is outstripped however by the growth of FlyDubai at +26%, with the expansion of routes. Seat Capacity for scheduled airlines departing MEA grew at +8% in 2015 over the previous year, with growth from the home nation airlines as well as Ethiopian Airlines and Kenya Airways. Provisional figures for 2016 show that growth in capacity slowing to less than 6% as the market becomes more mature and routes become established. Capacity departing the Middle East will continue its upward trajectory, but African schedules are suppressed and show no growth overall, with increases from the East and Southern sub-regions being offset by decreases from the Western, Central and Northern sub-regions.

Want to know more?

CiR have prepared a comprehensive overview of the Middle East region, exclusively for subscribers of the CiR Business Lounge service. CiR Business Lounge subscribers regularly receive complementary analysis and reports as a membership benefit, supplemented by full client service support to maximise service usage.

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PAX Source: CiR Business Lounge | Advanced Analytics Tool - Data based on Scheduled departing international passengers only. Data displayed for nationalities is based on residency through place of ticket purchase